BY IMOGEN GAMMIDGE
Many sectors of the financial services industry have been early and eager adopters of technology, 

but the UK insurance industry still conducts much of its business manually using paper-based systems. This could, however, finally be changing.
At Lloyd’s of London, which began life more than three-hundred years ago in Edward Lloyd’s Coffee House, it remains a familiar sight to see brokers and underwriters carrying paper documents around the marketplace in slipcases.
It is perhaps not a surprise that this traditional form of paper-based trading has led to low levels of productivity for business processing in the market. Added to this, the London insurance market is facing pressure from declining profitability and increased competition from overseas, notably Bermuda.
London’s position as the largest global hub for commercial and speciality risk could be at risk itself. Modernisation is no longer optional, it is essential.

Lloyd’s of London and the London company market

The London market’s unique selling point is its face-to-face ecosystem, which was facilitated by its paper-based trading. [1] It’s become clear in recent years, though, that the market’s over-reliance on paper places it at a disadvantage when it comes to administration costs.
But previous attempts to digitise the market both inside and outside of Lloyd’s, such as the 2001 Kinnect Inc. initiative, have failed. Perhaps the attempt to enforce a centralised electronic hub onto a complex and diverse market sceptical of the need for change was never going to fly.
Paper-based trading works because it is accessible to everyone; if electronic placement is not a collective endeavour then it cannot work market-wide.
The challenge facing Lloyd’s today is how to collectively modernise to become the digital marketplace that the industry needs and, at the same time, reduce costs without losing its face-to-face USP.

The impact of Brexit

A major catalyst for market-wide change came when the UK voted in June 2016 to leave the European Union.
The vote prompted many insurers to shift certain parts of their business away from London to locations within the EU, to enable the continuation of normal trade. Lloyd’s itself set up a Brussels-based subsidiary. [2]
This seismic shift has forced stakeholders in the London market to sit up and take seriously the need for London to innovate to retain its competitive position.

London Market Target Operating Model (LM TOM) July 2016 and the Placement Platform Ltd. (PPL)

A month after the Brexit vote, the London Market launched a blueprint for its future operating model – the London Target Operating Model (LM TOM). [3]
The TOM programme is aimed at making the market more accessible and cost-effective and replacing paper-based processes with more efficient ways of working. [4]
One of the key components of the TOM plan is the Placement Platform Limited (PPL), an electronic platform designed for risk capture, placing, signing and closing.
PPL is not intended to replace face-to-face trading – rather it should free up more time for underwriters to invest in those valuable relationships.

Electronic placement mandate

There was, however, still some hesitancy in the market about adopting PPL, and by February 2018, only 15,000 policies – or about 10% of the market’s total – had been placed using the electronic system. [5]
The then Lloyd’s CEO, Inga Beale, voiced her grave concerns about this lack of take-up. [6]
In March 2018, the Corporation of Lloyd’s announced a mandate for electronic placement.
The mandate contains a set of targets, requiring syndicates to write at least a certain percentage of risks electronically. Those targets will rise by 10% each quarter. [7]
And in December 2018, Lloyd’s announced further targets, stating that by June 1, 2019, all Lloyd’s brokers will be required to connect to a recognised electronic trading platform. For the first quarter of 2019, each syndicate will be required to place at least 40% of its business electronically, either via PPL or another recognised platform. This will rise to 50% in the second quarter.

Mandate success

The mandate strategy seems to be working.
Last month, Lloyd’s published data that showed the majority of syndicates had beaten a target to place 30% of business electronically by the end of 2018.
And on 19th November 2018, PPL’s board published an adoption table for the first time which showed that the targets for placing in-scope risks again had been beaten. [8]
This, coupled with the development and growing number of recognised electronic trading platforms, such as the Whitespace platform, highlights the will and collective endeavour within the market to make electronic trading a reality.

The future

The London market is, undoubtedly, changing. Lloyd’s has had a female CEO, daytime drinking has been banned, and famously strict dress codes have been relaxed.
The idea that brokers and underwriters could soon be walking around the market equipped with tablets for electronic placement and not a slip of paper in sight may feel revolutionary but is no longer far-fetched.
You only have to look at the iconic Lloyd’s building to see how tradition and modernity can co-exist.
The London market is now better equipped than ever before to join the race towards innovation of its business model using information technology.

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