Article img

Insurer in Full: Bruce or John: who will exit Lloyd’s first?

Lloyd’s CEO John Neal has had many successes at Lloyd’s but also has his critics. There is a growing sense at Lime Street that he may be closer to deciding it’s time to go...

Like many enduring double-acts, Lloyd’s chairman Bruce Carnegie-Brown and his CEO Neal share some common traits.

Both, for example, grew up with successful fathers posted overseas for long periods of time.

Both also have an affable disposition and don’t, for example, get too hung up on formalities – in contrast to some of their more prickly predecessors.

Indeed, their long tenure at One Lime Street (Carnegie-Brown replaced John Nelson in 2016 while former market underwriter Neal returned to Lime Street in October 2018 ) has ensured that a reference to “Bruce” or “John” is now understood to refer to them in the same way that, say, a mention of “Greg” or “Ajit” is universally understood to mean the Aon supremo or Warren Buffett’s reinsurance consiglieri.

And both are now probably approaching their final act at Lloyd’s. This is a certainty in Carnegie-Brown’s case. His final term of office ends in summer 2025 and, as The Insurer reported recently, a process is already underway to find his successor.


The received wisdom – at least until recently – was that a new chairperson will be in place by year-end and one of the important tasks they will oversee is securing Neal’s successor when he decides to step down (in contrast to his chairman, Neal has a rolling 12-month contract and even negotiated a salary increase last year).

But that presumption is being questioned with a growing expectation in market circles that Neal may himself decide to step aside later this year – with perhaps an announcement soon.

What’s caused this change of thinking?

One factor is undeniably positive: the market’s tremendous 2023 result (the best in combined ratio terms since 2006). Curmudgeons may say the market’s result has little to do with who occupies the hot seat at One Lime Street and is much more about the skill of the underwriters and the state of the cycle.


That may be true, but it’s also a fact they get the flak when the market gets it wrong, as Dame Inga Beale discovered after Lloyd’s 2017 annus horribilis. It is only fair then that they share some of the credit the other way. This is perhaps especially true in Neal’s case as he has played a more active role as CEO in managing underwriting performance than his predecessors (including a stint heading the oversight team between Jon Hancock’s exit and the arrival of his replacement Patrick Tiernan ).

The point is that the 2023 result – following a credible turnaround in 2022 – presents a “drop the mic” opportunity for Neal to leave on a high after almost six years in the role. It would also be a natural time to leave in the sense that it coincides uncannily with the average tenure of a FTSE 100 CEO (65 months versus Neal’s current 67 months).

But there are other “push” factors at play, as well.

The first is the market’s costly modernisation programme, which is indelibly linked with Neal’s stewardship. It has had a raft of names – from Future at Lloyd’s and Prospectus in its early stages to Blueprint One and Two more recently – and multiple shifts in direction and focus.

Along this drawn-out journey there have been triumphs – including the London Bridge securitisation platform, renegotiating the onerous back-office contract with DXC Technology, changes to rules around lead/follow and reducing red tape to incubate smaller syndicates – but there is no escaping the growing concern over mounting costs and delivery times relating to its now quite narrow objective of a core data record and digitalised processing.

Indeed, Lloyd’s has been consistently coy in responding to questions about the full costs to the market since it raised £300mn in a December 2019 debt issue, other than vague reassuring statements that it remains on budget.

In fact, we don’t even know whether the overall budget is actually £300mn – nor whether this also includes the heavy costs managing agents are individually having to shoulder to adapt their systems to accommodate the drawn-out systems improvements.

This has led to speculation that the overall burden could be much higher – perhaps even £500mn or more when all these other costs are factored in. This could be easier to swallow if there was tangible progress in upgrading the back office with the DXC (formerly Xchanging) joint venture – now called Velonetic. But for all of the hundreds of expensive consultants, software engineers and technicians employed on the project at various stages, progress has been disappointingly slow. After a failure to begin testing earlier this year, this publication first reported that the switchover deadline of 1 July had again been delayed until October.

Neal (along with Carnegie-Brown) was again pressed on this thorny issue at last month’s AGM.

The CEO repeated the mantra: “We do not see any change in that commitment or spend, or the likelihood of that budget being exceeded.”

But he added a caveat: “That assumes that we cutover in October. If we overrun beyond October because it's not safe to cutover, then there will be some additional cost.”

The Q4 deadline is therefore incredibly important to the credibility of Neal’s project – and by extension his ongoing leadership. Another delay, which would probably be until Q2 2025 because of the 1.1 renewals, will mean the market spends many more millions as it effectively operates with two systems and all the additional costs and management time that this entails. Sadly, fears are growing that this may be more likely following modest results from the now live testing taking place. Ultimately, these additional costs will be borne by the market’s customers.


Frustratingly for Neal there is only so much he can do. After all, Velonetic operates as a semi-separate entity (it is owned 50 percent by DXC and 25 percent each by Lloyd’s and the International Underwriting Association) and it has to engineer an upgrade that all brokers, syndicates and London market (re)insurers can operate on their multiple legacy systems.

