Lloyd’s chief executive Richard Ward talks to David Banks about the key challenges he faces as he prepares for a three-month spell that will define his leadership.
Business leader, negotiator, fixer, scientist, derivatives trader – the hats Richard Ward wears appear almost too diverse to be practical. Yet the Lloyd’s chief executive manages to draw on all of this wide experience and produce one cohesive strategy which, so far, appears to have yielded positive results. At the end of 2009, the Lloyd’s market and its member companies are in a relatively strong position thanks partly to the market’s robust standards and partly to the geographic and economic breadth of the risks it accepts.
But what plaudits can Ward personally take for the Lloyd’s market’s success? Between Lord Levene, as the market’s globetrotting ambassador, and Rolf Tolle, as franchise performance wizard, Ward has occasionally seemed in need of his own accolades.
At least, that is the view of people we spoke to on the trading floor, who nonetheless admire his style.
But 2010 could be Ward’s year; the year in which his role as leader of the Lloyd’s market is confirmed. A series of three key challenges – all of which will enter a crucial phase during the next three months – are likely to carve Ward’s name more deeply in the consciousness of international insurance.
They start with the ongoing adoption of electronic messaging and efforts to push into new markets. Plus, Ward will be closely involved in protecting Lloyd’s from regulatory threats around the world and preparing to exploit a strong position during an international financial markets recovery. I caught up with him in Monte Carlo to find out how he is tackling each challenge.
Three years after taking the helm at Lloyd’s, Ward is still proud to be a newcomer. “I’ve never stopped feeling like I’m new to the role. It’s because I’m a scientist, not an accountant or a lawyer. I don’t know when you ever feel comfortable, but that’s part of the excitement.”
I speak to him between meetings with reinsurance bosses visiting from Bermuda and fresh from a chat with UK finance minister Alistair Darling in London a few days before. Fast-talking and jovial, Ward is also in a reflective mode. “I’m actually a physicist, who started off doing neutron scattering with disordered crystals.”
More scientific terms roll rapidly off the tongue
and are clearly said for comic effect. Yet the jargon from Ward’s days as a senior physicist at a government research institute seems designed to make a point:
to emphasise how far apart he is from others in the
financial world and how much he values taking a
“Scientific research wires your brain in a structured way, to assess data and come to conclusions. It’s the discipline of problem-solving that’s so important, as well as the foundation of numeracy and being comfortable dealing with formulae,” he says.
He doesn’t look like a scientist. If anything, Ward has the demeanour and emphasis of an army officer. But the conversation about science brings his focus to the first of his major challenges as the Lloyd’s boss: technology. The Lloyd’s Exchange – the market’s
electronic messaging hub – began operating in the summer of 2009 and the start of 2010 will be crucial in any attempt to gauge success and encourage further buy-in from the London market as a whole.
“The Lloyd’s Exchange has only barely started,”
he says, “but we have an agenda going forward. What I’ve been doing with Lloyd’s in the market
has been to work out how we can use technology in an intelligent manner.”
Market process reform, particularly the use of technology, is where Ward says he is most proud of having made a difference. He uses phrases like “straight-through processing” and “seamless transactions” – his second barrage of jargon in the interview. This time it is said seriously, but again the phrases seem designed to emphasise distance: the distance between the market’s current technological state and where he wants to take it. But it is a change he is prepared to take time over.
“I’m not a revolutionary, I’m an evolutionary,” he says. “Otherwise, you risk falling flat on your face.”
Ward scrapped a deadline that demanded Lloyd’s members declare their participation in the Lloyd’s Exchange amid concern that corralling companies would only breed resentment and stifle buy-in.
One of Ward’s trademarks in the development of the Exchange has been to encourage greater collaboration > and consultation, particularly from software
developers. Thus, Lloyd’s has put together a
messaging system that is more adaptable and offers more choice, in contrast to the one-size-fits-all approach that stifled previous technology projects.
