On 8 September, ri3k announced that it now had what amounted to a critical mass of industry support for its electronic reinsurance hub. International brands such as Aviva, Guy Carpenter, PartnerRe, Hiscox, RSA and Talanx/HDI were putting their weight behind an effort to accelerate the speed of the industry's transition to an electronic business model. ri3k Chief Executive, Alex Letts, discussed the implications with
Sarah Goddard.

SG: When you started the company over three years ago, there were dozens of competitors in the b2b exchange space. Your recent announcement would seem to suggest that ri3k has emerged as one of the few chosen internet-based platforms for the industry. Why is that?

AL: We all know that this industry serves up a dangerous and highly capricious business environment. Surrendering to any sense of having succeeded would be both delusional and fatal. Our progress is like being an athlete selected for the Olympics - all we have done is gain the right to compete in the stadium. Now we really do have to prove that we can perform at the highest level. Ask me the same question in another three years and maybe I'll be able to answer it better.

SG: But why has ri3k got this far, while others have imploded?

AL: Our ability to make progress in the most hostile business climate with the most sceptical of industries is ultimately down to one simple factor. I was lucky to find shareholders who understand the job of being shareholders [Brit owns the majority of ri3k]. If that sounds sycophantic, consider that Brit has trusted our judgment and all the failings, absolutely 100%. They have resisted the temptation to interfere, they have adopted our solution for themselves, they have patiently put their money where it was needed during tough times, and they have promoted our cause. As a result, we have been able to strategise without fear, put customer needs before sales, and recruit for talent ahead of return. These are the attributes that define whether a new venture can create a platform for success. I often tease Neil Eckert that one day he'll be regarded as the Thomas Edison of the reinsurance industry. In reality, Brit has financed this whole thing itself to the tune of many millions of pounds, at a time when about half a billion dollars in other e-commerce ventures has gone down the plug-hole with zero return. One day the industry may say: "Wow, they were one internet investor who called it right."

SG: And made a lot of money as a result?

AL: That's what intrigues me. This is strategic for Brit. Their company is going well, and it has come out of nowhere in a few years into the FTSE 250. They have a strategy to continue to differentiate and grow. Owning and using the new internet distribution channel is a big part of this.

SG: But can Brit really continue to own the majority of ri3k, or does this ultimately compromise the status of ri3k as being independent?

AL: I can't obviously speak for a public company on its investment strategy, but enlarging our shareholder base could work for us or against us. The downside is obvious in the potential loss of operational independence. But the industry seems nervous about the potential for a monopoly on the electronic infrastructure. I could, I suppose, see their point.

SG: And how would you see the monopoly issue being resolved?

AL: Probably in an unexpected way, like so many of these things. There have been discussions from users about several ways of sorting this out: creating an industry consortium, bringing in a big financial institution, making a public offering, and frankly any other number of ways to dilute Brit's position. To be honest, I don't care how or when, or if ever this happens, so long as we can continue to respond to our customers instead of to shareholders.

SG: How realistic is an industry consortium?

AL: I don't know. There were some discussions and a reasonably workable framework was formulated, but the reality at the time was that ri3k was still too immature as a venture. I think that the industry will want to see how the renewals go this year before contemplating the role of this infrastructure and who should control it. Four years of operations, proven technology, a customer base and income; these are the minimum realities demanded these days by investors.

SG: You use the term `infrastructure' a lot. What do you mean by it? A lot of people are still unsure what ri3k is all about.

AL: The easiest way to understand ri3k is through analogy. The ri3k hub is a transport channel like the Suez Canal. But it carries reinsurance data not cargo. The route is shorter, more efficient. Through ri3k's engineering, companies can pass their contract and technical accounting data to their trading partners' IT systems. It will no longer have to make the huge and dangerous paper-based journey round the data equivalent of the Cape of Good Hope. The analogy falls down though in that we have also replicated all the business processes for treaty reinsurance placement, administration and technical accounting. This means that we're not just routing data, but routing instructions on what to do with the data. The machines at the other end will understand these and internally deal with the data without human interference. It's as if we have crewed the data cargo ships with robots too.

