Brexit and Its Impact on Lloyds: The Take of a Veteran British Risk Manager

By: | October 15, 2019

Tony Boobier is an experienced independent consultant focusing on insurance analytics. An international speaker, commentator and published author, he lies awake at night thinking about the convergence of insurance and technology. He can be reached at [email protected]

“Keep calm and drink more tea” might be the overwhelming sentiment at Lloyds of London at the moment. In the absence of being allowed anything stronger — Lloyds banned the consumption of alcohol during working hours in 2017 — it looks like effective use of the teapot may be a critical success factor going forward in these uncertain Brexit times.


It’s a period of unprecedented change not just for Lloyds but for the UK as a whole, as politicians argue amongst themselves about how the United Kingdom will leave the European Union as part of the whole Brexit debacle. The UK Government’s recently published report code-named ‘Yellowhammer’ points to potential shortages in food and medicines, delays at important ports and even the potential for civil unrest. Businesses are already being impacted by the uncertainty. But don’t worry, a week is a long time in politics.

In the City of London, contingency plans have been drawn up, Lloyds included. The London Market is currently the largest global hub for commercial and specialty risk, comprising over 350 firms and employing 48,000 staff, and one which contributes more than 20% of the City’s GDP. It’s built on traditions which have supported clients from all over the world as they undertake global trade and investment, and takes risk within a regulatory framework and tax environment which is attractive to foreign investment.

The outcome of Brexit is important to the London Market as access to the EU provides three key benefits:

  • It provides access for the London Market to the Single European Market
  • It encourages foreign investment
  • It facilitates trade to countries outside the EU.

But, as Bloomberg recently reported, as much as £61 billion of business is shifting to rival financial centers in Europe. If Britain leaves without a comprehensive agreement, Lloyds said that it wouldn’t be able to guarantee payment of claims although instructions have been given to syndicates to honour claims, even in the event of a no-deal. It’s no surprise that its clients are also making contingency arrangements too.

“Keep calm and drink more tea” might be the overwhelming sentiment at Lloyds of London at the moment.

From a customer point of view, clients and intermediaries will want to ensure that the protections and insurance coverage which they have come to rely on remain in place. The problem is potentially more acute for international and global businesses such as marine, aviation and cargo but in a commercial market which increasingly relies on global supply chains, the impact is likely to be profound.

These decisions to change insurance arrangements are not arbitrary as companies have a duty to their stockholders to ensure that there is continuity of cover. The impact of Brexit is not only affecting commercial decisions but undermining established and trusted relationships.

It’s not as if this is the only issue that Lloyds need to deal with. At the same time, Lloyds also just published ‘Blueprint One’, a document which lays out how it plans to build “the most advanced marketplace in the world.”

“The City”

It comprises six new integrated solutions —  a complex risk platform; a risk exchange; a claims solution; a capital solution; a new “syndicate in a box” solution, and a new services solution, with an ambition to see some of these in 2020. It reflects the increasing focus on data, digitalization and technology.

Some suggest that Lloyds traditionally struggled with change and transformation, and Brexit, in either a structured or no-deal form might only provide ammunition for those who are reluctant to accommodate change. Loss of business may also start to distort ROI calculations, and prejudice investment decisions.

Yet Lloyds, like all other insurance outlets, needs to move with the times. Being a specialists’ hub does not license it to operate within an invincible and indestructible bubble. Insurance, the broader industry, has never sat in isolation, but rather is part of a complex ecosystem which embraces political, environmental and economic climates.

It’s not as if this is the only issue that Lloyds need to deal with. At the same time, Lloyds also just published ‘Blueprint One’, a document which lays out how it plans to build “the most advanced marketplace in the world.”

Their remains room for optimism in all of this.  There has been talk in the past of London becoming a free-trade for businesses to “turbo-charge” the economy, something which the UK’s European insurance partners are likely to feel extremely nervous about.

The impact of such a “special economic zone” on their doorstep could equally destabilize the European insurance marketplace and reinforce London’s place as an established Financial hub.


The pressure is now on for London however. The latest financial center rating index placed London in second place below New York and above Hong Kong.  However, according to City AM, a London business newspaper, London lost 14 points in the index because of Brexit uncertainty and the city will be keen to ensure this isn’t the first sign of a slippery slope.

In terms of talent, with a lot of the technical expertise resting already in London, it’s unlikely that there will be a mass shift of personnel to the continent.

The Role of Machine Learning

It’s tempting to think that AI and Machine Learning might provide some sort of panacea for fears of shifting loyalties and talent pools. There can be little doubt that at one day in the future, more advanced systems may replace parts of human knowledge, but we’re not there yet. Perhaps market forces will cause development to be accelerated, creating new opportunities for tech companies; practitioners shouldn’t hold their breath.

Perhaps there are other steps which might need to be taken. In the past, Lloyds has sought to reinvent itself almost as a brand, with hubs not only in Brussels — as a response to Brexit — but elsewhere in the world. Already they have footprints in India, Dubai, Japan, China and Hong Kong S.A.R. The impact of unknown Brexit consequences shouldn’t be underestimated and a combination of factors could create some form of catalyst for a significant, currently unforeseen change.

Over the years, Lloyds and the London Market have shown themselves to be extremely resilient. In the life cycle of any industry there are inevitably ups and downs, and the road forward is sometimes rocky, so it’s important to remain stoical about these circumstances.

Practitioners will have proverbial cups which are “half full” or “half empty.” Some argue that by leaving the EU it will be easier for Lloyds and other UK businesses to trade with other non-EU countries.  Realistically, though, reaching meaningful agreements may take some time and carry a degree of commercial uncertainty. On the positive side, for every new risk that emerges from change, there are new insurance opportunities.

Regardless of political views, be they Brexit “Leavers” or “Remainers”, the consensus seems to be  that the UK leaving without any sort of deal is only likely to make life harder, at least in the short term. Politicians argue that, after 3 years, it’s time to put uncertainty behind and to allow the country to refocus on other issues like education and health care.


But leaving without an agreement strikes me as a brutal measure. It’s a topic which has dominated the UK agenda, distorted the political scene and undermined the Nation’s trust in its representatives.

As the French philosopher Joseph Joubert once put it, ‘Never cut what you can untie’, as who really knows what the future will bring. It seems like sensible guidance for many elements of life, not only in our personal lives, but also in business and politics. Unfortunately, it doesn’t sound like advice which UK politicians have heard, or currently care to hear.

In the meantime, the best solution for many may simply be to have another cup of tea, and wait for what now seems to be an increasingly inevitable and regrettable outcome. &

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