The 325-year-old Lloyd’s market makes changes slowly. The complexity of the risk, the uniqueness of the market place and the importance of relationships are all factors in the speed of change.
However, one area of noticeable change in the last three years is the core solution offerings to Lloyds. Traditionally, a small number vendors serving the local insurers, syndicates and managing agents developed software for each client. These vendors were small in size with management and development staff drawn from the Square mile.
There was significant re-use of the software across clients but the software offered was some way off from being productized. As a result, the clients (insurer, syndicate, managing agent) would be faced with on-going services bill to maintain what is essentially a bespoke core systems implementation. This had the advantage of being significantly fine-tuned to each client’s requirements but at a cost.
The Lloyds vendor market was known for mostly over-promising and under-delivering. CIOs would make comments like “our vendor is the best of a bad lot”. The sector is notorious for difficult and painful implementations. With only one or two new deals a year for vendors, it was a hard market to ensure continued investment in the solutions.
For years, the idiosyncrasies of the Lloyds market (messaging into the Bureau, peculiarities of business process, and complexity of the risk) were significant barriers to entry for other vendors.
Then two trends converged to create a more interesting target sector for the non-traditional London market vendors looking for continued growth:
- Mainstream software market matured significantly and insurers were able to partner with vendors with sophisticated partner programs, and strong delivery records to take on some serious legacy system challenges.
- Lloyds/London market insurers started to expand globally and were open to looking at more mainstream solutions for their non-Lloyds business. Several made investments in Europe or the US for their regional businesses and successfully implemented new underwriting and claims solutions.
The result is several of the big names in the core P&C systems market now have the global Lloyds or London market insurers as their clients, albeit for their non-Lloyds books of business for underwriting. Implementations are mostly in the US or in Europe.
The Claims area is a different picture. Several vendors have made the necessary investment (with thanks to their charter client) to be London market compliant and support Claims in the Lloyds market. This mostly involves modifications to messaging to be compliant to the London market message standard of ECF.
So the next uncharted territory is for a mainstream vendor to partner with a London market insurer and invest in the localization requirements. Our view is that is probably 18-24 months away.
It’s a good time for the insurer in the London market. There is increasingly more choice from established, well-funded vendors with better implementation track records and experience in product management. It’s a challenging time for the incumbent traditional London market software players as the competition is going to really hot up with these new market entrants. Time to buy ring-side tickets.