Sending the right message

The announcement by the insurance and reinsurance industry’s paperless trading service, RI3K, of a deal to facilitate the transfer of hundreds of millions of electronic messages has potentially huge implications for brokers and underwriters alike.

The use of RI3K messaging will reduce the need for the manual re-keying of data, upon which Insurers in London alone spend hundreds of millions of pounds each year.

In collaboration with connectivity provider giant Kewill, RI3K is now capable of providing straight-through processing of data in any format via system-to-system messaging, not simply email. Files and records on technical accounting, exchange placement and settlement data can be carried – and updated instantly. Best of all, though, it does not matter in what form data is sent.

At present, some six million messages are transferred electronically in the market each year. With the use of Kewill as an industrial-strength carrier, RI3K says that figure could be grown considerably.

On the back of many months of trials and testing, the company is now taking its case to brokers (not generally advocates of sending data electronically) face-to-face.

The omens look good. RI3K inked a landmark deal with Aon in February, and has arrangements in place with two-dozen insurers. A total of 18 of its clients are also on the verge on renewing their membership. The deal with Kewill, which already has connectivity relationships with insurers including Allianz and Hastings Direct, has been struck for an initial period of three years.

“This is an electronic post-office capable of serving any broker in the market who wants to use it.Alex Letts, chief executive, RI3K

Electronic Post-Office
Brokers who do not use RI3K for risk placement can still utilise its messaging service, as RI3K brokers can transmit data to anyone.

“This is an electronic post-office capable of serving any broker in the market who wants to use it,” says Alex Letts, chief executive of RI3K.

The benefits of electronic messaging are far-reaching. It drives efficiencies through the elimination of manually keyed data (and therefore errors), improves distribution and increases transparency, which has positive implications for contract certainty.

Moreover, with total reserving positions being in a state of constant update, underwriters will have a tool which with to underwrite more accurately.

Back office provider Xchanging, with whom RI3K have worked to develop the platform, are optimistic about the development. Executive Director Steve Beard says: “This [solution] will make it easier for our customers to trade and receive messages electronically. … It will ensure that Xchanging messages can be sourced from the same point.”

The short-term plan is to have 25% of the London market by volume using RI3K systems in some shape or form. After that, Letts says the next challenge is to raise it to 50%. An increasing proportion of this will be from insurance, and not from reinsurance as has been RI3K's specialty during its seven years of existence.

“The short-term plan is to have 25% of the London market by volume using RI3K systems in some shape or form.

Letts says: “This industry can only afford one infrastructure. We have volume. We are in a position to drive the agenda.”

ACORDing to standards
How this development fits in with the drive to paperless trading at Lloyd’s could prove particularly interesting.

It is hoped that the RI3K platfom will play a key role in driving ACORD standards forward. Letts adds: “We are an increasing catalyst for a market reform programme to make Lloyd’s the global platform of choice.”

Richard Ward has expressed his keenness for any efforts that are made to streamline processes at Lloyd’s. Having been in discussions with the likes of Catlin, Brit and Amlin, RI3K's move is clearly an attempt to do this.

Could it be one small step for electronic messaging, one giant leap for insurance? Time will tell, but a step in the right direction it undoubtedly is.