Lloyd's Breaking Free Of Paper Shuffle With U.S. E&S Partners

PROGRESS TO DATE

Updating NU on progress of the London technology initiative during an August interview, Mr. Stafford explained that data sought by London underwriters from U.S. distribution partners falls into three categories–risk information, premium information and claims information.

A property-catastrophe risk standard (ER3001) has already been developed, he reported, noting that the next step is to convert this standard from its current format as an Excel spreadsheet reporting standard and move it into XML format. That "will allow us to extract the data directly from MGAs' agency management systems," he said, noting that the XML standard is expected to be ready before year's end.

He said London market brokers and MGAs (syndicates) have also agreed on a premium standard, which standardizes accounting and regulatory information that currently sits on premium bordereaux. The premium standard is slated to be published by the end of October.

"Beyond property, we're not quite sure there's an appetite to standardize a lot of the risk information because a lot of the core risk information is actually captured on the premium standard" for other types of risks, Mr. Stafford said. He explained that if, in fact, worldwide distribution partners have no need for risk standards other than property-catastrophe, then the only other standardization task will be to have a claims standard in place by the end of 2010.

VALUED PARTNERS

Explaining why U.S. coverholders won't be required to use the new standards, but simply encouraged to do so, Mr. Stafford said that this reflects the perceived value of the coverholder distribution channel and the intent to make the lives of coverholder partners easier.

"What we are really saying [to U.S. coverholders] is here is a standard that London will support. All the [London] brokers are endorsing it, and if it's where you want to move to, then we will encourage you," he said.

"We're not going to mandate it right now because there are coverholders out there who have older systems, or maybe they don't have systems at all, which would make it quite onerous for them" to move forward quickly, he said. "We need to work with them on their timescales so we don't burden them with something that ultimately costs them too much money."

For those who want to forge ahead this year, support from London will come not just in the development of standards, but as Lloyd's representatives meet and work with all of the key agency management suppliers to ensure they can capture the needed data in their systems. That means it can be sent to London "at the push of a button" and that coverholders no longer have to rekey information, he said.

Mr. Stafford summed up the value of coverholders, explaining that Lloyd's is looking to them as a way to tap into more small-to-medium enterprise business. This will help to balance a Lloyd's portfolio dominated by high-end risks and property-catastrophe business, he told members of Kansas City, Mo.-based NAPSLO during a July 13 webinar.

Emphasizing the strategic importance of 2,500 coverholders globally–including 1,100 in the United States–he noted that they wrote one-third of Lloyd's premiums in 2009, up from 25 percent in 2008 and 21 percent in 2001.

"They understand the local pricing, local requirements and what will sell locally, and therefore have far greater knowledge than our underwriters in London of what's needed on the ground," he said.

"A lot of business that we place in London is big, complex business, which requires face-to-face negotiations. But for the slightly smaller business–the higher- volume business–we need people in the various territories in which we operate to represent the market" with local expertise.

"Coverholders are exactly that," Mr. Stafford told NU.

He also said coverholders are part of a longer-term plan over the next two-to-five years to further modernize the delivery of risk information. A technology road map envisions electronic data transfer through a single messaging hub, known as the Exchange, instead of via multiple messages to different parties in the London market.

Right now, only open market endorsements are being routed through the exchange. Open market business for U.S. risks is sent by U.S. wholesalers to Lloyd's brokers who underwrite the business in London.

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For More Information

A replay of Mr. Stafford's presentation during a July 13 webinar sponsored by the Retail Agent E&S Initiative is available at http://bit.ly/cTt26A).

The Retail Agent E&S group, which now has Lloyd's as a member, is a collaboration of the Independent Agents & Brokers of America's Agents Council for Technology, the American Association of Managing General Agents, NAPSLO, and the Association for Cooperative Operations Research and Development.