Lloyd's, which has 99 syndicate members comprising British and international insurers with most of its business carried out face to face, has suffered two years of steep losses and faces a threat from the growth of other insurance centres such as Bermuda.
New Chief Executive John Neal announced plans to set up two exchanges.
First off the ground will be the Lloyd's Risk Exchange, which will automate simple insurance business. A second platform will be used for complex risks, Lloyd's said in a strategy document entitled "The Future at Lloyd's".
Everybody would be required to join the exchanges, Neal, who became CEO last October, told Reuters in an interview.
"There's got to be one way of doing it," he said.
Lloyd's, which started life in Edward Lloyd's coffee house in 1688 and is known for insuring everything from ships to paintings, has been trying to modernise.
It has moved some of its business on to an electronic platform, but progress has been slow.
"Our businesses need to adapt," Chairman Bruce Carnegie-Brown told a packed launch event.
Lloyd's aims to cut the costs of insuring standard risks to 10-20 percent of current premiums from 30-40 percent through automation, it said in the document, with pressure on the market to be quicker and cheaper.
The existing electronic platform could be combined with other off-the-shelf technology to create the exchanges, said Neal.
"Human connectivity is still important, complex risk does need a bespoke solution," Neal said, though he added he would expect face-to-face business to decline.
The two-exchange model is similar to that of Deutsche Boerse, which has separate platforms for foreign exchange and for more complex derivatives, he said.
Lloyd's will also make it easier for new syndicates to set up business, for instance by allowing them to operate remotely, and will encourage different types of funding, such as private equity and hedge funds.
The strategy is the result of meetings with 1,000 market participants.
One market source described it as the biggest shake-up at Lloyd's since the early 1990s, when the market was almost brought to its knees by asbestos-related claims that wiped out many of its individual investors.
"We just can’t afford to fail," Andrew Brooks, chief executive of Lloyd's underwriter Ascot, told the launch event, adding that this was "the first time I’ve seen the market come together and realise it needs to change its model".
Further consultation on the strategy is scheduled for May and June, Lloyd's said, with the aim of implementing proposals from early 2020.
(Reporting by Carolyn Cohn; Editing by David Goodman/Keith Weir)
By Carolyn Cohn