Informed innovation for the London insurance market: software specialist Sequel Business Solutions launches its Innovation Forum, By James Brewer
Senior personalities in the London insurance market have lent their prestige to efforts to ensure that technological advance will be a force in fending off threats to the capital’s position as the global hub of their industry.
The £60bn ($94bn) London market has always touted its innovatory skill in keeping up with new and complex insurance demands from clients – and from spring 2015 it will be able to match IT capabilities ever more closely to that, with the launch of what will be known as the Innovation Forum.
The venture is being initiated by insurance and reinsurance software specialist Sequel Business Solutions for its broker and carrier customers, which include many of the leading participants in the market.
Sequel has worked with the London operations of more than two dozen well-known enterprises, delivering systems transformation programmes and “products [that] give customers control over their business information so they can make decisions quickly and with confidence.”
Sequel sales and marketing director Rob Stavrou said that early client feedback on the project was enthusiastic, ahead of further details to be announced in the coming weeks on how the Forum will operate. He said that members of the Forum would be able to discuss market issues in technology, while maintaining confidentiality for their own corporate strategies.
Mr Stavrou and his colleagues at Sequel have welcomed the London Matters report produced by the London Market Group, a senior market-wide body charged with championing a modernisation agenda, with Boston Consulting Group.
Remit of the London Market Group includes maintaining and promoting the vision of London as market of choice for global insurance, and sponsoring commonly-agreed projects.
Its report, London Matters: the Competitive Position of the London Insurance Market, followed more than 300 interviews with customers and market participants from many countries. According to the study, the London market took £60bn in gross written premium in 2013, with £45bn of this written in London itself and backed by London capital. Based on business written in London alone, the market is nearly double the size of Bermuda (£25bn) considerably bigger than Zurich (£19bn) and 11 times bigger than Singapore (£4bn).
The market contributed £30bn to UK gross domestic product in 2013, and employs 48, 000 people throughout the UK of whom 34, 000 are in London. In the last five years more than £140bn in claims has been paid.
But the market is said to be at a tipping point: London is only tracking global growth in commercial insurance, while it is losing share in reinsurance, down to 13%, from 15% between 2010 and 2013.
Furthermore, heavily reliant on the UK, US, Australia and Canadian markets, London is said by the report to be failing to win emerging market business. Only 0.5% of the absolute growth in emerging market premium in Latin America, Asia and Africa, was placed in London. London’s share of the Asian insurance market, for example, is a mere 2%. More than half of future growth will come from emerging markets, meaning that London’s global leadership will become increasingly challenged.
As customers prefer to buy insurance in their local market or region, up to 40%, or £16bn, of London premiums is at risk of flight to overseas underwriting. On top of all this, London’s expense ratios were nine percentage points higher than its peers in 2013, driven by higher acquisition and transaction costs.
On publication of the report, Steve Hearn, chairman of the London Market Group and deputy chief executive of Willis Group, declared: “London cannot rely on its historic advantages to guarantee its future growth. As a collective, the market must react with speed to the global competition, respond with new innovative products and reinforce the message that London is the best place in the world to underwrite complex commercial risks.”
Mr Hearn said: “We need the right culture and environment to ensure that London continues to be the global centre of innovation and expertise – think the Silicon Valley of the insurance world.”
Ian Summers, business development director of Sequel, said that the Innovation Forum “will allow us to listen more closely to our customers and support them effectively with their plans. It will concentrate on helping our customers grow faster. Technology has a key role to play in keeping London in pole position when it comes to insurance.”
Among recent individual contract successes for the software company, Sequel Impact, a risk exposure and aggregation product, has been adopted by Lloyd’s managing agency Ark Syndicate Management, which is a leader in marine and energy, accident and health, property, specialty and casualty. Launched in autumn 2013, Sequel Impact gives the underwriter, in one product and in real time, a graphically displayed exposure and analysis management tool. Cloud-based or hosted locally, it is available on devices ranging from desktops to tablets.
Sequel Impact, which complements Sequel’s suite of Eclipse Underwriting and Eclipse Broking products, uses a powerful analytical engine which quickly calculates maximum loss scenarios. The application can handle risk exposure parameters ranging from GPS coordinates to larger geographical zones such as postcodes or marine oil fields
Lee Ramsden, head of IT at Ark said: “Impact provides us with greatly enhanced query and mapping capabilities. The technology and knowledge is there to have a system that allows underwriters and other risk management stakeholders the ability to quickly and easily quantify and visualise risk exposure.”
Mr Stavrou said: “Ark represents a trend in the market where forward thinking firms are looking for significant business and process improvements to replace older and less flexible systems.”
A short time earlier, Lancashire Group – a Bermuda and London provider of short-tail specialty insurance in aviation, energy, marine, property and terrorism and political risk – brought in Sequel Impact. Stuart Blakeborough, group chief operating officer at Lancashir, said: “We looked very carefully at what was available in the market to support our specialist underwriting decision-making – and we chose Sequel Impact. We considered that it was the most suitable software for our energy business and its accurate, real-time reporting has been particularly useful.”
Mr Stavrou said that Ark and Lancashire were among ”an advanced guard of leading insurance firms using this proven and powerful decision-support tool to their great advantage.”
Founded in 1993, Sequel Business Solutions was acquired in July 2014 by private equity investor HgCapital, which is based in London and Munich. HgCapital manages over £5bn for leading institutional and private investors.
The London Matters report said that London’s capabilities are founded on the wide range of market participants competing and working together in a few blocks of the City. “Yet, such a structure risks becoming a weakness when rapid change is required. Clarifying and communicating London’s role in a globalised world will require all stakeholders in the market – insurers, brokers, regulators and politicians – to work to reinforce the market and its unique role in London, the UK and the world.”