SG: How innovative is this as an idea?

AL: Like all these things, the idea has been around for years, but not the ability to deliver. Jealous of the electronic efficiencies of the rest of the financial services sectors, the reinsurance industry has been trying to find a way to do this for a generation. The Suez Canal was opened in 1869, but it was the realisation of a plan that had existed since Phaeronic times over 2,000 years previously. The idea was obvious, but the technology, enterprise and finance to deliver it had never previously coincided. It was the same with ri3k.

SG: If the idea is not new, does this mean that other companies will chase the same space as you? What about Lloyd's Kinnect platform, or eReinsure in the US?

AL: I think that if ri3k is the Suez Canal, Kinnect is the Panama Canal. Similar principles, but different places, different times, different customer base. Its project is of similar scale to ours, but it will be serving the US wholesale insurance sector into Lloyd's, at least that's my understanding of it. It's certainly the closest parallel to ri3k, with similar problems and scale. These are major industry infrastructure initiatives. They will take a few years to fully complete and will be cash-hungry for a while yet. eReinsure on the other hand is a placement system for facultative contracts, with a current US focus. It competes heavily in the space occupied, until its closure, by inreon. ri3k has no emphasis on placement, nor on facultative. Our focus is currently on treaty, and in particular the data transport issues connected to the placement and administration. Both eReinsure and Kinnect have their roles; it's just that their roles are different to ri3k's.

SG: But either could move into the treaty reinsurance arena over time. Doesn't that pose a competitive threat?

AL: Theoretically, yes. But think about it for a moment. The complexities of what we are doing are so deep that it has taken over three years to get to where we are, moving fast. Facultative and treaty are different beasts, with different processes. It would take someone else at least three years to get to where we are today, by which time we'll be three years further along ourselves. And anyway, what customer would advocate building a rival canal to the Suez Canal along a parallel strip of ground, when the infrastructure is already there? It simply doubles the costs for no return.

SG: So would you ever consider moving into their space, to compete directly with either of those ventures?

AL: We have plenty still to do on our treaty area. Of course facultative does interest us, but our customers are keen that we stay focused and fully deliver against the array of their treaty needs. Anyway in this jungle we need all the mates we can get at the moment, so I'd rather not take an aggressive stance unless it becomes a defensive necessity. We would obviously defend our turf aggressively.

SG: ri3k does have something of a reputation for being aggressive already. What's that all about?

AL: You don't get to survive the three-year technology bust in the merciless insurance sector by being a pussycat. Indeed, in managing the ri3k brand, we deliberately work to the concept of ri3k as a bird of prey. Good thinking, strong, clear vision, highly manoeuvrable on the wing and totally streamlined. That's the dream at least! But, yes, also with a powerful killer instinct. That's aggressive if you like, but somewhat distinct from being a football hooligan. What's more, it's a brand personality that I'm sure this industry can live with comfortably.

SG: Finally then Alex, what are the dangers facing this bird of prey in the coming months?

AL: This is without doubt a key period in our existence. It is the first time that our customers and we have jointly spoken about the intentions for the industry infrastructure. They have added their weight to what we are doing and we must not let them down. The danger now is that people will want too much too quickly and thus expectations need careful management. We all will need to remain firmly realistic about what we can achieve and at what rate. I see a two to three year ramp up before the data is really flowing through the canal in the sort of volume that makes a difference and adds value to all users in the mix.Inevitably also there will be technology glitches, and even the occasional diplomatic faux pas where we overstep our position - we've certainly been guilty of that in the past. Ultimately you see, bird of prey or not, ri3k is just a tiny 25 person organisation trying to play a difficult role within a multi-billion dollar industry. It's a minnow mixed up with a pod of rampaging killer whales. And I can tell you that sometimes it can be a pretty scary place to be.