Six months from its launch, inreon is continuing to attract players to its portal.
Any re/insurer wanting to transact business through an electronic trading medium now has a plethora of platforms to choose from. The problem appears to be how to make the right choice, avoiding the pitfall of subscribing to a system which subsequently folds. Some of the systems now up-and-running replicate current placing procedures, others aim to revolutionise the way the industry operates; some act as risk exchanges, others focus on individual placements; none have, so far, reached anything like a critical mass in terms of business volumes. Truth be told, none have, so far, concluded a deal.
So with so much talk but so little action, how does a re/insurer decide which platform to pick? One way could be to look at the organisations involved in it. This is where inreon could steal the march on several of its competitors.
Inreon went live at the end of last year, backed by two of the biggest names in the reinsurance sector, Munich Re and Swiss Re, as well as Accenture (formerly Andersen Consulting) and Internet Capital Group (ICG). Despite the involvement of Swiss Re and Munich Re, inreon executives insist the exchange is independent, with each of the two reinsurers holding 25% of the stock apiece. A further 25% is held by ICG, Accenture has 5%, and the balance is split between management and others. Other reinsurers wanting to take a stake in the platform will be able to buy into the two founding reinsurers' stock holdings.
“The idea was hatched between all four founding partners,” explained Andrew Duxbury, head of marketing at inreon, though individually they had identified the need for a move towards e-trading. “This is an attempt to put together industry standards,” he added. “The bottom line is we want to make it cheaper (to transact reinsurance business).”
Since the 18 December launch last year, inreon has consistently been announcing the signing up of high quality reinsurance players as members of the platform. Apart from American Re (a Munich Re offshoot), reinsurers Partner Re, SCOR, St Paul Re, Lloyd's agency Wellington, Zurich Re and most recently Hannover Re have signed up as members of the exchange. Five buyers have become exchange members, though their identities have not been revealed. In addition, inreon's board includes some high-profile names from the industry: Kaj Ahlmann, previously chairman and CEO of Employers Reinsurance Corp and vice-chairman of EW Blanch, is chairman of inreon, while Rob Bredahl has moved across from ICG to fill the CEO role. Other luminaries on the board of directors include Clem Booth from Munich Re, Jack Snyder from American Re, and Rudolf Kellenberger and Christian Speiser from Swiss Re.
Membership of inreon costs sellers $30,000 per year, while buyers can choose to either pay $10,000 per year or take up a free membership with a $100 charge each time a risk is placed through the system. Market visitors – interested third parties – pay $10,000 per year for access to a limited amount of the site.
“Currently, transaction costs in the traditional market are about 40%,” commented Mr Duxbury. “If anything, facultative business is heavier than that.” It is this end of the market that inreon is initially focusing on, offering fac property cover in seven European countries – France, UK, Belgium, Spain, Italy, Germany and the Netherlands – and the US. From the start, inreon offered short-form non-proportional cover, and has recently extended its facilities to provide proportional fac and larger proportional fac business. Three more business lines are expected to be added to the platform before the end of the year.
By majoring on property fac business so far, inreon has started with simple product offerings, looking at the more commoditised end of the business. “We don't want to revolutionise the industry,” said Mr Duxbury, “and we are not looking to take the cycles out of the market, but this is an efficient way of trading business.”
In essence, inreon's system is simple, split into four phases of initiation, quotation, confirmation and settlement. The system enables price negotiation in the second and third phases of the process, and inreon has recently partnered with Wildnet, part of Benfield Greig Services plc, to provide on-line administration services. This will extend inreon's administrative process to include premium syndication, accounting functions, and claims notification and settlement. In addition, the number of countries an inreon-traded risk can be located in is set to increase in the near future.
Overseeing the placing process is a market authority, provided by inreon, and market visitors can view headline market statistics, but are unable to see specific transactions. “We err on the side of caution” when it comes to data protection and privacy, said Mr Duxbury. “Down the line, we will be able to construct indices without releasing specific information.”
Realistically, inreon is not expected to break even until year three of its operations. “There is a lead-in for this type of business,” commented Mr Duxbury. At the moment, inreon is acting purely as a transactional platform, though in the future it may convert to a formal intermediary role, probably when treaty business is added to the products available. At that point, the aim is for the industry shareholdings to have been diluted by other reinsurers buying into the platform. “Inreon will become something owned by the market,” predicted Mr Duxbury.
The company can be visited at www.inreon.com