London’s digital transformation will yield results this year: IUA's Matcham

This is the year of delivery for the digital processing platform the International Underwriting Association’s (IUA) joint venture with Lloyd’s and DXC Technology has spent the past year designing for the London market, according to Dave Matcham, the IUA’s chief executive.

The platform will digitalise, streamline and fully automate processing for the Lloyd’s and London market and is a crucial part of a digitalisation strategy known as Blueprint Two.

In an interview with Insurance Day, Matcham said the delivery phase is “hugely significant”, as the platform will eventually be used by at least 450 firms, including brokers, carriers, managing agents and the associated service providers, such as law firms and adjusters.

“It’s going to be an enormous benefit and this year they will be able to start testing digital processing at a cross-market level,” Matcham said.

“Fast forward to 2024, when it’s widely used and adopted, all carriers and brokers will be able to start thinking about their own internal operations: ‘Where can we exploit and benefit from digital services? Should we change our business models? Can we expand this into other markets?’ It’s huge and we, the IUA, are right in the middle of it as one of the shareholders of the company delivering it.”

“We’re not going to do basic property catastrophe cover in London too much – that’s done elsewhere – but when something can’t be understood, underwritten or financed in other markets, that’s what brings it to London. That’s our USP and speciality is growing in diversity”
_{Dave Matcham
International Underwriting Association}

The move to digitalisation has meant the words “reform” and “modernisation” to describe changes to the London market have “died”, Matcham said, because what the market is undergoing now is a transformation. “London’s digital trading environment will be the first of any around the world,” he said.

Blueprint Two concerns both the front and back office. The new platform will serve the latter, while e-placing platforms such as PPL and Whitespace serve the former. “It would not be surprising if it were made mandatory for members of Lloyd’s to use the new platform, while the IUA will encourage all of its members to use it too,” Matcham said.

Given this and other initiatives the IUA has under way this year, it is unsurprising Matcham is comfortable with the word competition when it comes to the London market. Comfortable does not mean complacent, though, and he is open about the bites being taken out of the London market, notably from its treaty business. This is perhaps because the large reinsurers are “using their big balance sheet”, he said, meaning they have the freedom to choose between jurisdictions.

Brexit is responsible for the biggest decrease in London’s premiums, but that £5bn ($6.1bn) to £6bn over two to three years is “all baked in now”, Matcham said. In 2021, London chalked up premiums of £35.6bn – £30bn in its own market and £5.5bn as “control business” (written elsewhere but overseen and managed by London).

This year, the IUA will be preparing its response to a forthcoming review of the Insurance Distribution Directive (IDD) ahead of its renewal in 2024.

“We would like, as much as possible, to retain what we have through the current IDD,” Matcham said. The European Insurance and Occupational Pensions Authority is engaged with its own consultation about operations for country branches and it is “very hard at the moment to predict”, he said, “how the IDD review will pan out.”

He added: “We believe European clients benefit a lot from using third country branches and so we expect them to be lobbying the EU to ensure they retain the accessibility they have now.” The third country branch regime has not led to “massive staff movement” away from London, however, because European firms have simply turned their European offices (branches) into subsidiaries and then reverse branched the company back to London.

Alongside its digitalisation ambition, London aspires to be “the specialty capital of the world”, Matcham said. “We’re not going to do basic property catastrophe cover in London too much – that’s done elsewhere – but when something can’t be understood, underwritten or financed in other markets, that’s what brings it to London. That’s our USP and speciality is growing in diversity,” he said.

On new product offerings, the IUA is working with the UK government to increase the surety insurance market in London. “It could be bigger if there were some form of mandate around surety coverage for public infrastructure projects,” Matcham said. “We are discussing with government about a model we are building which, if they find it acceptable, could develop that market.”

The IUA is becoming a “trusted source” of advice on the wording of contracts, he said, and plans to run masterclasses on this subject this year. “There’s ‘silent cyber’ and ‘silent climate’ but we don’t want anything to be ‘silent’; we want contract clarity.”

Other important projects for the IUA this year are its cyber underwriting group’s research paper on supply chain risk and its claims strategy committee’s oversight of a review of claims agreement procedures.

There has been exponential growth in cyber premium in the past few years and, although Lloyd’s is a much bigger cyber market than the London company market, 33 of IUA’s members also have a Lloyd’s platform, many of which exercise choice as to where cyber will be written, Matcham said. The IUA’s research paper reflects the fact cyber is no longer built within a comprehensive policy but, for regulatory reasons, must now be separately identifiable, he added.

The IUA is also overseeing a review of claims agreement procedures that aim to maintain a market-wide standard in claims processing. Current guidelines are now 12 years old and need to be updated to reflect moves to a digital world, Matcham said.

“Things are going to be quicker and more easily shareable, for example on the Electronic Claim Files,” he said, which the IUA has been helping to ensure can be used across the London market. Another example where guidelines need to be updated, he added, is to include the Single Claims Agreement Party.

Asked about the interconnectedness of risks, with the impacts of the war in Ukraine as a current example, Matcham said: “Within our system, any particular claim stands on its own. There may be interconnectivity, where multiple perils are clearly relatable to each other.

“The Ukrainian situation has generated both marine and aviation claims activity, for example. These connections would be important to carriers as they would likely write both lines of business.”