The focus is on Lloyd’s – and its new CEO-elect John Neal – at this year’s Rendez-Vous. But what the recent recruitment process also revealed was how chairman Bruce Carnegie-Brown expects to see positive change implemented in the market…
One of the sub-themes at this year’s Monte Carlo Rendez-Vous will be Lloyd’s following 2017’s poor results, the “get tough” approach on Lime Street’s varying underwriting standards and the decision of a number of senior Corporation executives – not least CEO Inga Beale – to resign this year.
Last week, Re-Insurance began by publishing the six essential requirements that chairman Bruce Carnegie-Brown had outlined to market figures for Beale’s replacement, including headhunter Ian Lazarus who led the process.
And towards the end of last week we revealed the former Lloyd’s underwriter and erstwhile QBE boss John Neal had been selected following ratification at a Council meeting, the Society’s ruling body. His direct underwriting experience having apparently been a key factor in his selection over Clive Buesnel, another shortlisted candidate and head of Deloitte’s UK insurance business. Lloyd’s confirmed the appointment on Friday 7 September.
On the right-hand page we itemise Carnegie-Brown’s six requirements and then on the following two pages we look at the career of the new CEO-elect.
But what was also revealing in this process is that it demonstrates the chairman’s clear view that what Lloyd’s requires is a leader who can lead a change programme by implementing incremental and achievable goals.
Carnegie-Brown is a pragmatist who was not looking for a revolutionary (or even a visionary) because he knows this person would swiftly come up against a wall of opposition on Lime Street.
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”. His choice of a former underwriter is probably also a signal of how important he sees Lloyd’s arresting the recent decline in its underwriting results (see below). He understands that the 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. Neal has impressed Carnegie-Brown who clearly believes he can lead a process of steady improvements in underwriting and efficiencies. Now he has to impress the market…
1. Knowledge of Lloyd’s
In addition to knowledge of the industry, Carnegie-Brown believed it was essential that Beale’s successor has direct working knowledge of the Lloyd’s market.
Why? 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 didn’t want to risk a hiatus in these initiatives as an outsider gets up to speed with these projects and he also believed 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 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 was 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 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.
The incoming Lloyd’s boss needed 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)
Carnegie-Brown believed it was essential that Inga Beale’s successor must have significant levels of international experience – and ideally in working in or with US businesses. While he recognises the strategic sense of overseas “call options” on key strategic emerging markets such as China and India, the chairman 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 therefore have had international experience and especially 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 added a sixth. The next CEO must passionately want the job and be willing to put the market before his or her career.
He’s right. Re-Insurance 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. At some point in the past few weeks or months, Carnegie-Brown decided it was Neal…