Rowan Douglas explains the changes in attitude towards technology at Willis Re, the reinsurance division of broker Willis, that have helped boost its recent increase in business.
The market may not perceive Willis as a leader in the use of advanced technologies, but this is a mistake. Since 2000, the company has developed a distinctive approach to successfully integrating technology to its businesses in a low-key way; in fact technology is not the main story in the transformation of Willis Re systems. The revolution has been cultural.
"Within two years, Willis has developed a commonly held set of commercial values across its operations, from Sydney to Minneapolis. These principles have been at the heart of new system development, creating a common guide for developers and business teams and dissolving old boundaries between technology and the business," said John Pelly, chairman of Willis Re.
What are the commercial principles that have legitimated technical developments and driven progress through?
Some principles have been honed by division but two key themes have been introduced by Joe Plumeri, the Group's chairman and CEO since October 2000: `One Flag' and the `Value Gap'.
"The One Flag policy has had the most profound impact on our culture and systems development," explained Grahame Millwater, chief operating officer of Willis Re. "It recognises that large companies perform better as a unified whole, focussed on client demands, rather than city-states and silos. Within a year the accepted norms of individual broker behaviour have been entirely transformed. There have been pockets of pain, but transformation has been worth it. We are winning global clients because we can demonstrate a genuine global team."
But how do you integrate a global team of more than 900 reinsurance specialists, within the wider Willis world of 13,000, into a cohesive family?
"Strong leadership has provided the right climate but you need technology to integrate world-wide teams effectively," added Jim Ryan, SVP and CIO of Willis Re. "With our latest advances, our international broking community can share information and work on transactions throughout the division and ultimately the group. Through the intelligent use of technology, we can focus our resources on partner needs regardless of geography."
The second driving principle is the Value Gap, the difference between what clients can do for themselves and what they can do with Willis. This philosophy has accelerated Willis Re's approach towards developing advanced technologies to augment its transactional broking role.
"We are here to help clients make better reinsurance decisions and obtain the best deals," said George Reeth, chairman of Willis Re in North America. "We must help clients understand and articulate their risks more clearly; define effective risk management or transfer solutions; facilitate the best transactions available and manage and ensure post transaction performance of services."
Willis Re has deployed an integrated set of client services in four key areas:
Ultimately the role of these technologies has been to draw Willis Re's capabilities together to allow its teams to exploit all the assets which being part of a global broker brings.
Risk and exposure
"To assist catastrophe clients, you need to become genuine experts in catastrophe risk exposures, using state-of-the-art modeling techniques coupled with investments in data, technology and personnel," said Tony Media, regional director of Willis Re, Europe. Through a team headed up by Oliver Peterken in London and Julie Serakos in Minneapolis, Willis Re has developed a range of services, from the pre-transaction process to assessing the final deal, ensuring that it responds to clients' exposures, he explained.
For example, in the UK, Willis Re has created an advanced flood risk analysis of the River Thames. Now used by the UK Government and re/insurers alike, the model allows effective exposure analysis for a region of 14,000 square kilometres, with three million people at risk and insured values of several billion pounds.
"We had to begin from first principles," explained Oliver Peterken, regional director of Willis Re Consulting. "In spite of this being a national problem, adequate data did not exist to model the Thames flood basin. We therefore conducted an airborne survey using `Synthetic Aperture Radar' data to produce a digital elevation model of unprecedented detail and accuracy." Up-to-date land use information was then overlaid to produce the underlying flood plain terrain map, combined with historic and potential flood depth data.
This risk analysis is delivered online to allow insurers to evaluate risk at postcode or portfolio level, and visualise areas at risk easily and effectively. This technological approach means that the Willis Re model can be applied to regions throughout the world.
Meanwhile, in Turkey, Willis Re's advanced exposure and financial models were delivered via the web in an integrated catastrophe risk management system in both English and Turkish. The model has underpinned the Turkish Government's ability to manage risks that have claimed 100,000 lives in the last 100 years and cost £12bn in the past decade alone.
The result is the Turkish Catastrophe Insurance Pool (TCIP) which, with extensive reinsurance arrangements managed by Willis Re, has transferred a significant proportion of risk into the private sector and enabled, for the first time, earthquake insurance to the Turkish people. The solution was entirely dependent upon TCIP's ability to apply advanced technologies across different environments, and was a winner of a 2001 Lumina Award.
Better reinsurance decisions
Following risk analysis, the next key role for Willis Re is to ensure an appropriate solution through programme design and reinsurance optimisation. Willis Re has developed a web-based application, Willis iFM, which delivers advanced financial modeling to reinsurance buyers anywhere in the world. Developed from hundreds of client assignments, it is provided to Willis Re clients without a separate charge.
Previously, in-house actuaries carried out financial modeling on an ad hoc basis. Increased client demand created an actuarial bottleneck and it was decided to develop a new tool to accelerate the process of modeling clients' portfolios and assessing gross and net losses under different scenarios and reinsurance arrangements. Willis iFM maintains the standard of actuarial modeling, but enables account executives to examine alternative structures to find the most appropriate solutions for clients.
Turnaround times for the initial programme analysis have been reduced from three weeks to just a few days, and subsequent analysis of alternative structures reduced from two weeks to as little as five minutes.
"Willis iFM has put the power of our central resources in the hands of our account executives worldwide," noted managing director, Stuart Stow, of Willis Re Australia. "The launch and rapid adoption of Willis iFM in 2002 has been a powerful example of web-based technologies enriching our brokers' capabilities in ways that are virtually impossible via other means."
From programme design, Willis has also employed a set of facilities to improve its knowledge of worldwide sources of reinsurance capacity.
"We are recording our transactions during the placing process via a browser interface using consistent data standards and referencing. Brokers can now analyse our worldwide placements by a variety of key market drivers. It unifies world view and allows brokers to assess potential counterparties consistently," commented Russell Dawson of Willis Re, London.
Security clearance of that capacity is now enhanced by access to Signet, a browser-based window on to Willis' market security analysis team which ensures information on carrier authorisation is available to all Willis Re teams across the world.
The company believes that detailed negotiation of complex reinsurance transactions will continue via traditional phone and face-to-face dialogue for the foreseeable future.
But, under a set of facilities collectively know as ePartner, technology is already playing a vital role in supporting the trading process.
In 2001, Willis Re launched eDistribution. Available initially to US accounts, this facility manages the reinsurance submission process and provides underwriters with the ability to review reinsurance opportunities. Each submission is, in effect, a unique website, with files and links to related data more comprehensive than those available in traditional paper submissions. Selected underwriters are provided with access to each site and can, if they wish, electronically authorise a reinsurance line.
"Willis Re's eDistribution is currently being used by over 240 reinsurance organisations, with over 1,100 individual users," said SVP and CIO, Mr Ryan. "The secret of its success has been the effective collaboration of clients, brokers and underwriters. By streamlining the marketing process, we are able to spend more time working on the submission's content and less on the physical distribution of the submission"
More recent work has provided clients with access to account information including contract wordings, placement documents and related information.
It is all coming together. From risk analysis through to programme design, submission and placement, Willis Re has deployed a range of integrated technologies to support the broking process. It is the beginning of a journey, but the first phase has brought confidence and a firm platform for growth.
"As a global broker, what makes Willis Re truly distinctive is the family identity that pervades our teams and offices," noted Willis Re chairman, Mr Pelly. "Ultimately our investments in technology have enabled us to strengthen those bonds across service lines and geographies. The linking of our technical goals with our culture and commercial objectives is the cornerstone of this technological progress."
By Rowan Douglas
Rowan Douglas is executive director at Willis Re.