The client is a global re/insurance company, and a leader in specialty insurance writing business in both the Lloyd’s and the company markets. Describe Data was engaged to determine the detailed requirements to design and implement an automated, follow-only syndicate.
Describe Data delivered a thorough report encompassing both a feasibility study and a strategic plan for the implementation of such a syndicate. The plan detailed expected time, resources and costs required, along with a high-level project timeline and deliverables. The implementation plan was designed to comply with financial reporting requirements and to provide connection points via API, for integration with the client’s existing core business and management information systems.
In addition, we produced two functional prototypes. The first was a technical implementation of a rules based underwriting algorithm, and the second focused on the user interface. The prototypes supported the report and provided demonstrable examples of how the automated syndicate could function.
We began with a discovery phase, as the deliverables for each client are different. The path through our processes (business and technical) may vary, but it always starts in the same place. Our discovery framework addressed the key decisions for consideration when planning the implementation of the new business unit. We worked with the client to determine what high-level decisions had already been made and how they impacted the project.
Our team conducted multiple interviews with internal stakeholders including underwriters, executive management, operations, and information technology teams. We spoke with Lloyd’s directly and we met with other subject matter experts who have relevant market experience.
Working closely with the underwriting and actuarial teams, we defined the underwriting rules for a subset of the algorithmic underwriting rules engine. Iterating on these rules, we developed a functional prototype to demonstrate how this works in practice including integration with portfolio and exposure management. Collaborating with the innovation team, we also built a demonstration user interface to visualise how the platform would look and feel. We worked with the operations team to design the required integrations with their existing internal administration and reporting systems.
In parallel with the technical development, we also researched Lloyd’s syndicate options and the competitive marketplace. We engaged with industry experts to develop strategies for broker engagement and wider communications.
A comprehensive business plan was produced detailing syndicate options, competitive analysis and recommended business infrastructure including all financials, human resources, and technology. Technical detail included data ingestion options, rule design, algorithm implementation, integration with existing systems and portfolio management.
Prototype Auto-Follow Syndicate Dashboard
For the specific requirements of this client, an automated, follow-only syndicate could be built and implemented in as little as 9 months for a projected cost of £2m, of which 70% is human resource costs. We defined seven key roles. Three are ongoing business roles (Active Underwriter, Relationship Owner and Technology Manager), and four are project specific technology roles (Project Manager, Technical Architect, Data Scientist / Actuary and Senior Developer). Our recommendation was for the three business roles to be permanent hires, while the four project roles could be outsourced or a suitable vendor engaged.
The remaining 30% costs include the technology infrastructure and the Lloyd’s setup fees (£100k for this specific use case). The timescale is driven by both the technology implementation and the Lloyd’s approval process. Financial projections suggested that a new highly automated follow-only syndicate could achieve a combined ratio of 90% with an expense ratio (including brokerage) of 38%.
Initial lines selected should: have an established follow market, be capacity constrained, be amenable to rules-based underwriting, be free of risk aggregations and have the potential to write new business. Four existing lines met these criteria, and one suitable new line was identified.
Starting as a Syndicate in a Box and graduating to a full syndicate after operating year two, would combine the benefits of the quicker and cheaper route to market with the power of full syndicate functionality for year three and beyond.
Following only business already led by the client for the first three to six months allows a measured start. Selected other leaders can be followed for the remainder of year one.
Significant effort should be focused on building technical infrastructure and implementing the algorithmic underwriting rules. This is the core of the automated syndicate. Recruiting a small highly capable team is critical to success.
Integration with existing client systems will be via API. This facilitates adherence with all financial and MI reporting requirements including Lloyd’s returns.
Ease of engagement for brokers is critical for the provision of deal flow. Automation and algorithmic underwriting will maintain consistency and reduce expenses.
A strong communications and marketing plan, commencing as early as possible, and engaging all stakeholders, including Lloyd’s and the broking community is essential.
