Top reinsurer leads a bid to place every aspect of a risk transaction electronically within three years.
The global insurance industry will be trading electronically by 2011 if an ambitious project, discussed at a secret meeting in Brussels last week, proves successful.
Six of the 10 largest global reinsurers and three of the five largest global reinsurance brokers met the Society for Worldwide Interbank Financial Telecommunication (Swift), the world’s major financial messaging network, in a bid to connect together every non-life and life insurance company in the world.
Andrew Hubbard, head of insurance services at accountant Mazars, said: “If they pull it off, it will be a seismic shift for the industry.”
The group of nine companies, led by Swiss Re, wants to be able to place every aspect of a risk transaction – from initial placement through to settlement – electronically, through Swift within three to four years.
Peter Arbenz, head of reinsurance information management at Swiss Re, said: “We thought, why risk creating a new platform like Kinnect [Lloyd’s former electronic connectivity platform] when something in the banking world already exists?”
According to Arbenz, 90% of those present at the meeting agreed that the project should initially involve just non-life reinsurers, and focus on the settlement aspects of transactions. Claims processing may also be included in an initial pilot and, if successful, the scheme would be rolled out into other sectors – such as placement, and even to life insurance companies.
“Why risk creating a new platform like Kinnect when something in the banking world already exists?
Peter Arbenz, head of reinsurance information management, Swiss Re
Arbenz said: “Ultimately, it would be natural to expand the project to risk placement in the interests of achieving end-to-end processing. But at the moment, we have to focus on non-competitive areas. The more you get into the placement side, the more you have to make sure you comply with anti-trust laws. Maybe this goal [of electronic risk placement] is three or four years down the line.”
Sources at the meeting said there was also talk of developing a special software application that would allow insurance companies to connect to the Swift network. Currently, most insurance companies’ IT systems are incompatible with Swift because they do not use the same messaging standards as other companies already connected.
Arbenz said the Brussels group was trying to agree a budget for the project by the middle of this year. Swiss Re and Swift would now create an outline plan which the nine companies involved would take to their senior management for approval.
He added: “Currently, the industry’s costs are too high. But costs are far from the only reason we are looking for a solution. There is also too much paper, too much scanning of documents and too much data entry. Ultimately, we feel that this type of solution will bring better client service and improve the reputation of the industry as a whole.”
The Swift network enables over 8,000 financial institutions in more than 200 countries to exchange 600 million electronic messages a year.