Subject: FW: October, 2011 Bordereau Newsletter
In This Issue
· Why is Disaggregated data important?
· US coverholders seek certainty from bordereau vendors that Lloyd’s standards will be met
· Report from Lloyd’s Coverholder Technology Forum
· Little “lesson” on disaggregation from Tom Bolt on risks you hope you never underprice
· Kudos to Lloyd’s staff for a job “well done”. (Yes, we name names!)
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OK, we give up. We attended the Lloyd’s Coverholder Technology Forum in London on September 29th and 30th. We met many new friends and had time to socialize with our associates in the Bordereau System vendor community. We even sat through a novel production called none other than a “Vendor Carousel” in which all 20 system vendors (yes, including CATEX) had exactly three minutes to talk about their systems to a group of 250 tech forum attendees. Surprisingly, out of all 20 presentations the words “disaggregated data” were used in exactly one of them and that was by us at CATEX.
We’ve been talking about the value of collecting data at its most granular level for ages. More important than just collecting it we’ve built a system that matches premiums claims, endorsements and reporting functions at that same granular level. (Of course the disaggregated data can be rolled up to a more aggregated level by hitting a button on our system.)
Don’t misunderstand us --we don’t collect old telephone directories with names and addresses for a hobby. But we did think that there wasn’t a whole lot of value to a market underwriter to be presented with an aggregated line item number, representing risks written by a coverholder, only because a new bordereau system delivered it faster and prettier than the monthly spreadsheet inundation.
Of course part of the value of a bordereau system is based on the accuracy and speed of getting that aggregate number. We read the insurance trade press here too –not exactly a news bulletin, that one.
But we do think that unless that aggregate number could be pierced, decomposed, or broken out into all of the individual risks, (property or casualty) and have premium and claim bordereau matched to each of those specific risks, that an underwriter would still be groping around in the dark about what risks may or may not be profitable in his or her delegated book! Even the basics, such as individual risks missing premiums, or what specific risks had claims and endorsements, or what risks mistakenly had inception dates after the expiry date, would go unnoticed.
Fortunately, as you might guess, there were many underwriters in attendance last week in London. We posed the question to them about the value of aggregated data and the value of disaggregated data. To a person, 100%, unanimously, totally –every one of them told us that the ability to look inside the delegated book and spot the performance of a specific risk(s) was what they were looking for. The aggregated number –reported to Lloyd’s –is really simply a by-product of what the binder underwriters need to do their jobs.
We rest our case. Our system can collect and manage risks at a disaggregated level. It had better! It is after all a part of the Pivot Point Insurance and Reinsurance Transaction System that processes over $5 billion in premium and claims annually. We simply enable functions such as premium, claims, loss triangles, endorsements, etc., on the bordereau system.
You decide if it’s important for you to have that view. If you agree with us then we can help you get that view –quickly.
Markets & Coverholders want Bordereau Systems to keep up with Lloyd’s
One big concern that we heard last week from both insurers and coverholders was that any new bordereau or program management system had to guarantee that the data coming out its back end to Lloyd’s was in the required Lloyd’s format. Lloyd’s can be a pretty intimidating place if you are a first time visitor. (Even we, who have visited frequently, will admit to riding up and down the exterior elevators just for the thrill of the amazing view of London.) US based markets, European and US coverholders in particular told us that they would not look favorably on any management system that did not guarantee that it would always include the then current required Lloyd’s data reporting format.
Rest assured that the CATEX Bordereau/Program Management system offers precisely that guarantee.
Several of the main events at the Lloyd’s Coverholder Technology Forum were held in a room called “The Old Library” at Lloyd’s. It’s not exactly a room that you would expect to see in the gleaming steel and glass design that is Lloyd’s today. The Old Library dates back to 1928 and its traditional oak panels feature intricate carvings of 17th & 18th-century merchant vessels. It’s a pretty impressive place to be sure and it was also the location for the “Vendor Carousel” where all 20 of us had 3 minutes to show our stuff. Somewhere in the room, I don’t know how they hide it, is a big hook that reached out and silenced anyone who exceeded the 3 minutes! They really enforced the rule.
