Lloyd's, in a surprise move, has decided to cut off funding for the Kinnect information technology platform and abandon the effort.

The cost to date has been ?70 million (or $125 million under current exchange rates), according to a Lloyd's representative, who said the market's Franchise Board agreed to stop Kinnect funding.

In a letter to customers, Michael Dawson, Kinnect's interim chairman, said that following the Kinnect board's recommendation, “the Franchise Board has agreed not to fund the Kinnect platform going forward. They have decided that the platform was not optimal in ensuring more efficient business processes for the Lloyd's and London market, and as a result it will close.”

The letter stated that as an operational platform, Kinnect's closure would be completed “through a phased approach and in an orderly manner. Every opportunity will be given to allow customers to complete transactions and/or extract data from the platform. Kinnect account managers will be in contact shortly to agree to details of the closure and answer any questions.”

The letter continued that the decision was made in the context of the “wider review of the franchisor's role, as part of the strategic plan and comprehensive analysis of the options for electronic trading.”

A key factor leading to the closure of the platform, the letter said, is the changing technological landscape. In recent years, “a lot of progress has been made in electronic data transfer,” the letter noted–citing, in particular, “progress made with other trading platforms and peer-to-peer systems.”

Just last year, the Kinnect Web site (www.kinnect.com) stated that the “Lloyd's-sponsored electronic platform, which securely exchanges risk information between brokers and underwriters, has more than doubled its customers this year, increased its volume figures and won two awards.”

Kinnect said it had 19 businesses backing the platform, including St. Paul Travelers, AEGIX, Catlin, SVB Holdings, Guy Carpenter and Talbot.

According to the Web site, between May 2004 and April 2005, “more than 500 risks were dealt with by Kinnect,” representing “1,300 signed lines and ?437 million ($780.39 million) in premiums.”

Roger Foord, an independent consultant in London, told National Underwriter that Kinnect is as “dead as the dodo,” and that “nothing's going to happen to revive it.” The reason, he said, was that Kinnect “delivered nothing anybody wanted.”

He noted that brokers and their clients “spend a month negotiating deals, there's no urgency–it's not a buy-buy-sell-sell market, like the stock market.” Mr. Foord added, however, that there are “loads of good technologies. The back office is very technology-driven.”

The Kinnect letter stated that going forward, there is a clear view that the franchisor's role “should be primarily on standards setting, not building infrastructure.”

After consulting with a number of managing agents, the letter said, “it was decided that support for a centrally built hub was not sufficient to continue the development of Kinnect. We will, however, continue to work with the market in support of electronic trading.”

According to the letter, support will be provided, which may include developing standards for peer-to-peer systems and hubs, keeping staff available, making money available to “prime the pump” for the right market solution, and providing Kinnect intellectual property to appropriate commercial organizations.

Special Reports /

Lloyd's Unplugs Electronic Trading System

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