I’m going to talk about the importance of oversight in helping drive better market performance in the context of Lloyd’s and the international insurance market. I am also going to explain what makes good oversight and why ‘less is more’.

Good regulation and oversight is about putting rules in place that enhance the ability of companies to do business, while protecting customers. Bad regulation restricts companies’ growth, choking them with bureaucracy. At its worst, it becomes protectionism.

Protectionism is the enemy of insurance, which works best when capital and risk transfer flow seamlessly across borders. Unfortunately, protectionism is a growing trend in some of the world’s economies.

The trick for any regulator is to walk that tightrope between ensuring markets can function to their maximum potential while at the same time as preventing any rogue activities. Strong performance management equals good business which equals happy customers and shareholders.

As director of performance management at Lloyd’s Corporation I have to decide how we oversee the Lloyd’s market.

I often describe it in terms of the difference of building with Lego or Duplo. By that I mean we can manage performance like we would a box of Lego – look for all of those tiny pieces, the small blocks that make up the way a firm does its business, and involve ourselves. More of a rules based approach.

Or we can manage performance of the market as if it were a box of Duplo – set a good framework and then focus on the really big blocks, the big things that really drive performance and good oversight will really make a difference. Very much more of a principles-based approach, and the one I choose.

We have been changing the way we carry out market oversight, moving it towards a far more risk-based approach.

What does this mean?

  • We will not attempt to oversee everything
  • We will not review everything
  • We will focus all of our efforts on the things we are really worried about
  • And where can make a difference

We can see the results of this already:

  • Minimum standards reviews reduced from 530 to 280
  • Portfolio review classes reduced from 220 to 150
  • Coordinated coverholder audits cut by 50%

More activity does not mean better oversight: carrying out a thousand reviews is not good performance management, it is simply a lot of performance management.

I believe in a principles based approach, where individuals are left to run their businesses as they see fit within the framework Lloyd’s sets, leaving them to manage the day to day performance of their businesses.

My role is to ensure the framework is fit for purpose, and to ensure that everyone is operating to the high standards Lloyd’s sets.

The objective of good regulation should be to encourage strong, sustainable businesses to thrive, prevent economic bubbles and protect customers should things go wrong.

Good oversight of the Lloyd’s market should encourage the same, ensuring we provide a secure capital environment for investors and customers and deliver insurance products to our policyholders around the world in a way that supports our brand values. Good oversight and good regulation drive good performance.