QBE’s announcement last week that Group CEO Pat Regan will depart over “poor judgment” involving a female employee marks a rapid and remarkable unravelling of a previously successful partnership.

In 2014 the insurer paid a sign-on fee of $8.5 million to tempt Mr Regan from the UK where he was Aviva CFO, and had recently been unexpectedly overlooked for the CEO position.

At QBE he moved from Group CFO to local CEO and then, for the past three years, Group CEO.

Taking over from John Neal – now the London-based CEO of Lloyd’s, who was himself docked $550,000 in bonuses by the board in early 2017 after failing to disclose a romantic relationship with his secretary – Mr Regan has been credited with devising a turnaround strategy that has helped QBE return to profitability.

He instilled simplification, discipline and a relentless focus on detail at the global insurer, which led to improving results, greater stability and new opportunities for growth.

Insurance News magazine carried out two in-depth interviews with Mr Regan – the first when he was running the local division in 2017, the second less than a year ago.

What stands out is the simplicity of the measures behind his planned transformation. He broke the business down into 50 “cells” and carried out thorough reviews in each of them. Another example is the “brilliant basics” strategy that encouraged employees to aspire to be “as good as we can be” at underwriting, pricing and claims.

“Sometimes the trick in life is to focus on the obvious,” he told Insurance News.

But last week the Regan locomotive was derailed as his tenure ended in the most disappointing way.

An announcement to the Australian Securities Exchange released early last Tuesday explained QBE was parting ways with Mr Regan after an external investigation into workplace communications revealed “poor judgment”.

In response to questions from insuranceNEWS.com.au, the insurer also revealed the investigation was launched after “an issue was raised by a female employee”. No further details were given or confirmed.

Unverified media reports say the complaint was made by a US-based QBE employee, who has tendered her resignation.

The reports say that the complaint sparked the appointment of a law firm to carry out an investigation focused on staff and management emails where the offending communications were apparently found.

The communications are said to involve texts, emails and a Zoom call.

QBE is refusing to say any more about the matter. What we do know is that Chairman Mike Wilkins (now Executive Chairman) and the board concluded the messages “did not meet the standards set out in the Group Code of Ethics and Conduct”.

Mr Regan is also staying silent, with some commentators reporting he’s still involved in negotiations on the terms of his exit.

So what now for QBE?

S&P Global Ratings believes the development could “could harm strategic continuity” and introduce doubts about the global insurer’s culture and governance.

While the “decisive action” demonstrates governance standards are high, “uncertainty remains” as to the impact on the group’s broader strategy and its ability to maintain momentum, the ratings agency says.

However, other analysts have been quoted as saying Mr Regan is “respected but not irreplaceable”, and that the insurer’s immediate future depends more upon continued market hardening.

Fitch Ratings says a significant shift in strategy “appears unlikely in the short to medium term. Strategic initiatives in recent years have supported QBE’s business profile, and we expect this to continue.

“These include the exit from several unprofitable markets and portfolios, implementation of an operational efficiency program to improve processes and lower costs, and balance sheet improvements through higher capital and lower financial-leverage ratios.”

S&P notes that Mr Regan isn’t the only executive heading for the exit, and that there has been “substantial change" at the board and senior executive level across all regions. CEO Australia Pacific Vivek Bhatia left last month to lead listed information solutions company Link Group.

As a result some commentators suggest that, while some well-qualified internal candidates remain, Mr Regan’s replacement is most likely to come from outside of the company.

The COVID-19 pandemic could complicate the recruitment process, and it’s a far from ideal time to be recruiting a new Group CEO.

It may be a while before a candidate is selected and installed, leaving Mr Wilkins to face the immediate challenge.

As a former IAG CEO, and having recently performed a similar stand-in role at AMP, he’s well-equipped for the task.