The Corporation of Lloyd’s has introduced a requirement for managing agents to increase the amount of their business written digitally through the electronic placing platform called PPL.
From the end of June 2018, each syndicate will be required to have written no less than 10% of its risks electronically; this target will rise by 10% each quarter until December 2018 to reach 30%.
There is a “carrot and stick” in Lloyd’s requirement in that if managing agents meet each of the target requirements then Members on the syndicate will be eligible to receive a partial rebate of their 2018 annual subscriptions. If managing agents have not met with each of the target requirements then Members of that syndicate will pay additional fees, in order to contribute to the costs of modernising market systems and processes and may be subject to capital loading. Further targets, expected to increase to 80%, will be set over time and these will be set in consultation with the Lloyd’s market. Different targets may also be set for different classes of business. The rebate will increase for each percentage point the Q3 and Q4 targets were exceeded up to a maximum of 15%.
Lloyd’s CEO, Inga Beale, said: “We must ensure that Lloyd’s and the London market moves together and continues to prioritise its modernisation efforts. We have agreed the scope and requirements for the electronic placement mandate. Those that adopt electronic placement in line with the mandate will receive incentives, in recognition of their increased efficiency. Those that fall short will be required to contribute towards the costs of modernising the market. We have a system that works and that supports face-to-face negotiations. Adoption by the market will increase efficiency, reduce back office costs, and most importantly improve customer service.”
Additionally, if syndicate fails to meet half of the quarterly targets, the managing agent will have to send Lloyd’s a remediation plan setting out how it will meet each of the forthcoming targets. Lloyd’s Bulletin goes on to say “If at the end of the year a managing agent has not ensured a syndicate it manages has achieved at least 50% of the Q3 and Q4 targets, then Lloyd’s will inform them that it reserves the right to increase the syndicate’s Economic Capital Assessment (ECA) by 5% at the next coming into line date if the current remediation plan is not complied with. This will give a managing agent time to address the position. The use of capital loadings in this way is designed to address the risk to the Lloyd’s as a whole of managing agents not embracing electronic trading with all of the benefits that brings.” and furthermore “the managing agent must inform the members of the syndicate of the potential consequences of it not complying with the agreed remediation plan.”
The electronic placing platform provided by PPL was launched in July 2016, initially for standalone terrorism business. Today, 36 lines of business are available on the platform, with 29 brokers and 93 carriers signed up. Accident & health goes live in April and the PPL board is working with the market on agreeing suitable live dates for the remaining classes of business including reinsurance and aviation. PPL is a core component of the Target Operating Model, which being delivered by the London Market Group, an association of associations, which itself is made up of the Corporation, the Lloyd’s Market Association (LMA), the International Underwriting Association (IUA), and the London and International Insurance Brokers Association (LIIBA).