Those who care about Lloyd’s are assured about the way chairman Bruce Carnegie-Brown is leading the process to select the Corporation’s next CEO.

Re-Insurance.com has canvassed the views of a series of influential market figures who have worked with Carnegie-Brown this year to distil a clear picture of what he expects from the next Lloyd’s CEO following the resignation of Inga Beale in June.

He has communicated that the next CEO must fulfil a minimum of six requirements. They embody the clarity of thought that has impressed those who have watched him chair Council meetings over the past year and his thoughts have been shaped from conversations with key market figures. Carnegie-Brown is a pragmatist who has quickly understood that a revolutionary who seeks to dismantle the Society’s 300-year+ structures will quickly come up against a wall of opposition. Implementing change at Lloyd’s requires consensus.

Carnegie-Brown’s first requirement is that the next CEO has an impressive track record of success in the (re)insurance markets and a strong affinity and understanding of Lloyd’s in particular.

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Ian Lazarus, Partner, Sainty Hird

This shaped his selection of Sainty, Hird partner Ian Lazarus to lead the search, a departure from the international alphabet executive recruitment firms Odgers Berndtson or the Zygos Partnership which Lloyd’s has recently relied upon.

Lazarus is a former Lloyd’s broker himself; specialises in insurance and has a strong pedigree in placing Lime Street executives (including Tom Bolt to replace Rolf Tolle as the franchise director in 2009).

The selection of Lazarus highlights Carnegie-Brown’s belief that the next person must have insurance DNA flowing in his or her veins.

Next, Carnegie-Brown has analysed Lloyd’s problems and also the structure of the market and concluded that what is required is a leader who can lead a series of incremental improvements in market processes and structures, building on the progress already made.

He expects the next CEO to challenge established market practices that may no longer be fit for purpose and also to support strategic initiatives already underway, such as PPL and head of underwriting Jon Hancock’s “Closing the Performance Gap”.

Carnegie-Brown sees PPL as crucial to the market’s modernisation agenda. The initiative has gained fresh momentum this year following the willingness of Hiscox group CEO Bronek Masojada to champion the project however is still criticised by some as being inflexible.

But Carnegie-Brown has concluded that the market cannot afford a step backwards; it needs to demonstrate an ability to adopt new processes that can lead to a debate on cost reduction. When a consultant recently derided the technology by saying it would soon be twenty years out of date, he replied: “Yes, and that’s a big improvement on the 200-year-old processes we currently have”.

Lloyd's-performance,2013-17

He understands that market faces significant challenges: sluggish processes; poor attritional underwriting and a clear divide between brilliant underwriting businesses and poor ones. It also – like the rest of the industry – needs to rethink distribution strategies in a world where technology is crushing barriers to entry and risk capital is plentiful and cheap.

But he also knows a “revolutionary” is doomed to failure. Lloyd’s is a market of many different - and at times competing - stakeholders. Lloyd’s isn’t teetering on the abyss. It is not a replay of pre-R&R internecine litigation or a post-9/11 liquidity crisis.

But it has got a slow puncture that is holding the market back. He understands that the danger with ignoring slow punctures is that they can lead to motorway blowouts. The next CEO must fix the puncture by having the gravitas and conviction to maintain momentum on the reform agenda and also to question accepted ways of doing business . It needs a proven leader who can manage change, knows insurance and has a track record of success internationally – and ideally in North America, still Lloyd’s heartland.

Fortunately, these seem to echo Carnegie-Brown’s six point basic prerequisites:

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Bruce Carnegie-Brown, Chairman, Lloyd’s

1. Knowledge of Lloyd’s
In addition, to knowledge of the industry, Carnegie-Brown believes it is essential that Beale’s successor has direct working knowledge of the Lloyd’s market.

The market has a number of critical work streams currently being undertaken; market modernisation and, in particular, adoption of the e-placement system PPL.

He doesn’t want to risk a hiatus in these initiatives as an outsider gets up to speed with these initiatives and he also believes that a “Lloyd’s person” is important to ensure he or she has the credibility to win the early support of key stakeholders, including the senior leadership of some of the largest brokers and underwriters.

2. Transformation/managing change; not a big picture revolutionary
The new CEO must have a successful record in transformation and change management but must also be mindful of the need to deliver steady, incremental improvements rather than attempt to lead a revolution that will be resisted by threatened interests.

Carnegie-Brown’s view is that what the market requires now is a CEO that can lead an evolution in cost reduction, efficiency of processes and to lead a debate on changing market practices that are outmoded.

This should be an incremental evolution of steady and realisable improvements. Market figures say that Carnegie-Brown is reluctant to support a CEO with a big vision of transforming Lloyd’s, which will face strong resistance without consensus (“If you’re going to take a horse to drink water, you better make sure it isn’t spooked beforehand and bolts”, he has told market insiders).

In other words, the next CEO must be bold but realistic. If the Corporation achieves a digitalisation of processes within the next three years through complete PPL adoption then that is a big win. More profound changes must be led by market pressures and consensus not the Corporation.

3. CEO/Leadership
The incoming Lloyd’s boss needs to have a proven track record of leadership - for obvious reasons. The market’s CEO must come into the job with the gravitas and credibility to win “hearts and minds”. It needs a proven business leader.

4. Effective leadership team
In addition to leading the market, the next CEO must build an effective working relationship with Carnegie-Brown. This working partnership needs also to be extended to the CEO’s two key lieutenants: Hancock and the new CFO. The next CEO must be the head of a working triumvirate that dovetails effectively with Carnegie-Brown as chairman.

5. International (and US in particular)
Inga Beale’s successor must have significant levels of international experience – and preferably in working with the US.

While he recognises the strategic sense of overseas “call options” on key strategic emerging markets such as China and India, he is very aware that Lloyd’s heartland is North America which, even in 2017, was responsible for 50 percent of the market’s entire business.

The next CEO must have international experience but almost certainly must have a successful track record in business relationships in the US.

After all, if the market reduced its costs by 5 percent, reduced its expense ratio by a few points and increased its share of US non-admitted business by 2 percent, then the slow puncture would be well on the way to being mended immediately. But the corollary is equally true – an uncontrolled 2 percent reduction in its share of US business would be damaging. Lost business is difficult to recapture.

6. And finally… must want the job
In addition to the five characteristics above, Carnegie-Brown adds a sixth. The next CEO must passionately want the job.

He’s right. Re-Insurance.com has previously described the job as the most difficult in the City based on the strategic challenges facing the market and the imperative of gaining consensus to support change (an unnecessary requirement for most CEOs who can use the tried-and-tested lever of “hiring and firing” to exact internal change).

But there are other obstacles. The job doesn’t pay well by corporate standards. Inga Beale earned £1.3mn in 2017. By comparison, AIG head Brian Duperreault pocketed $43mn.

And as the CEO of a market with many different stakeholders, you will be criticised regardless of how well you are doing while others will try and steal your credit.

Carnegie-Brown is well aware of this. The next CEO must passionately want the job because they are inspired to change the market for the better.