The Intelligent Quarterly from the publishers of The Insurance Insider

Spring 2017

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Igor Best-Devereux eReinsure has a well-established track record for being both an innovator and leader in the development of electronic placing for reinsurance. The company was founded in 1999 and was later acquired by specialty insurance distributor AmWins Group in 2013.

In an interview with Insider Quarterly, eReinsure president and CEO Igor Best-Devereux explains how initiatives such as e-placement are breaking down the barriers of (re)insurance distribution.

Insider Quarterly (IQ): How did you come to be involved with both the reinsurance market and the technology sector?

Igor Best-Devereux: I joined Sedgwick Group Special Services in 1982 and was fortunate to work in a team that was combining risk analysis, financial modelling and self-insurance. Many of the analytical methods are familiar today - but in the 1980s it could take days to run a simulation model! Many of the challenges, data quality in particular, are still with us.

From Sedgwick I moved to Alexander Howden and spent some time running a unit called Anistics, providing risk analysis and risk management systems; then to a management role in marine and energy broking.

In the early 1990s I moved from London to work in the nascent securitisation market in New York and then by complete chance I fell in with a company developing data networking technology. I ran that company's Asia Pacific business until 1999, when I started eReinsure.

IQ: What was the genesis of eReinsure?

Igor Best-Devereux: It was 1999 and starting a B2B dotcom was all the rage. There wasn't InsurTech or FinTech at the time, just anything that you could start and put "dot com" on the end of the name. Fortunately, we identified a real business need and eReinsure ended up being one of the few dotcom companies to make it past 2000!

The competition was, really, standalone portals specific to one reinsurer's product offering. Otherwise it was use of email, which is a terrible way to manage business processes and try to collect structured information. Our approach was focused on providing a web platform for a reinsurance buyer (or broker) to engage with multiple parties to place reinsurance.

We received early support from some of the largest insurance carriers. These major cedants enabled us to achieve a critical mass of business and encouraged the brokers and reinsurers to participate. Staying focused on the needs of these companies was really critical to our success.

Some other e-placing initiatives that came along later, including Inreon, Ri3K and Kinnect, had bold plans but eventually failed to get traction.

IQ: Tell us a little bit about how eReinsure works and what differentiates it from other e-placing platforms.

Igor Best-Devereux: eReinsure is a market engagement platform. Once a company has access, an underwriter or broker can log into the system via a web browser to use the negotiation workflow. The network of reinsurers and brokers is already in place to receive requests for reinsurance. There's no requirement for additional internal systems to be developed and reinsurers and brokers can benefit from one system feeding them business from multiple sources.

We developed proprietary technology combining a "one-to-many" distribution of reinsurance requests sent from the cedant to multiple markets; negotiation workflow to enable the parties to work out a deal; an audit trail; and a record of the final reinsurance agreement. We were granted two business process patents for our approach to e-placing and capturing digital provenance of the transaction.

The greatest differentiator is experience and adoption! The first mover advantage enabled us to continually update and improve the technology based on user input and to become experienced at delivering it as "software as a service".

Being early to the market also enabled us to form relationships with hundreds of companies encompassing thousands of users. This network effect is very powerful. Over the past 16 years we've learned a lot about the practicalities of electronic placing and handled over 450,000 reinsurance submissions.

IQ: How has the platform evolved since it was first developed?

Igor Best-Devereux: We started in the facultative market because we saw the problems cedants had managing fac purchasing. This was a burning platform. But the technology has wider application and so we have expanded into distribution solutions for facilities, treaty reinsurance and other areas such as multinational accounts.

Our customers' needs have also evolved. They've chosen to integrate systems to feed data to and from eReinsure; and we've introduced features to support compliance tracking, regulatory requirements, market security controls and certificate production.

In all cases the fundamentals are the same: capture data in a controlled way; keep it available through the lifecycle of a transaction, allowing for queries and integration with other systems that need this data; keep an audit trail of the transactions to support non-repudiation; store data securely; and control actions and information access via defined "roles and permissions".

IQ: Where do platforms like eReinsure fit into smoothing the path of distribution and reducing costs?

Igor Best-Devereux: To manage cost you have to have controls and eReinsure helps companies to get control over their reinsurance purchasing.

For the buyer, interacting with reinsurers and brokers becomes easier with one common interface rather than multiple channels and proprietary systems. Even where a reinsurer has its own portal to help automate underwriting and back-office activities, the ceding company wants the simplicity of one interface for all markets.

Passing information through multiple hands is also a large part of the distribution problem. Our approach has been to tackle those areas that traditionally multiply effort - enabling customers to simultaneously distribute a submission to multiple parties and build up an electronic file of each deal.

IQ: Why aren't more cedants complaining about distribution costs - and what can be done to accommodate their concerns?

Igor Best-Devereux: They are complaining about it - both the buyers and the sellers. Some cedants are buying less reinsurance and finding alternatives to drive down cost. Reinsurers are also concerned about returns. When you can't do much more to lower the cost of reinsurance capital and when the market has priced risk at a very competitive level the focus turns to distribution cost - hence all the interest in InsurTech. This means simplifying the distribution channel, standardising information collection and processes, and getting closer to the original buyer.

Technology is eating away at costly processes and providing market intelligence that used to be the purview of the specialist. The ever-present cost pressures will continue to reshape the (re)insurance workforce.

IQ: What do you see as the future of reinsurance, particularly facultative, distribution? Are there simply too many brokers for the product?

Igor Best-Devereux: Distribution throughout the (re)insurance value chain will become more streamlined - just as we have seen in other industries. Brokers will utilise their creativity, specialist expertise and market clout to remain relevant, but will face some of the greatest disruption to their traditional business model. There will continue to be consolidation and size and resources, especially technology, will matter.

The distinction between fac and treaty will blur and reinsurance will be a continuum of risk financing alternatives, from specialist individual risk underwriting to capital markets solutions. Insurance and reinsurance will converge, as we are already seeing.

The journey of risk to capital will be shorter and faster with less duplication of underwriting effort and less manual intervention in the overall process. Data carried along through the deal lifecycle will be reused from initial underwriting to ultimate securitisation.

It has been a long time coming in the (re)insurance market but I do believe that the focus of the venture community on InsurTech means that capital will flow to disruptive ideas. Most of these will be reliant on technology to change the cost structure of the market.

This article was published as part of issue Spring 2017

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