A New Year is in full swing and our thoughts have turned to what we might like to achieve in 2023 – and this could be an important year as we lay the foundations of true digitalisation and understand what that means for the more traditional methods of trading. And it is time to get a wider cross section of the market engaged in that debate.
We have made a lot of progress in our modernisation efforts over the years – albeit not without struggle. But, accelerated by the pandemic, well over 90% of placements in London happen on one of the electronic trading platforms – primarily Placing Platform Limited (PPL). That is a huge achievement in a market as addicted to paper as ours was. But this adoption, while a major behavioural change, has done little to disrupt the fundamental way business has been conducted. I always said that PPL was about getting people to use computers. Once you had delivered that, how they used computers in cleverer ways to deliver more effective methods of delivering world class client service would be up for debate. That is the point we are reaching now.
The work of the Data Council to agree a core data record and an initial way of capturing it via MRC version 3.0 is the next step in this progression. It is principally aimed at refining the back office processes around moving money between counterparties. But as we gather more and more data in a structured format, that gives us the opportunity to transform it into real information about the placement. That is the base metal for things like algorithmic underwriting – a concept being pursued as enthusiastically by brokers and underwriters themselves. That could revolutionise the follower market and begin to infringe on leaders. Beyond that, suppose PPL became such a store of information on London market business that you could begin to derive pricing indices. Could we be looking at insurance derivative trading that some have dreamt of for 20 years or more?
The answer to that is “no” if PPL does not deliver on its new version later in February and then in June. At the time of writing, all is looking good but it is a salutary lesson in not getting ahead of yourself. The visionary stuff I was fantasising over above will only come about through a cumulation of simple things. So let us keep our eye on the ball.
What all this means is that, finally some might say, technology is changing the way we do business. So what does that mean for face-to-face trading? And whither the Room in such a world?
This is a topic we have discussed before. What I will say is it remains the one topic guaranteed to provoke heated debate at the LIIBA board. People care about our physical environment. After all, it is that ability to go window shopping for insurance in London, that makes us different from other centres and that is at the core of the collaborative spirit that allows us to cover risks others can’t. Can all that be replicated purely on platforms and in WhatsApp? How far are we from our first ChatGPT-generated insurance contract?
I think the answers are “no” and “a long way” but it is a question I think it is valid to revisit, especially as more and more people are back in EC3 regularly. But it is not a question my generation alone should dominate because (a) we are not going to be around much longer; and (b) I had to look up what ChatGPT was precisely rather than being infused with this a priori knowledge at birth. So we are forming a focus group of under 30s-ish to get involved in this discussion. And we will be guided but not dictated by what they have to say. This must be a consensus of many demographics.
So, on reflection, the misery of January 2023 has flown by as we have got stuck into some really exciting ideas as to how the year will develop. We have some seismic progress to make and fundamental issues to resolve which will make for a fun 12 months. Much easier, as the great Townes Van Zandt would say, than just waitin’ round to die.