Lloyd's pauses underwriting room work as it weighs One Lime Street future
Lloyd's has suspended work on the future of the underwriting room while it holds talks with PingAn, the owner of the Lloyd's Building, and tries to reach a determination on the future of One Lime Street, Insurance Insider can reveal.
Sources told this publication that, as well as the possibility of extending the lease on the listed building – or the less likely option of leaving – discussions have been held around the Corporation buying the building from its Chinese owner.
The genesis of the discussions is the work Lloyd's announced around determining the future of the underwriting room as the market emerges from the pandemic and establishes new ways of working.
The work to make the underwriting room fit for purpose for a digitised market with significant work from home will be costly, and to amortise the costs across the remainder of the current lease is likely to be too expensive for Lloyd’s.
According to the 2020 annual report, the lease for the building runs until 2031, with an option to terminate in 2026.
Approached for comment, a spokesperson for Lloyd's said: "We’re pleased to see many colleagues across the market and Corporation return to their offices and the Lloyd’s Building.
"As our market participants adapt to new flexible ways of working, we will revisit our thinking on the future of the underwriting room in 2022."
They concluded: "Taking this time will give us a stronger grasp on the market’s working practices, ensuring our future vision for the space is fit for purpose and in line with the market’s needs."
Buying the building?
Buying the building is likely to require Lloyd's taking on significant additional debt, which may face opposition in the market given the £300mn ($402mn) financing raised in 2020 to pay for the Future at Lloyd's work.
The Corporation's annual report stated total cashflow outflows for leases of £25mn in 2020. In 2019, Lloyd's took an exceptional £51mn charge for repair and maintenance of the building.
Sources suggested the Lloyd's Council will discuss the path forward at its next meeting, due in the week starting 22 November.
A decision around the future of the Lloyd's Building is freighted with symbolism, with One Lime Street a representation of the market's long heritage and its tradition of face-to-face trading.
Whatever decision is taken on the building, CEO John Neal and the broader Lloyd's management are sure to continue to emphasise the differentiating value of face-to-face trading.
Lloyd's launched a consultation around the future of the underwriting room earlier in the year, telling the market: "As our ways of working change and we embrace digitisation, we are on a once-in-a-generation journey to redesign the iconic underwriting room and supporting spaces in the Lloyd’s Building."
It continued: "Our next chapter must build on our rich heritage, while creating a unique experience that seamlessly combines face-to-face and virtual interactions to future proof the market."
The consultation included interviews with senior leaders and focus groups, engagement with experts in design/technology and a series of fireside chats.
Lloyd's had promised to share its final vision "later in 2021", a timetable it has now confirmed it will defer.
Besides the dependencies around the lease and ownership, some sources believe a decision is better taken later in 2022, when there is more clarity on how working habits develop as the pandemic recedes.
Use of the underwriting room is down significantly on pre-pandemic levels, reflecting the move to increase home-working and electronic trading.
In September, usage Tuesday-Thursday was at around one quarter of pre-pandemic levels, and while this is likely to have risen through October and into November, it is still very depressed.
The Lloyd's building, designed by renowned architect Richard Rogers, was completed in 1986. It is considered to be of outstanding special interested and has a Grade I listing.