IT delays at Lloyd’s of London are causing concern

For underwriters and brokers on the trading floors surrounding the vast atrium at the center of Lloyd’s of London’s insurance market, business is good.

The centuries-old institution — a marketplace of more than 50 insurers and hundreds of brokers selling policies covering everything from cyberattacks to hurricanes — has shaken off the disruption of Covid and a string of costly natural disasters to offer its best underwriting performance since 2007.

Management efforts to help some of the underperforming insurers in the market improve have contributed, along with rising insurance prices. The September announcement of former senior Treasury official Sir Charles Roxburgh as the next chairman was well received.

Roxburgh said on his appointment that the market provides “valuable protection to its customers and healthy financial returns to members and investors”.

But the positive news undercuts unease among market figures about changes at the top of Lloyd’s amid long-standing problems with a crucial IT project, according to several people who spoke to the Financial Times.

Some are keen for Roxburgh to start as soon as possible to meet the challenges, even ahead of his official start date in May.

A key frustration was “Blueprint II,” a project to replace the market’s decades-old fragmented back office systems. The IT upgrade was first set out in 2019 and refined the following year, but there have been repeated delays. A June announcement canceled the planned October launch.

“It was promised and promised and promised, and it wasn’t delivered, and now it’s going to be 2025,” said one market executive. “People are very frustrated.”

Another complained about the lack of clarity about how the project was progressing. “It didn’t (build) to the extent that everybody thought it did. This was something we were told in January that we would be releasing in July.” A third said it was “a credibility problem” for Lloyd’s senior management.

Lloyd’s declined to comment for this article.

Lloyd’s has long struggled with the challenge of creating a common IT platform for the market. Currently, participants use a patchwork of sometimes outdated systems with different data standards and lots of manual tasks. Much of the trading is still face-to-face.

The initial goal is a common system with claims and policy data recorded in a standardized way for everyone to see. The bigger prize would be faster and more streamlined processes, connecting seamlessly to the platforms where policies are agreed and enabling the automatic settlement of tens of billions of pounds of claims paid by the market each year.

But much of the work has been delayed, executives say, by the difficulties of coordinating a single system for the entire market and the complexity of some of the insurance and reinsurance policies.

Some senior market participants say the delays are harder to understand given that the project had already been split into two phases: modernizing back-office systems and standardizing data first, and more ambitious changes later.

The corporation that runs Lloyds “accepts responsibility for the delay but is confident of delivery in 2025,” said a person familiar with its position. The project is the responsibility of Velonetic, a joint venture between Lloyd’s and IT consultancy DXC. The person added that “market testing has identified much greater complexity in the interactions between the market and settlement systems that are causing delays.”

Lloyd’s chief operating officer Bob James was appointed head of Velonetic this year and the unit has promised to offer more transparency and a “clear timeline”. DXC did not respond to requests for comment.

Others draw parallels with an earlier attempt to digitize processes. In 2016, the Lloyd’s market started using Placing Platform Limited, a digital system for “placing, signing and closing” insurance contracts with other market participants.

Robert Iremonger, a Lloyd’s market risk consultant, said it was often not used as originally intended.

“Many of the insurance agents still use paper documents in some cases, and then the broker puts it on the PPL,” he said. “It doubles the workload.” PPL said that about 70% of the contracts uploaded to the system have already been agreed to the market.

John Mason, the new chief executive of PPL, which is majority owned by Lloyd’s, said it was exploring ways to encourage take-up, such as providing traders with data to inform their underwriting.

As well as frustration over slow progress on Blueprint II, some senior market insiders are also worried about strains at the top of Lloyd’s Corporation, which oversees the wider Lloyd’s market.

He’s in a handover period to his new chair, with interim COO George Marcotte only starting the job this month and head of markets Patrick Tiernan on temporary medical leave.

Chief executive John Neal has temporarily taken over Tiernan’s regulatory responsibility to oversee Lloyd’s insurer market performance, adding to his existing regulatory and management responsibilities.

An insurance executive said the corporation’s reliance on Neal for a few key roles was an “operational risk.”

A person familiar with the corporation’s view highlighted the “strong bench of talent” under top executives helping to manage the situation.

Roxburgh’s job is likely to include appointing an eventual replacement for Neal, who was appointed in 2018 without a fixed term. Tiernan is a leading domestic candidate, according to people familiar with the matter.

Roxburgh returns to Britain in February from the US and is expected to begin shadowing outgoing chairman Bruce Carnegie-Brown shortly after, according to people familiar with the plans.

Roxburgh is “an outstanding intellect with a deep strategic understanding” of Lloyd’s, said industry veteran Michael Wade.

Lloyd’s, he added, faces big challenges, including changes in technology. But its unique setup as a marketplace of highly qualified underwriters and brokers surrounded by an ecosystem of specialist consultants and lawyers should do well. “His strengths far outweigh his weaknesses.”