RI3K To Provide LMP Compliant Tech Support for Facultative Re Business

London-based RI3K, a provider of technology infrastructure for the reinsurance industry, announced the launch of a fully LMP (London Market Principles) compliant electronic transaction module for facultative reinsurance.

The new addition to the company’s system – RI3K Fac – “uses the same technologies, interfaces and databases as the RI3K Treaty reinsurance system and, as with the treaty system, it handles every type or class of facultative business,” said the announcement. “The first facultative trades on the system will be for international property and marine, as well as US Life retrocession.”

“It’s the logical extension. Treaty and Fac now sit on one community platform,” indicated RI3K Chief Executive, Alex Letts. “It’s seamless for users.”

RI3K stressed that the key benefit of the new “facultative platform is in supporting contract certainty by keeping a record of the entire process of quoting and placement between all parties in the chain – buyer, broker, reinsurer.”

Keeping accurate records has now become absolutely mandatory, both in the U.S. – under the mandates of Sarbanes-Oxley (SOX) and in the U.K. under the rules promulgated by the Financial Services Authority (FSA). Insurers are increasingly required to use systems that meet the standards set out in the LMP, and, as the U.S. is a primary market for U.K. insurers, they also have to meet U.S. standards in order to assure, as RI3K described it, “contract certainty, auditability and transparency.”

Lloyd’s CEO Nick Prettejohn, in a recent speech at an FSA conference (See IJ Website April 7), summarized his hopes for a technology driven future: “So, in this vision, systems support the human activity of front and back office, to enable brokers and underwriters to enter data once, have real time access to that data, and to have a secure auditable record both of the substance of the transaction and the process that generated it. And businesses will use that data to improve process management.”

Letts expanded on that vision in a telephone interview. “The FSA is increasingly requiring more certainty in the marketplace,” he said. “They know what they want, and they know how to get there. I’m actually somewhat surprised how they have made changes in an entrenched industry.” RI3K fac is aimed at assuring that both treaty and facultative reinsurance contracts meet those standards of compliance, and at a reasonable cost. The only way to accomplish both goals is through the increased use of technology – something the London market, along with everyone else, is becoming increasingly aware of.

“I’m sure there will be bits we can extend or improve in the future – for instance, we still need to add lineslips and binding authorities,” Letts added. “But the market and Lloyd’s, in particular, should recognise that contract certainty for the complete reinsurance spectrum is now supported at the end of the browser of any user who really wants it.”

As more companies turn to technology, costs will decrease. RI3K said that transaction charges for use of the facultative system are currently £50 ($95) per transaction, but Letts confirmed that the company is currently in a consultation process with the industry to change its charging model for both facultative and treaty reinsurance.

Letts also noted that the SOX and FSA requirements are “heading in the same direction.” While the FSA is focused on protecting consumers and SOX on protecting shareholders, “they’re going towards the same place,” he observed.

The FSA plans on achieving full compliance by the end of 2006 and they’ve indicated they’ll keep pressing for further action by the industry in order to keep up that momentum. RI3K’s new facultative service is part of that process.

Topics USA InsurTech Tech Reinsurance London