Various plans such as rotational working are being considered as businesses juggle operational requirements with the need for social distancing. It has been suggested that some companies can hold less than a third of employees in the office at any one time if they are to implement effective social distancing as per the latest government advice.
It is understood that company staff surveys have shown little appetite for a return to EC3, with commuting a major area of concern for employees, although those living in house shares or less spacious accommodation are more in favour of coming back.
Marsh is understood to be gradually reintroducing the use of its London office in July, up to a maximum of 10 percent of office capacity. This will then be built gradually over the following months to a maximum of 40 percent of capacity, however coming into the office will remain an entirely voluntary decision for staff to take.
Tokio Marine Kiln is taking a similar approach, with a phased return starting in July with a handful of volunteers, and no member of staff forced to come into the office. Beazley is also preparing for phased return to all its offices in the summer, the manner and timing of which will be based on official guidelines and consideration of employees’ own preferences and circumstances.
Miller is currently planning a phased return in September, but is aiming to be flexible as the situation evolves. September is broadly believed to be the point when a more substantial number of workers will return to EC3, in line with the reopening of the Lloyd’s underwriting room on the first of the month.
However, it was suggested that some companies are not targeting a return until 2021.
Real estate
Meanwhile, some companies are reducing the amount of office space they lease in the City of London, having sighted an opportunity to cut costs in a market where expenses run at as much as 40 percent of premium and are a persistent threat to profitability.
The average rental values for London are between £70 and £82.50 per square foot for Grade A real estate, according to Q1 data provided by office design company Oktra. For lesser standard Grade B buildings, the average cost is between £67.50 and £75 per square foot.
Sources said Ed Broking recently pulled out of a nine-year lease it planned to sign for two floors at One America Square.
Tokio Marine Kiln is also understood to be reducing the amount of floor space it occupies in 20 Fenchurch Street – otherwise known as the Walkie Talkie – by vacating two floors, although it is understood this decision was taken pre-Covid.
A number of London market players had planned to move into the new 22 Bishopsgate building before coronavirus hit, although completion works on the building have been delayed.
Beazley and Canopius are also expected to move into 22 Bishopsgate, with the latter confirming to this publication that it would lease two floors of office space in the new building.
Michael Watson, chairman and CEO of Canopius also said: “The experience of lockdown has had a profound impact on ways of working. We think it is likely that there will be a greater amount of working from home in future which raises the question of how best to utilise our new office space.”
Beazley also confirmed that as per plans agreed in 2018, the London office move to 22 Bishopsgate would see a slight reduction in floor space and the same capacity for employees compared to its current office, albeit with very different types of workspace.
It was previously suggested that Hiscox was to scale back the number of floors it took in the new building from three to one, however it is further understood that no final decision has been taken on the matter.
Sources also said that managing agents are also considering how much box space they will need at Lloyd’s in the new working environment, in a bid to reduce cost further.
The Corporation shut down the underwriting room on 19 March as the country locked down in an effort to halt the spread of coronavirus.
When it opens, the underwriting room will operate at 45 percent capacity with social distancing guidelines. Lloyd’s installed perspex screens at underwriting boxes and temperature-check thermal cameras as part of the safety measures.
The Corporation is also considering a class of business rota system to manage capacity at Lloyd’s. However, sources said it is not clear how this would work with rotational working arrangements at individual companies, and could present a huge logistical headache.
Challenges and opportunities
The ability of the market to continue trading remotely has broadly been considered a success.
The uptake of electronic trading spiked following the lockdown, with PPL users up 40 percent between the middle of March and the beginning of April.
As a result, executives have spotted an opportunity to slash expense ratios, a perennial challenge for London traders.
“It will not have gone beyond most finance directors’ notice that nobody has been in EC3 now for 10 or 11 weeks and yet trading has still happened, contracts have been placed, claims have been paid,” London & International Insurance Brokers’ Association (Liiba) CEO Christopher Croft said at a Verisk event this week.
“I cannot envisage a world where people continue to pay for expensive floor space for underwriters in their expensive offices in EC3 and also box space in the underwriting room.”
Croft said he envisaged a future where smaller brokers located themselves in commuter towns with easy access to London for face-to-face meetings.
“That will lead to still a lot of face-to-face interaction, but a lot more focussed face-to-face interaction,” he said.
He suggested that the Lloyd’s underwriting room could serve as a “WeWork of insurance” where people could spend time between meetings and gather for discussion, rather than to trade.
However, remote working has also presented challenges and raised long-term questions about career development and forging relationships.
Croft also noted that the lack of social interaction limited the “tacit knowledge exchange”, which was one of the London market’s unique selling points.
“An enormous amount of how London as a marketplace works, and being the only true marketplace for insurance, are those informal interactions,” he said.
Latham & Watkins partner David Berman also told a Marsh webinar this week that conduct and culture had come under the spotlight during lockdown, and noted a trend towards “informality” and “lax, inappropriate behaviour”.
The Financial Conduct Authority (FCA) has warned that home working can facilitate misconduct, and that it is harder to instil a positive workplace culture.
In a joint-authored article posted on its website, FCA officials also noted that the success of home working depends on individual circumstances.
“It’s also important to remember that there is a disparity in the impact of home working, and that it better suits those who sit higher on the socioeconomic scale,” the article said.
“If you have a large house with a garden and a separate workspace (and you don’t have small children at home), home working is likely to be a very different experience to that of someone who shares a flat with no outdoor space with three other people and has had to spend months using their bed as a desk.”
Insurance Insider delivers global wholesale, specialty, and (re)insurance intelligence that enables you to act first. Redeem your complimentary 14-day trial for more premium content from Insurance Insider.
Scan here to download the app