Dave Matcham

A Messaging Hub for London- Keeping it Simple

The last main strand of market reform, namely electronic placing is now seeing some real momentum. Whilst there continues to be many individual/bi-lateral initiatives, and, of course, a growing use of RI3K, we seem to have, at last, the gestation of a genuine cross market concept which seems acceptable from a cost and functionality perspective (many still remember Kinnect!). I refer of course, to the proposed Lloyd’s Exchange.

What is it you may ask? It was described quite simply as getting everyone to the table, talking the same language. Essentially it is a messaging hub which will enable any market participant to connect via the web to access basic information about a risk being placed. Brokers and underwriters are free to enhance the risk package as they see fit for their own systems.

The initiative is perhaps misnamed but it has certainly been led and driven by Lloyd’s. After Lloyd’s initial push it has now become a market project with brokers and the company market all gearing up to be involved as early as possible. IUA will contribute to the next phases of the project with great vigour and enthusiasm. We agree that the hub is a real catalyst to increasing e-placing and should show once again that London is increasing its efficiency and demonstrating its innovation to its clients and other markets.

We eagerly await the pilot in the first quarter of 2009.

Electronic Trading

The recent renewal season saw record numbers of reinsurance risks traded electronically in London, mainly through RI3K.  This is further evidence that London is modernising its practices to deliver quality service to its customers. The numbers recently quoted by RI3K, ie. over 6,000 lines bound in December alone, are impressive but by no means the scale of a fully electronic market.

It is interesting to compare this growth to the small volumes of on-line Christmas purchasing at the turn of the Century.  The volumes now are enormous in comparison, both by number and amount spent.  Most importantly, the concept is seen as safe and reliable by generations young and old.   One study of recent Christmas on-line sales described the internet “as the dynamo of retail”.  Hopefully London will itself look back in 3 years time and wonder why it took so long.  A key challenge will be to change the culture and mind-set such that electronic placing is seen as a business benefit for clients and overall efficiency.

This objective is documented as one of the 2008 actions of the Market Reform Group.   Here, e-trading is described as the increased electronic exchange of structured data.  With diligent promotion and education from the market associations and product providers, underwriters and brokers will be encouraged to embrace the growth of e-trading such that we might one day see similar percentage growth to the retail market.

The Internet – dynamo for wholesale?