Lloyd’s Blueprint Two Update: The Oxbow Partners View
February 21, 2022 Greg Brown
In January 2022, Lloyd’s released the second edition of their Blueprint Two Interactive Guide. This 175-page interactive document is the latest instalment of the Lloyd’s Blueprint series – the transformation programme previously known as ‘Future at Lloyd’s’. This update primarily sets out the roadmap for change over the next two years.
We recently published our summary of the document. In this article, we share seven observations on the update and set out how we believe market participants should respond.
7 observations on the Blueprint Two Update
1. A shift to execution
In this update the focus shifts from getting the market ready, to setting out a concrete roadmap for change. Over the last 12-months, we’ve observed first-hand the market losing trust in the Blueprint. Our clients have shifted the questions they ask us away from “What should we do given Future at Lloyd’s” to “What should we do despite Future at Lloyd’s”. Lloyd’s are hoping that the roadmap will go a long way to appeasing those that have lost faith. Whether the guide is viewed as a success or not will depend on the ability to abide by the timelines provided in the roadmap.
2. Has the Blueprint lost its ambition or is this a shift to reality?
The original prospectus and Blueprint documents were hugely aspirational. They set out a bold vision for a digitally traded Lloyd’s that created an open and innovative platform for placing risk. For those that believed in the vision it painted a picture of an exciting future. In this latest update those original believers are left wondering where all that has gone. How has it now been boiled down to data standards and back-office optimisation? It all seems quite dry. Has the Blueprint lost its edge and given up on the ambition?
Oxbow Partners believe that whilst the latest update is not as visionary as its predecessor it could be argued that it’s what the market needs. A practical, realistic and potentially still optimistic, plan for execution. The Future at Lloyd’s journey has been tough to date and narrowing focus to core aspects of delivery that create tangible value is a noble ambition.
3. London Market not just Lloyd’s
This update signals a further shift away from ‘Lloyd’s only’ towards a fully London Market inclusive transformation. There is not a single mention of Future at Lloyd’s in the whole document. This is the first update to do that. From an execution perspective this makes complete sense. The Blueprint is putting in place a whole of the market operating model that makes accessing the London Market a consistent experience with a consistent set of rules. However, the question this leaves is does this erode Lloyd’s proposition to the market? If there is no difference between company and Lloyd’s market what is the value of Lloyd’s?
4. Where is PPL?
PPL is an obvious omission from this update. As the Blueprint has opened up to other platforms (e.g. Whitespace) there is a reasonable case for the omission – you must either include all or none. However, given the hopes and expectations on PPL 2.0 across the market we would argue continuing to track major milestones would be beneficial to help people understand the market transformation.
5. DXC as the saviour of the transformation
In January this year the LMG and IUA entered into a contract with DXC to transform the market. This is clearly a major milestone. Back-office capabilities are in need of a significant reinvestment and transformation. There is limited detail in the update on precisely what this means nor any idea of timelines. The contract was only signed in January so this will take time but given its front and centre positioning the market will expect this to come quickly.
One area of curiosity is that DXC were nowhere to be seen in the Blueprint a year ago. Now they are the change-agent at the heart of the market transformation. We believe confirmation of their involvement is an important step, but it hasn’t gone unnoticed that DXC is a late entrant to the party.
6. Narrowing in on data
The original Blueprint focused heavily on market platforms and the technology supporting it. Over the last two years emphasis has, we believe rightly, shifted towards setting data standards and freeing up the market participants to adopt them however they see fit. However, there will be an uphill struggle to achieve design and adoption. Fortunately, the Data Council being run by the LMA is a solid foundation and looks set to focus on taking practical steps to drive design and adoption.
The timelines for delivering the data standards are tight (end Q1 for CDR and end Q2 for iMRC) but achievable if there is a serious push to gaining consensus. This leaves the major task of driving adoption across the market.
7. Transition services – a get out of jail free card?
Two sentences in the update hold a lot of weight:
‘Full digital adoption will be available from the market-wide cutover in Q2 2024. For market participants who need more time, transition services will be provided.’
One of the challenges we identified in the first Blueprint was that until you move off legacy you end up with twice the cost (legacy plus new tech). Will these transition services provide a get out for insurers and continue to extend the timeline to market digitisation? Lloyd’s will need to make sure adoption is the more attractive option than a slower transition.
How should market participants respond?
Whilst there are challenges with the market transformation, we strongly believe that participants must consciously engage and support the transformation. Without engagement it cannot be successful.
We see three areas where market participants require concrete strategies and plans to support the transition set out in the Blueprint:
- Conscious Blueprint engagement strategy – make deliberate choices about where you will play and where you will not. This needs to be driven by your focus as a business and corporate culture (e.g. pioneer or fast-follower). We would strongly advise against ‘dipping your toes’ across the full spectrum of activities of the Blueprint. Once you have made these choices, put effort into actively engaging and investing in these areas.
- Connected-ready technology – the transformation is driving the need for participants to be much more connected. Typically, London Market businesses are technology ‘islands’. Participants will need to change and be ready to connect with the outside world. For many market participants this means a significant shift in technology strategy and architecture.
- Digitally-minded operating model – market participants should be evaluating whether their current operating model is set-up to prevent the inevitable teething problems that will come with digital adoption disrupting their traditional UW activities. They must ensure that they have both the business capabilities and people with the requisite skills to support this change.
Whether or not the Blueprint will be the main driver of a shift to a more ‘digital’ market place, it’s inarguable that the market is trending in that direction with Sequel (Sequel 6), Ebix (PlacingHub), InsurX & other vendors all announcing or in the process of developing propositions for digital platforms. Therefore, irrespective of Lloyd’s market participants need to make clear strategic decisions regarding their digital transformations.
Oxbow Partners has helped many clients in the London Market set out their strategy for transformation and digital adoption. Please contact us to discuss how we can support your digital transformation.
