One of my areas of experise and a good example of the cause and effect of the staffing crisis is the current shortage of contract wording specialists.

In February 2017 Lloyd’s held a Wordings Conference, “Better Wordings Matter” which highlighted some worrying trends:

• Managing Agents had lost their focus on Contract Certainty
• 33% of risks are not reviewed pre-bind by the leader and 66% by a following market
• More than half of managing agents in a follow position do not carry pre-bind checks
• More than 60% of managing agents employ less than five wordings experts

In a Lloyd’s poll at that time, the Talent Gap was highlighted as the most important challenge for wordings. (Lloyd’s, 2017)

While Lloyd’s will have been busy since 2017 strengthening the underwriting controls and reporting around the pre-bind review of contract wordings, it is unlikely that there will have been significant improvement in the talent gap given that the staffing issues will have been subsequently impacted by the pandemic and all the causes highlighted above.

In recent weeks I have seen a Recruitment Agency form a specific recruitment desk dedicated to wordings specialists advertising several vacancies with some very high salaries, an approach that I have never seen previously for this type of role.  Contract wordings specialists have long been an under-valued component of the market, it is a mundane but important role that requires diligence, attention to detail, deep technical understanding of insurance coverages, financial operations and knowledge of the legal structures surrounding the industry.  A good contract wording specialist is usually capable of far more than the role they are employed in and as I have found during my career, it is very difficult to develop a career path beyond this specialism.

Going back to the startling statistics revealed by Lloyd’s in 2017, a third of contracts being underwritten not being reviewed equates to £bn’s of coverage being bound without making the proper checks.  Little wonder then that the estimated leakage in disputes, legal costs and claims is estimated at £500m annually.  One of the contributing factors could be a more fundamental problem as the fact that there remain dedicated contract wordings roles harks back to before the 2007 contract certainty reforms, a time then there was separation from the underwriting process and contractual agreement as the contracts would often follow months or years after the binding of a risk. 

By accelerating the contractual agreement to pre-bind, the role has effectively changed and became a direct part of the underwriting process.  It is a positive development and ultimately an underwriting responsibility to check the contract in full before binding.  Increased use of technology, document comparison and checking tools aid and help to streamline the process but they will never be able to replace the understanding of coverages and the nuance of contractual language, especially in bespoke contract wordings.  Therefore, rather than bemoan a talent shortage, it is as much a failure of the market since 2007 to adapt and develop the required skillsets within underwriting teams as it is to attract new talent to a dedicated specialist role.