Lloyd’s Market Auditing – “Back In Your Box”

In the murky world of internal auditing, a certain amount of time is spent figuring out what is going on. There are the usual hurdles, people who cannot explain their role as they lack basic communication skills, don’t actually understand why they are doing what they do or they simply don’t understand your questions.  Even worse, process owners are often reluctant to divulge details of their role because it is so unique or complex that I, the lowly Auditor, wouldn’t understand.

The latter occurs periodically and is a trait of the Lloyd’s Insurance Market.  Before I had the opportunity to audit a Lloyd’s Managing Agent (who in turn manage the Underwriters), I always thought underwriting at Lloyd’s was involved, probably due to the mystique is projected by the industry, the romantic jargon such as ‘Lloyd’s names’, ‘Syndicates’ and the Bowellism style of architecture of the Lloyd’s Building.

Time to lift the lid. Lloyd’s underwriting is ridiculously easy.  There isn’t an awful lot to it.  Sure, there are some nuances that you have to get your head around such as the actuarial models used for pricing and reserving (which is the most interesting part) but it isn’t show stopping.  So I raised a wry smile when I read ‘Confessions from the City: The Lloyd’s of London underwriting workie’ in the Evening Standard.  For those who have missed the ‘Confessions’ series, basically someone in the know dispels the myth behind their job and the Evening Standard publishes it.

On this occasion, the Rookie discovered that the underwriting process is rather simple and it is a matter of spreading the risk around the market. The full article can be read here.  Of course, there is the need to evaluate the risk, negotiate terms with other underwriters and keep an eye on concentration levels but still. The most amusing observation was how the Underwriters loafed about in the office before heading off to the Lloyd’s Building and their Box at 10am. Funnily enough that was the trickest bit on an underwriting audit, finding someone after 10am to ask questions.

So sometimes it is easier than you think. If you think I’ve been flippant, please let me know and highlight where I’ve gone wrong.