It is an increasingly thorny issue – and one that regulators are likely to also be watching closely, including the Prudential Regulation Authority and Financial Conduct Authority because of the systemic risk of operational failure. There will also be scrutiny from Lloyd’s ruling body, the Council. Indeed, market insiders suggest some Council members have recently become more vocal in expressing their concerns and in demanding reassurances about the project’s costs and delivery.

Previous CEOs were criticised for expensive failures around modernisation initiatives such as Kinnect and the Target Operating Model. Now it is Neal who is facing similar pressures and as a consequence the temperature (and scrutiny) is rising.

Nor is the drifting modernisation project the only difficult issue on Lime Street. Neal has made a great virtue of improving the market “culture” during his near six-year tenure, which began with a controversial but unquestionably damaging Bloomberg Businessweek article about heavy drinking and mistreatment of women at work.

Many felt the timing of the article was deliberate: Neal had only recently arrived at Lloyd’s when it was published and two years earlier the executive himself had to publicly forgo part of his bonus after embarrassing revelations about an undisclosed relationship with his then PA. He exited QBE later that year, capping a difficult time at the Australian insurer.

But the response of the new Lloyd’s CEO was canny (and appropriate): he embraced the issues of sexual misconduct and bullying head-on and ordered a raft of policies to improve market behaviour, including a ban on lunchtime drinking for Corporation staff and tough penalties on those who fail to behave properly. It was a change from Dame Beale, who spoke a lot about issues of diversity and inclusion during her time at Lloyd’s but did less in terms of imposing meaningful changes to rules around behaviour.

But almost six years after he succeeded Dame Beale, questions are being asked about whether the Corporation – which Neal heads as the Lloyd’s CEO – is always practising what it preaches to the market that it oversees. In 2022, for example, a number of veteran Corporation executives unexpectedly left the performance directorate department amid suggestions that whistleblower complaints had been made about conduct and behaviour.

Their quiet exits appeared to contrast with the very public shaming of companies by the Corporation, such as Atrium and its former marine underwriter Richard Tomlin (aka “Employee A”) for misconduct (alleged in the latter’s case). The latter successfully defended himself against a determined, three-plus year campaign by the Corporation to bar him from the market, which is likely to have cost millions in wasted legal expenses.

Questions are now being asked about the annual market culture/values survey which Neal commissioned as part of his campaign. The results of the Q1 2023 survey were published in March 2023 but this year not as much information appears to have been published.

In some circles, this is fuelling speculation that the Corporation itself does not come out well. Indeed, the Corporation’s internal messaging suggests this may be the case.

On its intranet, Lloyd’s says: “While leadership scores remain strong, scores on questions relating to role-modelling values, and trust that leaders mean what they say have declined since 2022. Of all the comments improving leadership and managers’ behaviours was the second most prevalent.”

Alongside the values report, questions are also being asked about whether the Corporation is always rigorous in applying proper process in its own employment practices. Eyebrows were raised last year with Neal’s termination of two senior members of the executive committee: general counsel Peter Spires and chief marketing and communications officer Jo Scott.

Of course, business leaders have to make tough decisions but the suddenness of both exits was a surprise and perhaps especially for Spires after 27 years at the Corporation. In Scott’s case, she was swiftly replaced by Rebekah Clement, a younger colleague from the communications department. Her sudden elevation to the Lloyd’s executive committee (with a new role: corporate affairs) was no doubt deserved but Neal’s critics are increasingly emboldened. A year after the appointment, they are more vocal in querying whether all the correct processes took place considering it was such a swift appointment.

Neal has many qualities. Not least, he has restored Lloyd’s confidence after the heavy losses and failures associated with previous management. He is also a great survivor: as demonstrated both by his recovery from his terrible cycling injuries in 2022 and his career elevation despite a tough time at QBE before joining Lloyd’s.

But there is a growing feeling that he may be close to concluding that leaving the market on a high following its recent results turnaround makes increasing sense considering the growing pressures (and critics) elsewhere.

If that is correct, then it will likely be John that leaves first and perhaps one of Bruce’s last tasks at the Corporation will be to find his successor.

Who might that be?

Patrick Tiernan – Lloyd’s chief of markets – has previously shown a desire for the role and might be expected to make a play for it again. On an interim basis, that could make sense especially with Rachel Turk in place as his obvious successor. But Bruce should canvass market opinion widely about the next permanent incumbent. The issue of managing Blueprint to a successful conclusion will surely be high on the agenda and this should elevate the standing of those who have experience in delivering successful change programmes…


For continued access to market leading content click here to enquire about a subscription to The Insurer - your company may already have a corporate subscription in place…

See more
See less
Share fluctuations
Tokio Marine
Hannover Re
Ryan Specialty
Brown & Brown
See more
See less
Upcoming events