LONDON (Reuters) – Lloyd’s of London said on Wednesday it will pilot an electronic exchange to handle simple insurance risks this year as the 330-year old commercial insurance market seeks to modernize.
Lloyd’s, which started life in Edward Lloyd’s coffee house in 1686, is trying to become more efficient and cut costs as it competes with rival insurance centers such as Bermuda and Singapore.
As part of the modernization plans, Lloyd’s said last year it would launch two electronic exchanges, one for simple and one for more complex insurance risks.
It said on Wednesday it had taken a 40% stake in an existing electronic placement system, PPL, which will form the basis of the complex risk exchange.
“We are now ready to start building the Future at Lloyd’s, having achieved three major objectives – securing finance, setting the governance structure and detailing the plan for the next 12 months and beyond,” Chief Executive John Neal said in a statement.
The Lloyd’s market is made up of 99 syndicate members and insures anything from ships to sculptures. Much of its business is carried out face-to-face in its City of London tower, with brokers and underwrites carrying papers around the building in briefcases and even suitcases.
Several insurance sources told Reuters they approved of the modernization plans, though one said the exchange was trying to do too much too soon. Some smaller insurers and brokers are wary of being cut out of the new-look market.
Simon Matson, CEO of Gallagher’s UK broking and underwriting business said: “We cannot overlook the importance of human discussion and specialist expert counsel which is vital for the complex risks underwritten at Lloyd’s.”
Christopher Croft, chief executive of Lloyd’s broker association LIIBA, said Lloyd’s needed to improve its complex settlement processes.
“Brokers are still asked to do too much on behalf of insurers – significantly more than in any other insurance center – very little of which is visible,” he said in a statement.
(Reporting by Carolyn Cohn. Editing by Jane Merriman)