John Neal's Legacy: Technology delays overshadow modernisation progress during CEO tenure

By Henry Gale

May 29 - (The Insurer) – In the last of our four articles looking back at John Neal’s tenure as CEO of Lloyd’s, we examine progress on market modernisation and efficiency.

Neal’s stint at the helm of Lloyd’s saw perhaps the most ambitious modernisation plan the market has seen to date.

Six months after becoming Lloyd’s CEO, John Neal declared the market had “a tremendous opportunity to reimagine Lloyd’s”.

The Future at Lloyd’s prospectus in May 2019 showed no shortage of imagination. It envisioned Lloyd’s having its own digital platform for placing complex risks, an automated exchange for simpler risks and claims being paid before customers realise they have a loss, among other drastic changes to the way the market would trade.

All these were in aid of core commercial goals, the prospectus said: bringing more business into Lloyd’s, improving the market’s efficiency and attracting more capital.

The six modernising initiatives would be a digital placement platform, an automated risk exchange for less complex risk, an updated way for capital to access Lloyd’s, a framework for entrepreneurial syndicates with lower startup costs, a digital solution for claims and a hub of market services.

The six initial modernisation initiatives

SYNDICATE IN A BOX

Of those six ambitions, the syndicate in a box (SIAB) was realised earliest and in the closest form to what was initially proposed.

Reduced approval timelines and capital requirements, among other modifications to the traditional syndicate model, attracted dozens of applications and several launches followed in subsequent years.

The entrants included established Lloyd’s underwriters such as Beazley and Munich Re testing new ideas, (re)insurers from outside Lloyd’s such as Greenlight Re and Sukoon entering the market and new ventures such as Oka and Wildfire Defense Systems. MGU Carbon Underwriting’s Syndicate 4747 is the only SIAB so far to have graduated to a full syndicate.

Others continue to underwrite as SIABs (several have not yet reached the three-year mark where becoming a full syndicate is an option), have been absorbed into other syndicates or have shut down. Part of the plan for SIABs was to ensure that failures, inevitable with entrepreneurial ventures, could happen quickly and safely.

By November 2020, when the Corporation had reworked many of its other modernisation plans with the publication of Blueprint Two, SIABs had reached the “business as usual” stage. They are now an accepted feature of the market.

Syndicates in a box

CAPITAL SOLUTION

While Lloyd’s plans for a new capital solution changed over time, it did introduce a new investment platform that has seen significant uptake.

Blueprint One spoke of a “new end-to-end journey for investing at Lloyd’s with simpler, nimbler rules and processes and new structured investment opportunities, supported by a new capital platform.”

The Corporation paused this work “in light of market feedback and the COVID-19 pandemic”, it said in Blueprint Two. But it was still exploring new options for investors to deploy capital to Lloyd’s.

This materialised into London Bridge, a protected cell company devised to transform insurance risk (a corporate member’s Funds at Lloyd’s) into an asset that alternative capital providers can invest in.

Its first deal was struck in November 2021, and its successor London Bridge 2, which brought additional capabilities, has been used by $1.92 billion of capital, as of the end of 2024. In January, then-CFO Burkhard Keese told The Insurer TV he expected the vehicle would deploy more than $1 billion to the market again in 2025.

DATA AND TECHNOLOGY

But the bold new technology platforms Lloyd’s had proposed in Blueprint One were not to be. Aside from the systems’ cost and ambitiousness, they would have required a level of buy-in that not all the market’s participants shared.

The Corporation revised its plans with Blueprint Two. It would not develop centralised systems for placement. Instead, it would provide common standards for market participants and third-party platforms to use, upgrade the ways it collects data on the market’s activity and develop technology services for specific functions such as compliance and tax.

One of the key modernising aspects of the new plan was that risk data would be processed digitally. A new, “intelligent” form of the market reform contract would capture the information needed to create a “core data record” for every risk. The data would be stored in a central repository connected to other systems and updated with endorsements, renewals and claims.

Lloyd’s would also replace its existing systems for claims (ECF and CLASS) with a digital platform supported by a new set of claims data standards and the core data record.

With all those solutions delivered, Lloyd’s said, brokers and insurers could save more than £800 million a year, equivalent to a 3% reduction in the market’s combined ratio. Placement tech and data would save at least £500 million and claims process enhancements would save over £300 million.

Though scaled down from Blueprint One, these changes would still prove complex and challenging to build, test and implement.

Several of the components the new systems rely on have been built and agreed. The intelligent market reform contract (now MRCv3) was approved last year and was mandated from September 2023. Many managing agents have gone live with the new faster claims payment (FCP) system.

But the timelines for cutover, when all market firms adopt the new services, have been pushed back repeatedly, delaying the point at which the market can substantially realise the benefits of modernising its operations.

Delays

However, progress on Blueprint Two appears to have accelerated in recent months. All the technology products for phase one have now been built as of Wednesday May 28; none had been completed at the time of the previous market update in October 2024.

And while timelines stalled, the market’s acceptance of the need for tech modernisation grew. The changes, particularly the move to digital processing of data, are now widely seen as a must-have for the Lloyd’s market, even if testing and transition bring short-term pain.

Many Lloyd’s CEOs have tried and failed to upgrade the market’s technology with a series of failed initiatives.

While Blueprint Two has seen criticism around its delivery, Neal may yet be remembered for setting in motion changes that will outlive his tenure, even if they are only implemented in full some time after he leaves office.

POSITIVE OUTCOMES

Even the plans that Lloyd’s set out and then chose not to proceed with are advancing in other ways.

Lloyd’s does not have its own placing platform, but adoption of third-party digital placement platforms has increased significantly since Neal became CEO.

There is no central risk exchange with automated quoting and binding, but algorithmic underwriting and smart follow initiatives, led by market participants and technology firms, mean brokers can access more near-instant Lloyd’s capacity after agreeing terms with a lead.

More managing agents are also using aerial imagery to assess claims remotely and technology to automate certain parts of the process for less complex claims.

The market is improving its technology in these and other areas, led by organisations’ own commercial goals rather than directives from the Corporation (and Lloyd’s has also supported the development of these technologies through the Lloyd’s Lab).

And if we judge Lloyd’s by its progress not on the narrow upgrades, but on the goals the Corporation first set out in its prospectus — to bring more business into Lloyd’s, improve the market’s efficiency and attract more capital — it is in a better place than when Neal took over.

The market has grown its premiums significantly, with strong volume growth since 2020. Its expense ratio is nearly five points lower than 2018. And the London Bridge vehicles have brought substantial alternative capital into Lloyd’s.

With more insurers entering the market and seeking to grow young syndicates, signs of progress towards the operational improvements promised by Blueprint Two, and a bullish outlook for London Bridge 2 in 2025, the best may be yet to come.

In John Neal’s last week as CEO of Lloyd’s, The Insurer is reflecting on how the Lloyd’s market has changed between his appointment and departure, and his role in shaping it. The other pieces in the series include our takes on underwriting performance, growth and culture.