Frustrations are rising in the Lloyd’s Building, on Lime Street and around Leadenhall market about the lack of communication the market is getting on the progress of Blueprint Two and the likelihood of a safe cutover still happening in October.
This publication revealed last week that “vanguard” testing with early adopters is currently behind, and Insurance Insider further understands this delay has risen to six weeks, rather than the previously reported four. However, Lloyd’s and Velonetic have remained tight lipped about what this means overall.
The Lloyd’s market was due to make the switchover from existing central-processing services to a cloud-based system in October, having previously delayed this from July to provide more time for pre-launch testing.
“Cycle 1” testing with “vanguard” early adopters was due to start in April and finish by this month.
But, according to a recent market newsletter seen by this publication, Velonetic, Lloyd’s and multiple market organisations decided the full six-week test window allocated for cycle 1 testing would now be used only for onboarding.
This was due to complexities that emerged in the onboarding process, it said. Sources say the delay is down to an issue involving data repository interoperability, which limited the ability to transfer large chunks of data from big brokers.
Insurance Insider now understands this issue has been resolved but Lloyd’s is yet to comment on the delay or make any public statement.
Additional costs
Another question remains over what this delay might further cost the market and if Lloyd’s will reveal this. One source explained that most of this is already paid for with the initial £300mn figure already in prior year accounts.
However, they added that further costs might include costs for running two systems, for additional training and helpdesk staff and also if the new platform needs to be refreshed.
They predicted these costs would be “10%-13% of Velonetic’s annual revenue” and would be borne by shareholders.
Missing a deadline isn’t great but everyone has experienced it. Sometimes it isn’t our fault, sometimes it’s bad planning or unknown factors, or maybe even just plain bad luck.
Whatever the reason it isn’t a nice feeling to know you haven’t achieved what you were aiming to and maybe you’ve let some people down.
Lloyd's and Velonetic are probably feeling all of this right now and it is now looking increasingly unlikely that they will meet the final deadline of October to achieve full market cutover safely.
One Lloyd’s market source, when asked if October was at all achievable now, simply said: “No.” Another said a six-week delay would be very hard to recover from and if another defect arises that takes even half the time to sort out then the timeline doesn’t allow for another three-week delay.
In the grand scheme of things, a delay like this might be forgotten in time if it all works eventually – but it is embarrassing, given this is the second time delays have hit and ‘twice delayed’ isn’t a moniker any project wants to be given.
A safe cutover
Safety has been a constant message throughout the Blueprint Two updates and it’s time now for the Corporation to admit that October will not be possible. Missing October means that the earliest next date to achieve full cutover would be February 2025 as the market participants will not risk problems with 1 January renewals.
The writing is very clearly on the wall and market sources are getting increasingly frustrated about Lloyd’s failing to communicate this in an open and honest way.
The next scheduled event on Blueprint two is on 24 June where it is believed a statement will be forthcoming. Insurance Insider understands smaller market meetings have been taking place as well as weekly updates for the vanguard group on testing status and Lloyd’s is still reviewing the impact of the DRI systems issue.
Lloyd’s slow reaction is a reminder that this a juggernaut turning, and it must negotiate layers and layers of governance to make decisions and then communicate them.
Another source told this publication that the Corporation might not be confirming a change in deadline as it doesn’t want to lose momentum, “it is just trying to keep the foot to the gas”.
There is obviously a fine line between a desire to keep the market's nose to the grindstone and the reputational damage of changing the date again but Lloyd’s is only adding insult to injury if it thinks the market will only work on this if it keeps the original deadlines in place.
A source explained that given the scale and significance of the project, companies within the market are fully aware of due diligence and getting this right, and are not willing to take unnecessary risks.
Full buy-in
Lloyd’s, in fact, could not have a more supportive audience for Blueprint Two itself at this time. This is a programme that the Lloyd’s market must implement and makes no sense to do individually. Despite the fact it is a massive market with many participants, differing capabilities and motivations, it shouldn’t be like herding cats because everyone wants to move in the same direction.
“This has to happen because we can't digitise the marketplace without this changing,” one source explained. “We want it done safely and October is not safe.”
“We're all there with bells on,” as another source put it, adding one of the advantages of Lloyd's is that it gets everything done in this centralised way.
Delays to centralised technology programmes are nothing new for the insurance market and no one Insurance Insider spoke to considered this a small or easy project. Essentially Blueprint Two covers how every pound and dollar moves in the Lloyd’s marketplace and is a big project.
Some of these back-end legacy systems are 30 to 40 years old and have never been replaced, which means this is the first time that they are being unpicked and issues will arise.
“It's big, it's hairy. It's messy. It's really complicated,” a market source explained.
The market is, therefore starting to wonder why Lloyd’s has underestimated the complexity associated with this programme and it risks losing credibility if it doesn’t front up to the issues and start doing better.
A source close to the market explained that in onboarding – a process that hasn’t been done for over 30 years – one firm had 75 separate entities to bring onboard and this hadn’t been foreseen in advance.
However, on a more positive note one source pointed out that at least these issues were being found now rather than when the cutover has happened and the system is live.
The next step is to assess what went wrong and put together a new plan. The key to this, for Lloyd’s however, might be to step away from timetables.
Sources suggested that getting cycle one and two done, no matter the time it takes, will pay spades in the future and prove to the market the systems work. Otherwise, it risks spending more time managing expectations than working on the project.
Date-driven project planning has already proved problematic for Lloyd’s and Velonetic and new details will only continue to come to light as it delves deeper into the working of its legacy systems.
Milestone planning would instead highlight the achievements of the programme and aid decision making going forward to help achieve overall success.
Either way it’s time for a decision and some clear messaging before the market loses faith.
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