Bosses of insurance firms have been warned by the Bank of England to improve their workplace culture after recent reports revealing sexual harassment and bullying.
In a letter to all chief executives of general insurance firms, the Bank’s Prudential Regulation Authority (PRA) said these revelations were of “deep concern” and reiterated that senior managers could face bans in cases of non-financial misconduct among their teams.
The warning shot came after the Lloyd’s of London insurance market was rocked earlier this year by reports of a pervasive culture of sexual harassment.
The 333-year-old group then admitted “ugly, stark and unacceptable” results of an independently commissioned survey in September, which revealed nearly 500 of its workers had witnessed sexual harassment in the past year.
Lloyd’s chief executive John Neal said the findings of the poll of more than 6,000 staff were far worse than expected, and vowed to reform the group’s culture.
In the so-called Dear CEO letter, the PRA’s acting director of insurance supervision, Gareth Truran, wrote: “Recent public reports relating to sexual harassment and bullying within the London market are of deep concern and it is clear that some firms have more work to do to improve aspects of corporate culture and individual behaviour.”
He added: “These issues also raise broader questions about whether
firms are promoting a culture where staff feel able to speak up about poor practices or unidentified risks within their organisations, including issues relating to a firm’s financial soundness.”
The PRA said it was concerned in particular during times of challenging market conditions, when staff are under pressure to hit targets.
Mr Truran said: “Senior management should be careful to ensure that commercial pressure to deliver results does not translate into inappropriate pressure on individuals within control functions to weaken assumptions.
“Boards should be alert to this risk and ensure that the effectiveness of the risk control framework is supported by the organisation’s culture.”
But the PRA said it was “encouraged” by some of the moves being taken in the industry to address the issue, while it is working closely with the Financial Conduct Authority to tackle inappropriate culture and behaviour.
For its part, Lloyd’s is launching a “Speaking up campaign” by the end of the year to encourage people to act when they see or experience inappropriate behaviour.
It has already promised an independent and confidential access point for reporting inappropriate behaviour.
Individuals found to have acted inappropriately will also be subject to sanctions from both their own companies and Lloyd’s, including a possible temporary or permanent ban from entering Lloyd’s.
In April the institution also set out a new code of conduct that included a ban on its staff drinking between 9am and 5pm.
But the PRA said it welcomed other less formal channels across the entire insurance sector, such as routine opportunities to meet non‐executives outside formal board meetings.