It’s a rhetorical question. It doesn’t, as Bruce Carnegie-Brown only took the reins last year and is delivering on one of the key functions of any chairman which is to patiently take the soundings of an organisation’s stakeholders and find the right executive team to deliver a strategy and a vision.
But the question is still relevant because Lloyd’s has begun the search for CEO Inga Beale’s successor following re-Insurance.com’s revelation yesterday that the recruitment firm Sainty, Hird will manage the process.
Will this individual be a high profile figure presumably from the industry or financial services – an alpha achiever who is well-connected, polished and a great communicator – or will Lloyd’s pick someone with strong operational experience and a track record of creating efficiencies and managing change?
They are not entirely mutually exclusive. For example, one could argue that former Aon President Steve McGill fits both camps and perhaps also Clive Buesnel - an early founder of Xchanging and now head of Deloitte’s UK Insurance practice - or Paul Jardine, the former lieutenant of Stephen Catlin.
But many of the other possible candidates that have been speculated upon fit in the first camp and it is not immediately obvious that Lloyd’s needs another alpha leader.
And this goes to the heart of the role. What is the Lloyd’s strategy, vision and role in an industry that is facing profound challenges?
In fact, the Lloyd’s CEO has long been a difficult role to describe. It is not a company. There are no shareholders, no P&L (in a conventional sense) and the management of underwriting standards is delegated to a different function.
But what is clear is that a consensus must be reached by the market’s stakeholders as to Lloyd’s role in the industry at a time when shibboleths around capital and distribution are being challenged.
(Re)insurance companies used to market themselves on the strength of their fixed and vast capital bases: it is why, for example, there are two distinct insurers called Prudential on both sides of the Atlantic.
And Lloyd’s underwriters used to rely on London’s wholesale brokers to source retail business from around the world – and North America in particular – and bring it to Lime Street.
But capital is ample and increasingly fluid and the industry’s customers are more aware of the advantages this could bring. Last month, for example, the Maersk unveiled a major blockchain initiative when it renewed its 1 June program that could ultimately lead to “just in time” underwriting capital being applied to risks in real time. The shipping giant does not want a vast, static insurance program that is renewed on an annual basis based on last year’s losses if it can have access to risk capital that is deployed in real time to its actual risks. Will this be the first of many initiatives and where will it end?
A revolution is also taking place in distribution as technology brings the potential to cut down on long distribution chains and the frictional costs they create. Brokers are at the heart of this process and indeed Willis – Maersk’s placing broker – was influential in the recent blockchain initiative.
Distribution is a vast cost to the London market because of the number of hands that touch the risk before it makes it to Lloyd’s. For example, on page 65 of the Lloyd’s 2017 results is a revealing statistic. Excluding claims and Lloyd’s total costs last year were £9.7bn and the vast majority of these - £8.6bn - were acquisition costs (or fees paid to brokers).
Can Lloyd’s reduce this without upsetting the brokers and no longer having access to attractive business? It’s a herculean task and is also complicated by the anger felt by brokers over the regulatory scrutiny they face in London not least as a result of the FCA review into wholesale broking.
Ultimately, Lloyd’s needs to ask itself if it is a regulator, a marketplace, a capital provider, a brand of underwriting excellence or a a maintainer of standards in underwriting, claims and process? Can it be all of these things? Is Vision 2025 – its current business plan – still fit for purpose or should it ripped up?
And how does it create a sense of collective purpose when it has so many different stakeholders - from the powerful global brokers to the wholesaler independents; from the managing agents who are vassal states of large global (re)insurance companies to those Lloyd’s insurers who are independent.
To find the right CEO, Lloyd’s needs to understand what Lloyd’s needs to be. Should this person lead the debate or execute an agreed strategy that Lloyd’s powerful stakeholders have already bought into?
Arguably, it is one of the most difficult jobs in the City. Good luck to veteran headhunter Ian Lazarus and his firm Sainty, Hird & Partners in finding the right person…