The new Lloyd’s CEO John Neal will take the helm at a key juncture in the market’s 330-year history.
The marketplace faces acute short-term challenges, as well as long-term threats, to its position that Neal will need to move decisively to address if Lloyd’s is to defend its position as the home of specialty risk.
Chairman Bruce Carnegie-Brown has notably acted more like a non-executive chairman than his predecessors, and this creates the space for Neal to play a bigger role than Lloyd’s CEOs have traditionally been able to.
Although he will have more of a broader remit than previous CEOs, Neal will have to accept the limitations of the role: the Corporation is not a PLC and cannot be run from the top down.
He cannot force the managing agents to run their businesses in a certain way, but there are lots of areas where he can look to make a positive impact by setting the tone for the market, pushing modernisation initiatives and using the business planning process to instil underwriting discipline.
Inga Beale’s exit was only finalised in late June, and Lloyd’s should receive credit for acting rapidly to bring in a replacement.
When he takes the hot seat in October, Neal will have to prioritise work on a strategy to address the market’s short-term issues, as well as helping performance management director Jon Hancock to execute on the current work to close the performance gap.
Alongside the well-documented profitability issues around loss ratios, Lloyd’s needs someone to drive increased operational efficiency in an over-expensed market.
It also needs someone to steady the ship after a succession of exits from the top team in recent months.
Recent resignations and retirements include CFO John Parry, chief commercial officer Vincent Vandendael and chief strategy officer Paolo Vagnone. Neal will need to work with Carnegie-Brown to replenish the depleted senior ranks.
Support from the managing agents is crucial. Many of the active underwriters and CEOs that this publication has spoken to feel ignored by the 12th floor of 1 Lime Street, and if the market is to pull itself out of its current crisis, it needs all of the captains of Lloyd’s 50-plus managing agents to be pulling in the same direction.
Longer term, Neal will need to tackle the big-picture challenges that face EC3, which require the market to define a vision for its long-term value proposition.
Here, it will have to address the major distribution challenges, the burden of over-regulation, the ongoing need to modernise processes and the market’s expense problem.
Neal has a breadth of relevant experience behind him, and the appointment has been fairly well received in the market. However, his latter experience at QBE was anything but plain sailing.
Neal first gained recognition as an entrepreneur who built up Lloyd’s motor insurer Ensign Syndicate 980. The business was sold to QBE in 2003 and Neal made the jump from entrepreneur to corporate environment successfully.
In the years that followed, he worked his way up QBE’s ranks, becoming chief operating officer for Europe in 2007, then QBE Europe CUO and global CUO in 2011, moving to Sydney in the process.
Named as Frank O’Halloran’s successor in February 2012, he finally took the reins that October, inheriting a company that was fast approaching crisis point.
In November 2012, Neal was forced to issue the first of six profit warnings in his six-year tenure after the consequences of his predecessor’s over-aggressive push into North America started to become clear.
A slew of US acquisitions gave QBE a significant specialty presence in the world’s largest insurance market, but they also resulted in serious issues around reserves and regulatory issues surrounding the forced-place insurance market.
Neal moved swiftly, overhauling management and replacing key O’Halloran lieutenants, as well as divesting businesses and overhauling reinsurance buying.
Despite his efforts, further profit warnings followed as sleeper issues in long-tail classes of business such as workers' compensation, general liability and construction defects risks emerged.
In March 2017, somewhat embarrassing headlines emerged, as QBE chose to dock Neal’s bonus by A$550,000 ($355,370) after he failed to disclose a relationship with his executive assistant in a timely fashion.
Later that year, adverse weather and legacy portfolio issues dogged QBE’s Asian and Latin American books.
Neal announced his intention to step down in September 2017 and the next month QBE made a sixth profit warning under his leadership, driven in part by the natural catastrophe losses from Cyclone Debbie, the Alberta wildfires, the Ecuadorian earthquake, and Hurricanes Harvey, Irma and Maria.
Detractors of Neal will say this points to an inability to turn around a failing company.
But there is a widespread view in the market that he was handed an impossible task in trying to get QBE back on track, and performed creditably. In addition, it means that Neal arrives battle-hardened, with a very relevant set of experiences.
The market perception of Neal is positive; many senior figures in the market have told this publication that they welcomed his appointment.
Sources said Neal is technically proficient, a real market practitioner and – crucially – an underwriter at heart. One senior market source who has worked with Neal said he was one of the few CEOs in the market who can cut deals across the table in real time.
Another refrain from sources was the strength of Neal’s communication skills. Sources also suggested that he was personable and well-liked in the market.
Having a combination of both London market and international experience is perceived as a major strength, with sources suggesting that he has shown he can lead from the front and get things done.
What has been most noticeable, however, is a renewed sense of hope. The hope that a fresh broom could bring real change, and that, in Neal, Lloyd’s may have found its “true CEO”, who can successfully put the Corporation on surer footing.