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Technology

A brighter future

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Tech initiatives can spur delegated authority business in 2021, says Sequel business development director Tim Rayner

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It has been a challenging couple of years for London’s delegated authority market but recent strides in modernisation make the outlook for coverholders far brighter as we head into 2021.

Inefficiencies in the London market have put coverholders at a competitive disadvantage in recent times, compared to other leading markets around the world.

This is particularly true in North American binders, where losses and increasing scrutiny on performance have forced carriers to be more selective and to demand tighter terms, higher deductibles and lower commissions when delegating authority. If left unchecked, that could drive business out of London and back to the US domestic market.

Fortunately, innovations in technology are reducing costs and improving efficiency in the delegated authority space; automation is reducing human error and the need for re-keying of information, while API and cloud technology is shortening the distribution chain by allowing market participants to share data directly, faster than before.

This brings challenges of its own, as the proliferation of individual APIs and web portals that have sprung up, each with their own logins, can be time-consuming and arduous to navigate.

However, these issues are being gradually overcome through a combination of centralised market initiatives and the continued uptake of solutions from insurance software specialists such as Sequel.

Sequel Rulebook, for example, is a specialty underwriting pricing and distribution platform that offers a powerful real-time step change to spreadsheet bordereaux, while Sequel Rulebook Hub is a platform which allows underwriters, coverholders and brokers to transact from within their own systems, in real-time, using just a single login.

Lloyd’s is also moving towards real-time data exchange through initiatives such as Coverholder Workbench.

According to Lloyd’s Blueprint Two, one of the biggest challenges for coverholders is having a trading system that supports their business needs while also meeting Lloyd’s data requirements.

In response, Lloyd’s has developed a cost-effective, configurable platform which includes all the essential tools coverholders need to trade and will be extended to feed data directly to Delegated Data Manager - the market’s central capture platform for premium, risk and claims data to which submission of delegated authority data will be mandatory by the second half of 2021.

Blueprint Two also targets the removal of bordereaux from the market by 2022 - a move Sequel has long advocated.

Lagging by typically 60 to 75 days, these spreadsheets of outdated policy data make it virtually impossible for carriers to get an accurate view of their position in any given line of delegated authority business.

Going forward, market participants will instead share data in near-real time within a market-wide ecosystem and see a number of key placement and settlement processes automated.

Sequel has been moving the market in that direction with its suite of tools, particularly Rulebook’s dynamic rules engine for pricing and Rulebook Hub, which gives capacity providers visibility across their delegated authority business as it is being quoted.

With the market seeing a flight to quality from capacity providers in recent times, this level of transparency may help smaller coverholders in particular by reassuring underwriters their delegated business is being written at the right price and within agreed rules and guidelines.

A centralised hub approach also allows underwriters and brokers to pool aggregate capacity, giving coverholders the ability to fluidly draw upon as much capacity as they need to meet demand rather than being allocated a fixed amount of capacity to work with - and we expect more coverholders to demand this kind of efficient and flexible capital deployment arrangement in 2021.

At the same time, capacity providers are also accessing better data through tools like Sequel Impact, which allows them to monitor their exposures across their portfolios live and deploy capacity with confidence.

Meanwhile, Lloyd’s has developed an insights portal using Coverholder Workbench data that will give managing agents and other stakeholders greater oversight across their delegated portfolios, while Sequel MGA gives managing agents an end-to-end product management and distribution solution, facilitating fast, seamless business.

Initiatives such as these should restore capacity providers’ faith in London’s delegated authorities and equip coverholders with a powerful toolbox from which to write business quicker, more transparently and more effectively than before.

These solutions will also improve the competitiveness of London globally, particularly on high volume business where automation and speed of service is key yet London has lagged behind in recent years.

Bringing coverholders and capacity providers closer together also puts pressure on wholesale brokers to improve their service, add value and potentially reduce commissions - driving further efficiencies and cost savings in the distribution chain and bringing products to customers quicker.

Covid-19 has shown that the London market can pivot and adopt new technology - perhaps more nimbly than many people may have thought. The market must continue on this path to further improve performance and decision-making throughout value chain.

This will give coverholders some respite from the squeeze they are feeling on commissions, rates and terms, but the biggest winners will be the clients, who look sure to benefit from improved choice, speed and efficiency from London coverholders in the year ahead.

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