Electronic Placing

For this market to completely open up globally, the business must ultimately be able to take place between people who cannot see each other over a desk or meet over a coffee to sew up the deal.

We’re limbering up for something of a giant leap here in the London Market right now, with the implementation of global insurance electronic messaging (ACORD) standards to underpin our strategic push towards electronic trading via the Lloyd’s Exchange.

With it, centuries of ingrained practices are beginning to be rationalised into a more standard approach.

Billed, however, as a relatively small step on a long road, the ultimate goal of the Exchange is to support, streamline and expedite the placing process, not to replace it. In doing so, we will reduce costs, increase competitiveness and fully open London up for international business. Nothing too trivial then, especially when you look at the nature of the broking and underwriting business here.

Complex commercial insurance and reinsurance contracts require considerable intellect to formulate and negotiate and our intensely co-located market undertakes this sort of work to great effect. The brokers and underwriters, with many collective years of experience and relationships, are people who do their best work face-to-face. Relationships are formed and trust is built on an understanding and “market” language between the two parties.

Now, the technology being employed to help streamline this is already largely tried and tested. Electronic messaging is hardly a new concept and, being the last global financial market to “go electronic,” we’ve learnt much from the trailblazers. But it’s not the technology hurdle demanding the giant leap — it’s the language.

By way of an analogy, I’m writing this on a laptop equipped with a dictionary to help compensate for a misspent education. My computer is enforcing the standards for writing in English. A triumph of technology, except this will in no way guarantee that you, the reader, will have the faintest comprehension of my endeavours. A model of clarity to me might not make the slightest sense to you or, worse still, you could infer an entirely different meaning to my intent.

Such are the joys of language, especially one as rich as English whose use between our two great nations is fractionally different. Thus, successful use of all this technology demands other knowledge and skills that the computer itself cannot really help with — it can neither detect nor clarify ambiguity.

Putting distance between communicating partners has always demanded great care in the absence of body-language, whiteboards and marker pens. It’s hard enough to avoid uncertainty where all participants have the same dictionary and grammar rules and work within two minutes walk of each other. The electronic messaging demands clarity and that has to be negotiated. And this is where we are now, learning in bilateral “pilot” arrangements and small groups how to agree a business data exchange using the ACORD dictionary and grammar rules; how to ensure clarity; how to actually fill in those electronic forms for particular classes of business; what is really meant by doing it this way or that.

This is absolutely essential if electronic business is to be a success, even locally with UK participants co-located in the same few city blocks.

Few, if any, in this market believe that electronic trading will ever supplant the face-to-face dealing for the complex big-ticket business — it is first and foremost perceived as a support system in that environment. We therefore have a safety-net whereby if the technology does not deliver the clarity, then the face-to-face will. But for this market to completely open up globally, the business must ultimately be able to take place between people who cannot see each other over a desk or meet over a coffee to sew up the deal. It must all be conveyed electronically without a hint of imprecision between people who have no long-term relationship, who may never have met or even spoken before.

So, the Lloyd’s Exchange may be a small step but the real giant leap is the challenge of removing ambiguity, and in this respect the technology can only play a relatively minor role.