Unusually, there was no detail on what took place that warranted the resignations of founding CEO David Walsh and underwriting head Graeme Newman. Indeed, Lloyd’s only issued a short statement which included a refusal to “comment on the specifics of the case”.
We say “unusually” for two reasons.
The first is that CFC is a remarkable London market success story. Launched in 1999, it was one of the cyber insurance pioneers and as an MGA has made hundreds of millions in underwriting profits for its capacity providers (many of whom are Lloyd’s syndicates).
In 2021, CFC was valued at over $3bn– a high-water mark valuation at more than 30x Ebitda. The forced exit of a Lloyd’s company’s two most senior leaders is a rarity in itself – that it happened to such a respected business as CFC is extraordinary.
The second is that Lloyd’s near-silence on CFC is in stark contrast to the approach taken with Atrium and its former marine underwriter, Richard Tomlin, last year. In that case, a public notice of censure and a four-page market bulletin trumpeted that Atrium had been levied with a record £1.05mn fine (plus over £500,000 costs) for previously indulging in a “boys’ night out” culture which, according to Lloyd’s, involved “initiation games, heavy drinking and making inappropriate and sexualised comments about female colleagues, which were both discriminatory and harassing to female members of staff”.
Atrium’s then two most senior executives – CEO Richard Harries and underwriting head Toby Drysdale – have since left the firm. Lloyd’s CEO John Neal professed how “disappointed” he was. It was, in other words, a very public tarring and feathering of a Lloyd’s insurer and a demonstration of how serious the Corporation is in ensuring work culture and attitudes reflect modern standards of acceptable behaviour.
There was no suggestion in the bulletin that Tomlin (identified by Lloyd’s as “Employee A”, but whose identity was so widely known within the tight-knit London marine market that he was dismissed from Convex shortly after publication) was involved or participated in the “boys’ night out” events. Indeed, it was even acknowledged in the later tribunal judgment that he had called for it to end.
However, the bulletin laid out two separate charges that did involve him. Lloyd’s said Atrium failed to take adequate steps to deal with his "systematic campaign of bullying against a junior employee over a number of years".
In addition, explained Lloyd’s, Atrium failed to notify the Corporation of its own investigation and, rather than pursue disciplinary action, it “negotiated a settlement package with Employee A, and allowed him to resign from Atrium rather than face disciplinary sanction”.
As a consequence, Tomlin was then charged with “conduct which was discreditable to Lloyd’s and detrimental to the interests of the Society and its underwriting agents”.
If found guilty, a lifetime ban was inevitable.
But Tomlin – as regular readers will recall – was largely victorious at the Enforcement Tribunal earlier this year with the chair rejecting all of Lloyd’s 36 charges. And yesterday, this publication revealed he was also successful in appealing on the outstanding minority of charges upheld by the two junior (non-legal) panellists. In effect, the process ruled that the charges were unproven, untrue or not serious enough to warrant a market misconduct process.
It will naturally be interpreted by some as a David vs Goliath victory – not least because Tomlin has been out of work since his investigation was made public and he will have racked up huge legal costs and time defending his name.
But it also raises issues of regulators balancing the importance of enforcement/maintaining standards of behaviour versus following due process and considering what should be made “public”. This is especially true when it involves someone’s livelihood.
This is important because it is essential that victims of bullying and discrimination are able to speak out but equally that those accused are given a fair opportunity to defend themselves and challenge the accusations. It wasn’t fair (as the original tribunal itself ruled) that, in Tomlin’s case, he was effectively identified by Lloyd’s and therefore lost his job before this process took place.
It also appears odd that, in CFC’s case, Lloyd’s is content to remain silent post investigation while for Atrium there was a four-page notice of censure which – with its details – predictably inspired lots of lurid headlines in the national as well as trade media (BBC: “Lloyd’s of London fines Atrium over initiation games”; Sky News: “Lloyd’s of London underwriting firm Atrium fined £1.05bn over ‘Boys’ Night Out’ discrimination and bullying”).
Why the different approach with CFC this year versus Atrium last year?
Perhaps Lloyd’s is changing its approach after the Tomlin affair, perhaps the misconduct at CFC was not as severe as what occurred at Atrium or maybe a quiet arrangement was reached with CFC’s leadership to go quietly with no fuss?
We simply don’t know.
Nor, for that matter, is there clear agreement on what amounts to non-financial misconduct. Bullying and discrimination clearly is unacceptable, but one of the 36 misconduct charges levelled at Tomlin was that he used a derogatory nickname of the former Lloyd’s CEO in a pub. Does that really warrant a lifetime ban from working in the market?
The Insurer argues the most fair and consistent way for any regulator to publicly handle non-financial misconduct probes is the same as financial ones. The investigation should take place in private and only once the results are established, the explanation and details are published. This would enable transparency and clarity on what actually amounts to unacceptable behaviour and, above all else, ensure due process and that everyone is treated fairly and equally during the process...
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