Blueprint One: has Lloyd’s bitten off more than it can chew?
On 30th September 2019, Lloyds of London launched its “Future at Lloyd’s” project, Blueprint One. The corporation is hoping to use digitisation and automation to reduce costs and boost efficiency in its marketplace - where brokers and underwriters meet to do business. To achieve this, Lloyd’s will implement several solutions and platforms as part of its three-phase plan. Phase 1 will run from January to December 2020, phase 2 from January to December 2021, and phase 3 from January 2022 onwards.
Complex risk platform
A complex risk platform is the first of these new introductions. It allows for risks to be placed and bought digitally and provides for real time negotiation on contracts. An early build of this platform is to be tested in phase 1, alongside a suite of other common services, such as a streamlined central accounting and settlement service; a tax calculator; and other data services.
Risk exchange
The risk exchange allows for the automated placing of high-volume simple risks, which compromise half of the business traded through Lloyd’s. A certificate production facility allows for automated policy and contract construction. US based business and property risks are to be targeted early on. An early version of this exchange is intended to be rolled out in phase 1.
Claims solution
Further automation is provided through this claims engine. It triages and routes claims, automates decision making in simple claims and assists complex claim handling. A suite of central tools, such as satellite imagery and drone services, will also be introduced to help manage claims. A pilot for this automation is to launch in phase 1.
Capital Solution
New investment opportunities and a simpler investment process are key to this solution. Investment opportunities include new Insurance-Linked Securities (ILS) structures, which allow for the introduction of third-party capital. The new capital platform aims to improve the customer experience and attract new capital providers through the ease of matching risk and capital. The capital platform and first ILS transactions are planned to come through during phase 1.
Syndicate in a box (SIAB)
SIAB is a way to bring new syndicates into the Lloyd’s market. The qualifying criteria is that the syndicate must be profitable; innovative; developing (gross world product >£100m in first year) and have limited exposure to Lloyd’s peak perils. They will benefit from the removal of the 20% new-entrant uplift. Phase 1 will accept applications and onboard a new SIAB. Munich Re has announced that it will launch the first SIAB called Munich Re Innovation Syndicate.
Modernising Risk Syndication
A lead-follow market model has been introduced, so that syndicates must decide how they operate within Lloyd’s. Leaders will operate to best practise standards, whilst followers will meet minimum standards and operate with a lower cost structure. Theoretically, this should strengthen market performance and raise underwriting standards. However, Lloyd’s are aware of uncertainties surrounding the regulatory responsibilities of syndicates and it is not yet clear whether there will be enough market competition. The intention is for the entire market to trade in this manner by phase 3.
Data and technology
Lloyd’s are attempting to achieve these solutions through data and technology. All solutions will run on a cloud infrastructure which will enable efficient delivery of services. This provides the basis for a common data platform, which is to be the definitive source of all transactional data. Lloyd’s also intends to act as a services hub to help drive efficiency. The hub will include a services portal allowing easy access to all services.
Conclusion
Lloyd’s vision is to focus on technological advancements to ensure that its market is as efficient and prosperous as possible, but not at the expense of the customer. They are taking on a larger role in overseeing standards and overhauling their services, hoping to become the go-to global marketplace. It is vitally important for the leadership team at Lloyd’s to drive this change. Resistance may be met, but to be implemented successfully, this much-needed reform must come from the top.
However, have they bitten off more than they can chew? These sweeping solutions are so broad that executing them concurrently may prove difficult. Implementing this in a single company would be hard enough; implementing this in a market with as many syndicates and parties as Lloyd’s is a real challenge. Instead of focussing on individual issues, they have chosen to overhaul much of their market and service. If they have spread themselves too thin, which could well be the case, then their extensive plan to boost efficiency may end up hindering it.