Bite-sized Blueprint One: How are Lloyd’s modernising the way risk is syndicated?

On 30th September Lloyd’s of London published their vision for the Future at Lloyd’s. Here at r10 we have undertaken a detailed study of the contents of Blueprint One and in the tenth of a series of bite-sized articles look at the proposals for changing the way that risks are syndicated, and how this may impact your business.

How Lloyd’s are modernising the way risk is syndicated

One of the more eye-catching changes proposed in Blueprint One are those that impact the roles of Lead & Follow underwriters.

In today’s marketplace underwriters are able to both lead & follow placements, but under the proposals laid out, this will change.  Syndicates will be accredited as either Lead or Follow, with different functions and expectations of them.  It is likely that the Leader or Follow status will attach to the syndicate as a whole or to individual classes written.

The corporation is working with the LMA on a consultation to review the proposals in detail.


What will the key differences be between leaders and followers?

The proposals may evolve as the consultation process concludes, however the outlined characteristics of lead & follow are as follows:-

Leaders will, among other things:-

  • Be compensated for the additional work that they undertake
  • Be defined at class or syndicate level
  • Operate to best practice underwriting standards
  • Consistently deliver world-class underwriting results and quality growth
  • Maintain deep broker relationships
  • Innovate within their leading classes
  • Provide data and data services to followers

Followers, will undertake to :-

  • Operate at lower cost
  • Be high-quality portfolio managers
  • Build collaborative relationships with Leaders
  • Contribute to world-class underwriting results and quality growth

It is not clear, at this stage how the new definitions of Lead & Follow will integrate with risks placed outside Lloyd’s and compensation frameworks for Lead have yet to be confirmed.


What are the expected benefits from these changes?

The move to separating the lead & follow underwriting roles is intended to support the modernisation of the market and enable simpler decision-making frameworks to be built.  These in turn will enhance efficiency and enable smaller niche syndicates to operate at low cost and encourage syndicates to participate in new classes, before committing to a Lead role in the future.

It is expected that follow syndicates will benefit from a more proportionate governance & oversight regime.


What is the proposed timeline?

How will the new approach to risk syndication impact your business?

For Brokers, the re-defining of roles for Lead & Follow may help with securing capacity on syndicated risks placed on the new Data First replacement for PPL.  Claims agreement should be simplified and overall clients may benefit.  There are, however, a number of open operational questions as to how this new approach by the Corporation integrates with placements split across Lloyd’s & the company markets.  The proposals specifically identify that it will be necessary for Follow capacity to build collaborative relationships with Leaders.  Does this mean that follow-capacity will be more inward-looking?

Relationship management teams at both Managing Agencies and Brokers will need to re-evaluate their value propositions, depending on Lead / Follow status and it will be interesting to see how the Corporation ensures that there are sufficient Lead capacity across all classes to ensure it remains a vibrant, competitive marketplace.

How r10 can help

With our in-depth London Market expertise, r10 is uniquely placed to help guide your organisation through the Future at Lloyd’s change programme and over the coming weeks will be updating our blog with insights & guidance on what the changes may mean for you.

Please get in touch for more information on how r10 can help you prepare to play your part in the market of the future.


Read the next bite-sized article in our Bite-sized series “What are the proposed culture and people initiatives?”, which is the eleventh out of the twelve proposed Future of Lloyd’s capabilities.


Author: Chris Carney