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Why Lloyd’s cannot be sentimental about its iconic City building

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It should be easy to avoid sentimentality when it comes to a building some occupants called “Prozac Towers”.

Yet Lloyd’s of London’s inside-out building has that effect, even if the insurers who’ve inhabited it over its 36 years grumble about low ceilings and a lack of natural light for those toiling in the galleries above the grand underwriting room.

If Lloyd’s left architect Richard Rogers’ premises, which also bear the group’s name, would it be a sign of another City institution diminished? Yes. But that is as much about the inescapable decline of face-to-face market trading as London’s insurance industry, which is one of the City’s great post-Brexit hopes. And if Lloyd’s is to adapt, as it has done many times over the centuries, then there’s no time for sentimentality about a building.

There is some irony about how we got here. Lloyd’s — one of the last holdouts of in-person trading, the last refuge of wet ink stamps, paper policies and fountain pens — now cannot tempt its members back from their home office screens. The “boxes”, or desks, in its underwriting room stand, if not quite empty, undermanned.

Almost everyone agrees even now that doing business face-to-face in Lloyd’s underwriting room was more efficient. Brokers got better deals when they could squeeze the underwriter in person. Underwriters wrote better risks when they could talk them through more thoroughly.

But the system is clearly not sufficiently efficient to draw them back to the Lloyd’s Building. In the run-up to January renewals, the underwriting room was hardly humming. Underwriters have coped for two years without it. Complicated renewal seasons have been handled remotely.

If underwriters are reluctant to return en masse every day, that means the efficiency of old no longer holds. It was built on a system where brokers queued to see underwriters at their “boxes” in the underwriting room. The wait was long, but worth it. A marketplace reliant on critical mass and ease of access to expertise fails to function if many of its participants are off elsewhere.

Instead, those “boxes” have become some of the most expensive real estate in the City. Lloyd’s has long had high costs. The underwriting room has become an unjustifiable expense for its occupants.

It could be repurposed. Plenty in the industry see the appeal of a central space. But it is not clear that it needs to be in a building that is expensive to maintain and unpleasant to work in. The building’s listed status makes it more challenging to adapt as a modern workplace. Lloyd’s could shrink the amount of space it rents. But the site may have more appropriate functions, and Lloyd’s more appropriate homes.

Such a move would not spell the end of Lloyd’s. To outsiders, it might be synonymous with the underwriting room. But its attractions extend well beyond the physical space. There is the brand, its financial strength, the value of its licences, its international relationships, and the power it has to herd its members.

There are risks that losing 1 Lime Street as the centre of the City’s insurance hub does weaken its status. But securing that status in an industry increasingly dominated by global companies will be a delicate challenge for the market’s management regardless of which premises they work from.

Uprooting Lloyd’s may unsettle others. One of the building’s benefits is that it is easy for participants to trickle in and out. That cannot be achieved on the 33rd floor of, say, the Scalpel or the Cheesegrater. But London’s EC3 postcode has become an extraordinarily successful insurance cluster. If proximity to other market participants is the key to the City’s strength in the sector, the tenants of the towers that now overshadow Lloyd’s should be sufficient to anchor the industry to London even if some business inevitably floats off overseas.

Lloyd’s has form for clinging on to property. Its current building houses an 18th century dining room transferred from its previous 1950s premises. Is a move likely when it can break its lease in four years’ time? No. In nine, when the lease is up, it should think about it. When the London Stock Exchange left its Old Broad Street tower for Paternoster Square in 2004, no one was left to shed a tear. The open outcry traders had long since departed. It is not hard to envisage a similar situation for Lloyd’s in a decade or so.

cat.rutterpooley@ft.com

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