It is no longer acceptable for IT in the London market operation to be incompatible with the rest of a global (re)insurance group, states Tony Illinesi.

Big structural changes have taken place in the London market during the 1990s, especially in the past five years. A good way of viewing these changes is to count the number of branches in London, as opposed to subsidiaries, and to look at the changing titles of the top people.

While the chairman of a London market company is a species endangered almost to the point of extinction, a new breed of chief operating officer or general manager (or similar title) has emerged in his place. Subsidiaries have been replaced by branches, and those that remain have been incorporated closely into the operations of their parent companies, the vast majority of which are based overseas.

This is not to suggest that London has become less important. Indeed, the effect of conversion to branch status is normally to strengthen the London operation by giving it access to parent-company capital. The number of new start ups and various pieces of market research suggest that the level of insurance and reinsurance activity taking place in the London market has not declined and may be increasing.

The underlying significance of these changes is that the mainly foreign companies that trade in the London market are now driving corporate strategy on a global basis. They are no longer content to allow their London operations to act as stand alone entities; the London part of the business is expected to conform to company's overall strategy. As a consequence, the big corporate decisions affecting the London market are taken in places like Chicago, Munich, Paris and Copenhagen.

The implications of this new landscape for information technology in the reinsurance industry are profound. One obvious result is that companies are demanding systems that are global in their reach and application and consistent throughout a group's operations. It is no longer acceptable for the London office IT to be incompatible with the rest. Global insurance and reinsurance groups that operate in a seamless fashion across all their branches, offices and subsidiaries have a clear competitive advantage. This applies to most areas of activity - marketing and human resources, for example - but especially to IT.

This consideration is, however, only part of the picture. The demands being made on information technology have grown and will continue to do so. IT systems must be able to meet the needs of the local markets in which underwriters work, at the same time as enabling companies or groups to write business on a global basis. This requires tremendous flexibility from IT systems, including a capacity to track underwriting on a local as well as worldwide basis. The flow of information from branch to head office and within branches must be two-way, but at the same time controlled and not totally unrestricted. It must be easy to access and able to incorporate a variety of other information sources.

London's needs
London generally produces a greater need for flexible IT solutions, mainly because of the complexities of the subscription market and the need for additional interfaces between the International Underwriting Association (IUA) and Lloyd's and between the two processing bureaux. In addition, decisions are often required in a shorter time in London, meaning an extra imperative to be able to retrieve the right information at speed.

Looking forward, the developments described above take place against the background of the merger of the three main reinsurance networks, LIMNET, RINET and WIN, with a fourth, IVANS, also involved. It is too early to assess the likely impact of such a development, but it will certainly improve efficiency within the industry and encourage investment in electronic commerce. (See Mark Baylis' article in the March 1999 edition of Global Reinsurance for a more detailed account of the merger of the networks.)

Even more noteworthy, it will give insurance expertise greater access to the world market. This works in favour of London as a centre, with its enormous concentration of talent. Investment in IT is essential to any market that wishes to remain or become pre-eminent. Far from dispersing the London market, IT should harness its strengths. It will also promote the concept of London as a complementary market, supporting other centres by providing them with an international focus for the global industry.

Tony Illinesi is a consultant at CSC, which produces software and consultancy support for the global insurance and reinsurance industries.