Seen but not heard
When Ward arrived as chief executive in April 2006, the underwriting floor regarded it as another outsider being brought in. He immediately made a flurry of announcements about what he planned to do to “sort out the back office first then tackle the distribution”. He also criticised managing agents for arguing among themselves and for failing to invest in graduate programmes.
Then there was silence. This was detected by the first of our sources. One, an underwriter, says Ward is now mainly heard when Lloyd’s results are announced. “He needs to be more visible and more of a political animal,” she says. “He needs to take more risks and cut red tape to allow underwriters to do the same. But if personality makes a difference in decision making across the market, then I think Richard Ward can also claim to bring energy and a fervour to succeed.”
Was it an intentional decision on Ward’s part to refrain from making potentially frictional statements?
As the second of our anonymous sources – this time a broker – suggests, Ward’s lack of announcements after an initial six months of very public
communication could reflect a desire to settle into a more diplomatic style.
Today’s Lloyd’s certainly has a more unified
message. Dissent is at a minimum and the market
is no longer characterised by sniping and division, which says a lot for Ward’s style: affable,
collaborative, reflective and responsive.
Our third Lloyd’s voice, also a broker, was full
of praise for the management but wondered how
Ward and Co would avert pressures to become
overcautious in the future. It is a subject Ward is quick to counter. “I would take issue with that,” Ward says. “We are known for being risk takers and entrepreneurs. But I do think we are known for being careful with money.”
“We made a return in 2008 and we were able to do that because we invested in fixed incomes and government bonds, and because of that we were able to take risks on the liabilities side. I would not describe it as being cautious, I would say it is being very mindful of the risks; managing them appropriately and deciding which ones you want to take on.
“In the early 2000s, we had Enron and Worldcom. So the measures that Lloyd’s is taking are not about being cautious, but being clever.”
The second major test for Ward will be protecting Lloyd’s and the London Market from any knee-jerk regulatory reactions in the wake of the economic crisis. The Neal Bill in the US is one of several protectionist measures around the world to tax foreign reinsurers.
“We are worried about any protectionist moves by any country that will have an impact on cross-border trade. We need to see how it plays out. We have to guard against being protectionist, guard against nationalism and reduce barriers to free trade. The way to get out of the economic crisis is to encourage cross-border trade, otherwise it could damage or slow the recovery.”
A concurrent regulatory obstacle comes in the European Commission’s refusal to protect standard policy conditions in insurance from competition law. But Ward says he is not worried.
“We are a highly competitive market, competing on price in a very fair and transparent manner, and the market is absolutely compliant,” he says. “The [European Commission’s] Directorate General for Competition looks like it will not renew that block exemption, but we’ve been operating using common wordings that have not fallen foul of competition law.”
The third challenge Ward is taking forward is the effort by Lloyd’s to exploit opportunities that arose during the downturn. Lloyd’s has commissioned accountants Deloitte in July to conduct a review on the subject. It is expected to overhaul the Lloyd’s
strategy by adding to its existing three-year plan.
Foremost in the expected recommendations is a proposal widely voiced in the London market that Lloyd’s should attempt to gain business from Lexington, its leading rival in the US property
and casualty sector, when it is spun off from AIG. Analysts expect Lexington to change its underwriting style once it is bereft of the financial backing of the US government.
Ward says competing head-on with current or former AIG subsidiaries might be an opportunity, “but only at the right price”. “We won’t drive down rates,” he says. “We’ve established a reputation for doing business at the right price.”
David Banks is deputy editor of Global Reinsurance
Ditching the golf
Richard Ward says his pastimes have not changed since joining Lloyd’s, except for one thing: he no longer gets to the golf green. “I decided not to play any golf, because I did not want to be compared to Nick Prettejohn, my predecessor. Nick was very good and I’m an absolute hacker.”
Here’s a man who knows how to play to his strengths. He adds: “But for the most part, my hobbies have not changed in that I don’t get a lot of free time.”
Ward, who is married with two children, is a keen sports fan, who enjoys sailing and has played in a veterans’ field hockey team.