On 30th September Lloyd’s of London published their vision for the Future at Lloyd’s. Here at r10, we have undertaken a detailed study of the contents of Blueprint One and in the third of a series of bite-sized articles we look at the proposals for the Lloyd’s Risk Exchange and how it may impact your business.
What is the Lloyd’s Risk Exchange?
The Lloyd’s Risk Exchange will connect existing systems via API’s or a user interface to provide an instantly searchable marketplace for less complex risks. Products will all offer instant quote, bind and issue of certificates or policies and provide standardised data for re-use downstream. Where permissible, straight-through processing will be enabled.
Why is it needed?
The Future of Lloyds Prospectus identified that in 2018 44% of GWP was placed on Binders & Lineslips (split 39% / 5%). This is typically non-complex, high volume business and is administered by multiple parties across a myriad of systems. It was proposed that a more efficient method for handling such business could be created to reduce costs and improve the overall client experience.
In Blueprint One Lloyd’s has further developed the concept into a proposal that will significantly change the way that product is created & distributed across the Lloyd’s market. This high volume, low value business will be transacted through a Risk Exchange that will connect clients to suitable solutions, provide automated, algorithmic underwriting and processing, with the promise of lower transaction costs, broader choice and a more responsive claims experience.
Lloyd’s have sought to define eligibility criteria for risks to be traded on the exchange to ensure that maximum benefit can be derived from the new model.
Where risks have borderline eligibility, the exchange will be interoperable with the platform for complex risks to ensure that business can be directed to the alternate platform with minimal re-keying.
So, how will it work?
As with all the major initiatives under the Future of Lloyds Programme the risk exchange will build on the core ecosystem of components to deliver a highly integrated, efficient solution.
There will be a series of components that will be key to the risk exchange platform.
- Flexible interface that connects to existing distribution systems.
The Exchange will connect to existing distribution platforms via API’s and data standards, enabling re-use of existing assets, where possible. Where participants do not have a suitable platform Lloyd’s will provide a front-end solution via a Lloyd’s portal.
- Structured Product & Distribution configurator
To enable products to be matched to clients, product attributes, (e.g. Industry, Territory, Turnover) will be standardised and held centrally alongside standardised product data structures for downstream consumption. The configurator will also allow Coverholders & Managing Agents to define the distribution attributes (Broker / MGA specific, global, etc) of a product.
- Instant Search, Quote and Bind
- Product and client attributes used to match client’s with available & suitable products
- Upselling and cross-selling capability, where allowed
- Back-end connection to syndicate & coverholder rating engines, or where absent, Lloyd’s will provide a simple rating engine
- Reporting Dashboard
- Dashboards will provide real-time analytics of performance across the portfolio
- Profitability
- Capacity & Aggregate Use
- Conversion & Renewal rates
- Underwriters will be able to view and manage their exposure in real time
- Policy & Certificate Production
- Cert & Policy workflows will orchestrate with Lloyd’s local office for signing, as required
- Integration with Common Market Services
As with other Future of Lloyds initiatives, the risk exchange will leverage the central components to add value, maximise efficiency and data capture.
- All Binding Authority data will flow through DA SATS
- Central settlement – post bind clients can opt to pay directly to risk exchange (where permissible)
- Tax calculator available via API to rating engines
- Centralised KYC / AML / Sanctions checks
- Central reporting, MI / BI and analytics capability to simplify reporting requirements
- Data enrichment capabilities will be available via API to reduce data required at the front-end.
- Clause libraries will provide mandatory, territory specific clauses
- Centralised checks will ensure that licensing and regulatory needs are met
- Data will be incorporated into the Common Data Platform enabling downstream activities (e.g. claims,, premium settlements, etc) and provide data quality and stewardship services
What is the proposed timeline?
Lloyd’s have published an outline plan and promised to work to agile methodologies, so it would be safe to assume this can only be taken as a guide right now.
How does the new Risk Exchange impact your business?
Clearly Lloyd’s is seeking to reduce frictional costs where risks are relatively straightforward, whilst at the same time provide value through the provision of central services such as data augmentation, straight-through processing and avoidance of many of today’s cumbersome administrative processes.
The Lloyd’s risk exchange will require all parties involved in distribution to review: –
- Their existing product development and distribution strategies
- The suitability of their existing distribution platforms, given the changes the risk exchange will bring
- The operational, compliance and workforce impact of implementation.
How r10 can help
With our in-depth London Market expertise, r10 is uniquely placed to help guide your organisation through the Future at Lloyd’s change programme. Over the coming weeks will continue to update our blog with insights and guidance on what the changes may mean for you.
Please get in touch for more information on how r10 will help you prepare to play your part in the market of the future.
Read the next bite-sized article in our Bite-sized series “What are the Claim Solution Proposals?”, which is the third out of the twelve proposed Future of Lloyd’s capabilities.
Author: Chris Carney