Lloyd’s wants risk exchange tech. Lloyd’s Lab just selected one

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The Lloyd’s of London insurance and reinsurance market is set to be a focus in the coming days, with a new strategy and reform agenda set to be revealed in the awaited “Prospectus” that’s due to be published next week.

Lloyd's of LondonThe Lloyd’s Prospectus is expected to include details on a range of measures designed to help Lloyd’s become a more competitive and innovative place to place and underwrite insurance and reinsurance business, as well as to make it more appealing to capital providers, including new sources of third-party capital.

Among these measures are expected to be a focus on modernisation, use of technology, performance improvement, a renewed focus on core markets, and a more welcoming and lower friction policy to attract new sources of capital and capacity.

Automation of processes is likely to receive considerable attention, as to is better management and more efficient payment of claims.

In addition, some further rules around the amount of catastrophe tail risk syndicates hold is also possible, our sources suggest.

A focus on broker remuneration and intermediation costs is another area Lloyd’s is expected to take a long, hard look, to identify where money can be saved and efficiency can be added to its processes.

Among the items previously revealed was a desire for Lloyd’s to have in place an electronic front-end for certain types of risks.

Lloyd’s ambition is to have a risk exchange in place, expected to be for the more standardised risks to begin with, enabling insurance and reinsurance deals to be placed and transacted much more efficiently into the market.

The idea is that such an electronic exchange could make transacting with Lloyd’s markets more efficient, simpler and quicker, while also providing a pipeline to risk for the syndicates in the marketplace.

We’d also suggest any such risk exchange, or risk placement technology, could also be used in the opposite direction, to allow Lloyd’s players to more efficiently access their own sources of reinsurance and retrocessional capacity.

But, as we wrote previously here, we’d question whether a Lloyd’s “owned exchange” would be in the market’s best interest ultimately, as independent exchanges tend to be more successful in financial circles and Lloyd’s players could leverage them to access and cede risks anyway.

As we also explained previously here, Lloyd’s has been offered assistance to create this type of technology, effectively automating its market placement processes, numerous times before over the last two decades or more.

But perhaps now is the time for Lloyd’s to take the leap to really turn the paradigm of how risks are placed into its market on its head once and for all?

Which leads us onto the headline of this article.

The Lloyd’s Lab, an insurtech incubator or innovation hub run under the mantle of the Lloyd’s market, has just selected the 12 insurance technology (insurtech) start-ups that are joining its second cohort for a ten week program during which they can leverage the breadth of expertise and knowledge at Lloyd’s to help hone their strategies and business models.

Among those 12 insurtech start-ups is one that offers precisely what Lloyd’s is looking for.

Tremor Technologies, Inc., the programmatic reinsurance risk placement marketplace provider, is one of the 12 insurtech start-ups to successfully make it through to cohort 2 of the Lloyd’s Lab.

Lloyd’s Lab describes Tremor as, “A marketplace for the reinsurance industry that uses auction and optimisation technology to ensure that trade happens at fair market prices extremely efficiently.”

Tremor is the only one of the second Lloyd’s Lab cohort that provides a technology solution that offers a way to place and trade insurance, reinsurance and retrocessional risks and programs.

Interestingly, Akinova, another start-up designing risk exchange type technology, was not successful in joining the second cohort at Lloyd’s Lab, despite having been involved in the pitch day, we understand.

Insurtech start-up Tremor is already making waves in the market, having successfully now placed two property catastrophe reinsurance programs, the first for an unnamed top-20 U.S. P&C insurer at the January renewals and the second more recently for insurance giant Markel.

Tremor has further placements, or auctions, of risk lined up for clients as well, the start-up has said, suggesting it already has proven exchange technology that could be used by Lloyd’s syndicates and players on both an inwards and outwards basis.

Lloyd’s syndicates could participate in the auctions that Tremor runs for ceding companies (in fact we understand that more than 15 are already signed up and actively participating in auctions) and could also use Tremor as an exchange for placing their own risk into reinsurance and retrocessional markets.

That would achieve a lot of what Lloyd’s likely seeks, from the risk exchange it has mentioned wanting to create. But all without Lloyd’s itself needing to do any of the work, or needing to own one itself.

The timing is interesting, with Tremor being added to the cohort at the Lloyd’s Lab just in advance of the publication of the Lloyd’s Prospectus next week.

Being selected for the Lab is a further vote of confidence in Tremor’s technology and the experience is likely to deliver significant benefits to the start-up, while establishing it among the Lloyd’s set.

Also read: “Structurally unprofitable” underwriting adds urgency to Lloyd’s reforms.

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