The Ever-More Modern Marketplace

This market has been accelerating towards this over the last decade and in the last three to five years has really started to build momentum. That’s been coming from a variety of angles. You’ve seen momentum with the brokers, who are starting to invest in their own internal capabilities to manage data and to engage with insurers on that.

You’re also seeing this from insurers. They’re doing the same thing, starting to build their own internal capabilities, like Brit’s Ki vehicle [the digital follow-only syndicate launched in 2020]. And you’re seeing things in the market, whether it’s market bodies like Lloyd’s investing heavily in projects like PPL, their placing platform which deals with contract settlement, or private companies like InsurX building solutions to enable the market to be more efficient using digital technology.

So there’s no one party. It’s really the case of the whole market—brokers, insurers, market bodies and private companies—coming together to leverage some of this amazing technology now being created in various parts of the world and applying it to London market insurance to deliver a better product and better solutions, ultimately for end clients.

It’s really a question of data. People talk about how data is the new oil. Oil is powerful when it’s refined, and it’s the same for data in the insurance industry. It can be incredibly powerful, but it has to be refined to be able to use it. Over the past 20 years, the capability to refine data had been constrained. A person analyzing data can only do so much, whether they are an actuary or an underwriter. In the last decade some really powerful tools were developed to harvest very large amounts of data, organize it and take out information that can allow you to make better decisions. Those better business decisions then reward those players who do it well and continue to fund further development in the space. That’s probably what’s really accelerated this change in the London market in the last five years.

We saw this momentum in the market, and we knew the market was going to digitalize, but the business case for making the investments required to do that digitalization had quite a long payback period. Really, that’s the opportunity that InsurX had as the independent exchange. We sit in the middle of the market, and our singular objective is to make our partners—whether they’re brokers, whether they’re insurers—more effective in what they already do. By plugging those parties together, any one broker can access all insurers signed up on the other side of the marketplace, and vice versa for insurers. As of today, we have 11 broker partners and eight insurer partners all plugged into one ecosystem. As we build those numbers, the power of that network becomes more and more important. It’s allowing each individual broker to be better at what they currently do to serve their existing clients by plugging in to this digital infrastructure that we’re building for them.

We are independent in terms of the parties that we trade with because we are not a broker, we can work with all the brokers in the market without competition concerns, and equally because we are not an insurer, we don’t want to underwrite and can work with all the insurers. That independence means that more parties can come together and work in a collaborative, cooperative manner. That’s always been the strength of the London market, this ability to work together to syndicate risks, to deal with complex risks together in a collaborative environment. InsurX, as an independent exchange, is just taking what the market has done for the past 200 or 300 years into the new digital age.

We launched in the contingency market because there was a fundamental customer need. InsurX looked to take a technology and a concept that a number of us were saying could be really powerful into a market segment where there was a shortage of capacity. Following the pandemic, a lot of insurers exited that class of business. But with the pandemic receding and a lot of events happening, big artists like Bruce Springsteen and Taylor Swift going back on tour and big sports events taking place, there was a need for insurance capacity. London is a leading market for contingency business, but it did not have enough insurers providing capacity. We worked with brokers to turn raw, unstructured data into something really useful to insurers. They then used it to form their own digital appetites, and we fuel those appetites through our exchange. We initially launched last year with two brokers and three insurers. By the end of the year, we had signed up seven brokers and six insurers, and we traded over $20 million of premium for those parties. We think it’s really important that InsurX is in multiple classes of business. We want to take this concept, which is now proven, into a number of new classes.

We launched into property at the tail end of last year. We initially planned to launch with four brokers, but by the time we actually launched, we had six. Within a month we had another four brokers saying they want access as soon as possible. That’s happening for a fundamental reason: the product we now serve up to brokers gives them faster capacity than they would otherwise be able to access and access to new capacity that they wouldn’t otherwise be able to access. Brokers are doing this because it allows them to serve a better product to their end clients. If they serve their clients better, they win more business.

I see it going two ways. Firstly, we’ll be building the amount of capacity on the InsurX platform and traded in the London market. We are speaking to insurers who are not currently trading in London but would like to access the market using our digital technology. We already work with one Bermuda reinsurer to provide capacity through our platform to follow one of our existing insurers. We will see more types of capital supporting efficiently traded risk in the London market. It may come from reinsurers or insurers based around the world. It may be newer forms of capital, whether ILS [insurance-linked securities] or something else.

Secondly, the London market will start to bring its product closer to its end customers. We’ll start to see the emergence of digital technologies that make it even easier for brokers and their clients to trade more efficiently with the London market. I think it’s very likely that they will continue to trade with their existing partners but in a more efficient manner. This is a case of making faster pipes to connect the parties together rather than to cut out any individual that’s currently serving customers.

The London market has been making investments over the last couple of years to allow customers to get better, faster and cheaper access to that market. The U.S. is the world’s biggest source of insurance business, and London will want to do more business with the U.S. through these mechanisms. You’re going to see more trading and more adoption of this technology between London and the U.S.

What is happening here now is what happened on Wall Street in the ’80s and ’90s. This is no different; it has happened before. The digitalization of financial markets can happen very quickly, and it can bring massive benefits to those parties that get involved in it. What we are going to see—and it’s going to be on both sides of the Atlantic—is some massive winners and others who get left behind because they haven’t adopted or understood how this technology will shape their businesses. It’s going to fundamentally change the nature of how commercial insurance is traded.