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A very old market chestnut

the great London Market technology debate has been holding our attention in the office this month, and refining the issues with our cover piece’s author has forced me to reappraise my view on this extremely old market chestnut

Let me put my own standpoint in context here: I’ve known of London Market reforms since 1995, when I was asked to be a guinea-pig user on a Beta version of a placing system that was going to launch on the ultimately ill-fated Electronic Placing Support (EPS) platform. Suffice to say, the system was almost useless, and it never made it to market

But even back then, we understood the value of technology — we were all fond of the instant-messaging capabilities the fax machine offered. We just loved the fact it was physically possible to fax a slip over to Paris and get a line down on a file within half an hour (if you didn’t run out of paper!)

We also had the Limnet claims system — which was basic, but it worked, and saved lots of time advising the market of claims

Anyway, fast-forward to today, and now we have a unified bureau. We also have a unified claims system, a unified wordings repository (although the LMA has another one, too), and we are well on the way to a unified accounting and settlement system

“One system — many different ways of plugging into it” seems to be the model that works. Look at stock exchanges around the world for confirmation of this: the brokers plug into unified centralised systems that match buyers and sellers.

So what is so different about placing risks? Turn to the feature on page 18 to see that the market is still smarting from the costly failure of the Lloyd’s Kinnect initiative well over a year ago. The horrendous experience of EPS, and then Kinnect, has made the market extremely wary of tossing further cash into the seemingly bottomless pit of IT budgets on this one

We also have many competing placing systems out there — but as far as I understand them, they are all-or-nothing, winner-takes-all solutions, because if you send someone a risk through XYZ system, they need that same XYZ system on their machine to write you a line

I think all the players in that space say that there should be no ‘one size fits all’ solution because they’re scared that they won’t end up making the one size that is eventually taken up. They protest rather too much

So on to the Holy Grail of placing, we’re probably going to have to wait — either a genuine winner will emerge to take it all, or we’ll be left with something of a hodgepodge of bits and bobs and peer to peer

But given the track record, and the Luddite attitude of a significant band of 50-something placing brokers, perhaps we’re better off where we are for the time being. After all, the really juicy cost savings are probably to be had on all the unglamorous back-office stuff — the Holy Grail might turn out to be just a cheap pewter tankard after all!

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