In Full: Lloyd’s embarks on redundancy drive
The Corporation of Lloyd's wrote to all of its 1,100 staff to invite them to register their interest in voluntary redundancy, The Insurance Insider can reveal...
Sources said that the communique did not give a target number of voluntary redundancies and it has been suggested that at present the Corporation does not have a specific number of roles it is looking to eliminate.
However, it is understood that the Corporation's management team has accepted that given the savage soft market conditions, it will have to find a way to bring its headcount down and improve efficiency, with the total number of staff set to be lower by the end of 2018.
Sources said that the email made no mention of involuntary redundancies.
The organisational overhaul is believed to be the first stage in an ongoing revamp to the Corporation's operating model as it seeks to improve its systems and processes.
Further details are due to be released to the market by the end of the third quarter, sources said, with headcount reductions likely to feature.
A Lloyd's spokesperson told this publication: "We have been looking at the future operating model for Lloyd's including our proposed structure, our processes and technology, so it can ensure that we are easy and efficient to do business with.
"What we are announcing is the opportunity for people to register their interest in the programme, and this will help inform how we continue to develop our plans around the operating model."
The Corporation employed an average of 1,124 staff in 2016, up from 1,026 in 2015. For last year it reported total income of £332mn ($430mn), up 38.9 percent year-on-year, and operating expenses that climbed by 19.6 percent to £296mn.
Expenses have run away from the market in recent years, affecting underwriting profits to the point where margins are wafer-thin or even non-existent.
The Lloyd's market expense ratio has soared from 34.7 percent in 2010 to 40.6 percent in 2016 as broker revenue harvesting has intensified, pushing acquisition costs significantly higher.
In the first of two announcements made last December, the Corporation explained it was restructuring and simplifying its operations.
Lloyd's CEO Inga Beale said at the time: "This new structure and various initiatives will allow us to become more effective and efficient, ensuring the market has clear routes into the Corporation, avoiding duplication, whilst freeing up teams to look at the issues and opportunities around ensuring Lloyd's remains at the heart of global insurance and reinsurance.
"These changes are about making it easier for us to play the role the market expects."
Changes included the consolidation of oversight functions for regulation and compliance within a single regulatory division and the merger of several different units into a new Policyholder and Third Party Oversight function.
In a second announcement, Lloyd's declared it was reducing market subscriptions by 10 percent for 2017 as it sought to help managing agents address steepling costs.
Expense control is increasingly coming into focus in the market, with a number of carriers and brokers attempting to improve the efficiency of their business models and reduce headcount.
In late February, The Insurance Insider revealed that Allianz Global Corporate & Specialty was looking to reduce its global headcount by around 10 percent as part of an efficiency drive.
Aon subsequently confirmed that it had taken a $103mn charge in the first quarter related to workforce reductions, as it looks to hone its model and future-proof the business following the divestiture of its HR business process outsourcing platform.
Lloyd's declined to comment on the redundancy programme.
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