The emphasis for reforming the London Market has switched to speeding up the way in which people are paid, says Marie-Louise Rossi
A recent announcement that the Market Reform Group has set up a new accounting and settlement (A&S) steering group is hardly the kind of news to grab the headlines. It is, however, a big step forward in the modernisation of the London Market - known as the London Market Principles (LMP) - and will lead eventually to the speedier payment of claims and premiums.
Until recently we have been concentrating, at least in terms of public announcements, on the introduction of the new standardised LMP slips.
Despite a slow start, these have started to gather momentum and we are now able to focus on measures that will directly speed up the flow of cash around the market.
This is what everyone - clients, brokers and underwriters - wants more than almost anything else. And it is an area where we know we have to improve.
The goals of the A&S project are in accordance with the broader objectives of market reform - to increase efficiency and improve customer service. Regulatory issues are also providing an impetus for reform. The FSA is seeking to impose more rigorous disciplines across the market and, while the impact of these changes is still unclear, it is expected to focus on increased transparency and certainty - objectives central to the A&S process.
All work to date on A&S has endeavoured to identify issues and problems within the London Market's current A&S processes.
A number of areas of concern have been identified, many of which cannot be solved by short-term changes.
Consequently, the new A&S steering group has commissioned analysis of a longer term and more robust solution, which will address issues of speed, flexibility, accuracy and standardisation.
After considering a number of alternatives, we are working on a model which should eventually enable all the main processes to be carried out electronically, including closing, using ACORD international standard messages.
We believe that there are significant benefits to be gained from the implementation of this model. These will accrue to brokers as well as insurers in terms of reduced processing costs, better and more certain cash flow (which can include principal-to-principal accounting, if the parties so wish), and an improved external perception of the London insurance market.
Six working parties of underwriters and brokers are currently trying to resolve any outstanding issues identified in the first phase of work, ensure practicality of the design and, most importantly, demonstrate the business benefits for all parties.
We hope to present results of these work streams by the end of the year and to quantify the commercial benefits for each of the market communities, as early as possible next year.
Marie-Louise Rossi is chief executive of the IUA, and chairs the cross-market accounting & settlement steering group.