Lloyd’s of London has taken further steps to improve the workplace culture, performance, and behaviour of colleagues outside of the office. Tom Herbert of Collyer Bristow examines the implications for business.
Lloyd’s of London is a corporate entity governed by the Lloyd’s Act of 1971. It is a marketplace where multiple financial backers come together in syndicates to pool and spread risks.
The underwriters or “members” are a group of companies and individuals. Through its byelaws the Council of Lloyd’s has the authority to regulate and guide the market. Lloyd’s enforcement powers (through its Enforcement byelaw), give it a range of possible sanctions when misconduct is discovered, including fines.
In 2022 they fined Atrium Underwriters PS1,000,000 for the culture of drinking heavily, playing initiation games, and making sexual remarks about female co-workers.
Lloyd’s has gone further in its consultation and stated it will not tolerate insurers that are classified as underperforming due to poor culture. If remedial steps are not taken, it may consider “taking actions to remove the firm’s permission from operating within the Lloyd’s Market”.
Sanctions can be severe and wide-ranging. Lloyd’s acknowledged that despite the new levels of supervision and conduct, participants in the market have become aware that certain issues (such bullying) may not be enough to bar firms or individuals, and that its current processes for dealing poor conduct are unclear. Accordingly, the company has published a list of unacceptable behavior that does not include harassment or bullying. It also includes “conducting Lloyd’s Business while under the influence alcohol when it leads to unprofessional conduct”.
Lloyd’s Management is currently consulting on a framework to deal with behavior that is meant to ensure better alignment with internal HR and discipline processes of firms, and support firms’ abilities to investigate and address issues by themselves.
Discipline is a form of punishment
The framework will clarify the conduct that Lloyd’s deems unacceptable, and will also specify when and how Lloyd’s may intervene. The framework is in line with UK employment law, which requires that all organisations have both grievance and disciplinary procedures.
The list will not be exhaustive and will only include behaviours that are considered gross misconduct or misconduct, which will result in disciplinary action. Lloyd’s encourages managing agents and syndicates, in accordance with the Culture Principle (a way to gain oversight of culture and performance), to investigate and solve issues themselves. This can be compared to how managers and supervision are given the responsibility to investigate and fix issues for the board or senior leadership.
The consultation proposes also that employers must manage behavior “outside of the workplace but in the presence colleagues”. This is a challenge in some situations, but something organisations should be doing already as they are vicariously responsible for certain acts committed out of the office (for example discrimination, normal (and sexual) harassing, etc.). The consultation also proposes that employers will need to manage behaviour “outside of work but in the presence of colleagues”, which although challenging in some contexts, is something organisations should already be doing as they will be vicariously liable for certain acts committed outside of work (for example, discrimination and ordinary (and sexual) harassment).
New positive duty
A new positive duty is coming into effect on 26 October 2024. This will require employers to take “reasonable measures” to prevent sexual harassing their employees, both in and out of the workplace. It is therefore vital that organisations get a grip on bad behaviour and conduct.
According to this position, Lloyd’s also announced that the byelaws would mirror the rules established by the UK’s Financial Conduct Authority. This is particularly true in relation conduct committed outside of the workplace, but in the presence market participants.
There may be a backlash, similar to what the FCA received when it came to the question of whether poor behavior is enough to put someone’s fitness and propriety in jeopardy for holding a regulated post (or if they fall short).
“At the core of this, the main point is that bad behaviour and conduct shouldn’t be tolerated.”
The question is how Lloyd’s will balance the regulatory obligations and each organisation’s legal obligations in order to make sure they work effectively together.
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This is based on the principle that bad behaviour and conduct will not be tolerated. Organisations in all sectors, not just the insurance industry, are increasingly urged to take control of their business. Employers need to start by auditing the business from a HR and employment law perspective.
This will include having company policies (such as harassment, alcohol and drugs and events) that are regularly reviewed (and refreshed) and communicated and stored in a place that is easily accessible to employees (such as a company intranet), clear employee support and complaints/investigations channels, training tailored to different roles within the organisation (such as employees, managers and senior leadership) and a comprehensive risk identification/assessment bespoke to the organisation. Any steps taken by organisations should be in line with regulatory requirements.