Sue Langley, Lloyd’s Director of Markets opened the meeting by welcoming the 250 attendees and reviewing the two days of events. Peter Montanaro, Head of Delegated Authorities took over from there. (We’ve interviewed both Sue and Peter in the past at www.catextv.com if you’re interested).
By Friday much of the action for us at least was focused on the Captain’s Room which is a very large space off to the right of the main entrance to the Lloyd’s building. In this room all 20 vendors had set up stands and displays describing their bordereau management systems. We were in a great location and had a chance to meet just about everyone.
Off and on throughout the day conferees came through the Captain’s Room and we had a chance to discuss the importance of disaggregated data with leading syndicates, big US markets, London binding brokers and US and European coverholders of all sizes.
Disaggregation battles on a very large scale
Tom Bolt (pictured above) is the Director of Performance Management at Lloyd’s. Part of that job entails making sure that the syndicates that are based in Lloyd’s adhere to underwriting guidelines that Bolt issues. His concern is first and foremost the integrity of the Lloyd’s Central Fund –which is the pool of money that underpins Lloyd’s syndicates worldwide and upon Lloyd’s stellar financial ratings is based.
Well, Tom reads newspapers too it seems. He’s noticed that the regulatory and legal reaction in the US to the BP Macondo oil well disaster last year hasn’t even really reached a crescendo yet. Tom seems to remember recent history too and has seen the lingering ultra-long tails of the asbestos claim disasters of the 1980s still causing waves today. In his position it wouldn’t really seem to be a stretch to connect the dots from what could well become a multi-multibillion dollar liability loss from a Macondo type disaster and the decades long torture of endless asbestos losses. Luckily, for the insurance market at least, much of the Macondo losses will be borne by the oil companies self-insurance programs, but Bolt is paid to see into the future and spot oncoming problems that could affect Lloyd’s.
So far so good, right? Now what Bolt wants is for syndicates who cover offshore energy risk to break out the liability portion of their coverage separately instead of lumping it in with the offshore rig package policy that includes pure property damage or loss. He says that by “breaking it out” of, dare we say, disaggregating it, the liability risk will be able to be priced separately and prudently in a manner closer to the potentially huge claims that could arise in case of an event.
The reaction so far from the syndicates has not been uniformly positive. Pushback is indicating that there is a fear that non-Lloyds markets will continue to lump in the potentially costly claim risk of the liability portion of the package policy with the overall coverage policy available for sale by offshore energy clients. The translation would seem to be that the Lloyd’s markets, by being required to separately price liability, are concerned they will lose business to non-Lloyd’s markets who can continue to lump in little things like off-shore pollution, including seepage and pollution and the Oil Pollution Certificate of Financial Responsibility, into the package policies.
Maybe this is a valid concern but it would seem that by separating the coverages the managing agents would be better placed to recognize, monitor and manage liability exposures that could, if they occurred, literally sink the ship. The question we would pose is that isn’t this thrust the same thing –only on a much bigger scale –that Lloyd’s is trying to achieve with the delegated authority reporting effort? Isn’t it a good thing for markets to be able to properly identify and price a risk that would sink an insurer, potentially reach the Central Fund (not to mention knock out a few hundred miles of coastline) and allow a market to directly challenge a client about their mitigation and prevention procedures that are in place to avoid such a disaster?
We think maybe Tom Bolt is on to something and we’re following the industry discussions closely. As we go to press with this newsletter (October 6th) there are reports that an “agreement” has been reached between Mr. Bolt and the Lloyd’s offshore energy underwriters. We will include the details in our next edition for you.
Kudos to Organizers of Lloyd’s Coverholder Fair
CATEX need to give a shout out to Sue Langley, Peter Montanaro, Adam Stafford, Sarah Thacker, Gemma Reed, Matthew Chandler and many others who put together a very good two day event with attendees from around the world. It was a job very well done.
We also want to say hello to friends we made from Zurich, London, Malaga, Amsterdam, Scottsdale, Boston, Daytona Beach, Ft. Lauderdale and on and on. You can be sure that we hear all of your suggestions and received your input in the spirit it was given. The next time you see our system you will see that we not only paid attention but have implemented many of your ideas.