Face to face, or not face to face, that is the Lloyd’s market question

There has been much fanfare recently around the newly refurbished ground floor of Lloyd’s and the associated excitement in media streams around the prospect of trading returning to the halcyon days of brokers sitting with underwriters and engaging in person. To be fair, the shiny upholstered ground floor does look much better, but I think it takes more than a new carpet and some plants to really encourage the levels of face to face broking that were once seen in this esteemed building.

I would caveat what follows by stating that I write as a participant in the casualty market, and I appreciate the sentiments expressed below may well be different for other classes of business.

To take a step back in time, I first entered the Room in 1999 as an underwriter at Danish Re Syndicate and there was much to decry in terms of efficiencies. We kept unsecured paper files at the Box (we had to hole punch each document) which no doubt would send any self-respecting data security officer into paroxysms of anxiety in today’s digitally aware world. Queueing wasn’t very organised or comfortable but necessary as at that time it was forbidden to stamp a slip and agree participations unless you were physically in Lloyd’s, although I am not convinced everyone abided by that rule. We saw a constant stream of brokers between 11-1 and 2.30-4.30 as the core hours of trading. We sat there every day, 5 days a week and bar some line slip facilities where we received slips in bulk to enter on our systems outside of box hours, all of our commercial activity was undertaken in Lloyd’s. The office was for admin only.

Over the years, subtly but surely, the methods of placing business changed. Binders and facilities became more prevalent and everyone, rightly, looked to make business processes more streamlined and embracing any available technology. Queueing for an hour for an endorsement clearly did not fit this profile. By the latter part of the 2010s, say around 2018, although we faithfully attended the Box every day the reality is that the broker footfall had dwindled significantly. Probably at this juncture only 20% (if that) of our business was being done in person. Maybe a shame in some respects, but there it is. PPL was also the logical conclusion of this transition, allowing the market to bind business electronically and removing further need for in person contact.

To my mind, COVID cemented the remote broking model. The market embraced remote working and placement of risks during the pandemic, as it had to, and with the revelation that face to face engagement really wasn’t necessary for the efficient placing of business, the need for it fell away further. It simply isn’t the case in my experience, as sometimes gets mooted, that COVID was the catalyst for trading to move away from face to face. That had happened several years before. As Casper, we now trade outside the Room and have noticed no difference to our trading volumes at all. I noted at one stage there was some anecdotal commentary around brokers bemoaning the lack of underwriters attending boxes – but the fact is underwriters stopped doing this a while ago in response to lack of broker footfall. Indeed, some markets have left the Room entirely as the volume of business generated simply didn’t justify the costs of having desks there.

So the idea that with the aforementioned new carpet and plants we will return to a world where much of the market’s risks are placed in person seems rather fanciful. Indeed, Lloyd’s even seems to have hedged its bets in this regard as the facelift is confined to the ground floor and nothing has changed on the floors above. Do not misconstrue my comments as a lack of faith in the model. We are proud promoters of Lloyd’s as a brand and paper, which we wholeheartedly endorse – Casper trades under its own Lloyd’s stamp after all. However, the messages to my mind are mixed. It does not gel to talk of a desire for people to return to the Room when the market also seems in a race to generate algorithmic trading models. If this is the direction of travel, to have high levels of capacity within largely follow-only businesses powered by AI, then the corollary of this will be that we don’t need that many people at all. Hence why I find the message confusing – on the one hand let’s talk more and engage face to face, but on the other let’s encourage the genesis and rapid growth of underwriting businesses that de facto do not need personal engagement to be effective.

Let’s face it – future generations of market professionals will decide. It’s all very well for gnarled veterans like me to focus rose-tinted spectacles on the good old days. I have a hankering for the more traditional methods of generating income because I was brought up in that environment and most of my really close relationships (all one of them) were forged in that crucible. We are now used to communicating through technology constantly and this unsurprisingly has segued into business, and in many aspects makes a lot of sense. I trade with quite a number of brokers I haven’t yet met and indeed who don’t seem to feel the need to meet either (although I suspect my reputation precedes me). That does not make it wrong.

In conclusion, though, we are still great believers in real people. It’s tough to sit a client in front of an algorithm and they aren’t great socialisers either. At Casper, we still think real people are at the heart of successful relationships and so we’ll still be bothering our market peers to meet in person. Just need to get that shuffleboard table in the office now….