RI3K, the London-based operator of the innovative electronic infrastructure platform for the reinsurance industry, and Xchanging, London’s leading business processing services company, have teamed up to provide a new initiative for U.K reinsurers and brokers.
The initiative, XPressCheck, was announced at a press conference today at the Monte Carlo Rendezvous. The service provides a means for preliminary checking of contracts on-line. “The early checking service will allow subscriber reinsurers to have their reinsurance policy wordings checked on-line by Xchanging prior to being signed,” said their joint bulletin
“XPressCheck” will be a crucial element in the effort to meet the FSA [Financial Service Authority] challenges for Contract Certainty”, said RI3K Chief Executive, Alex Letts. “RI3K already captures and delivers evidence of the reinsurance transaction in a standard format which is crucial for Contract Certainty. Contract Certainty will be further enhanced through approved slip wordings checked by Xchanging being delivered to subscribers prior to inception.”
Roger Townsend, an Executive Director of Xchanging stressed that “this joint initiative will give impetus to Contract Certainty which is designed to reduce the operational and legal risks to brokers and reinsurers whilst improving service levels through speedier processes and improved visibility. It will enhance transparency and support the competitive position of the London Market.”
“Contract Certainty is a global issue”, Townsend continued. “Providing the Market with confidence in the proposed policy wording at the earliest stage, is key to achieving the goals of Contract Certainty. The use of “XPressCheck” is an excellent way of delivering this.”
Xchanging’s back-office business processing was first launched 6 years ago in co-operation with Lloyd’s to modernize and process its paper work. It has gone from a start-up (although a well-financed one- AIG has a significant stake in it) to a company employing 3,000 people located in 14 countries. Xchanging describes its primary focus as “seizing the opportunity to drive fundamental change within an organisation by moving from managing resources to managing services.”
Although Letts said in a telephone interview that the tie-up with Xchanging had been under way for some time, it couldn’t have arrived at a more opportune moment, as insurers, reinsurers, brokers, agents and claims mangers all struggle with the unprecedented claims from Hurricane Katrina.
“The damage from Hurricane Katrina spells good news only for the lawyers,” said Letts. “As night follows day and flood follows storm, the next episode in the Katrina story will center around the legal disputes. The global problem over contract uncertainty is going to raise its head big time, as policy wordings are found to be missing or incomplete. What will become apparent also is that contract certainty issues extend to evidencing process and having a single indisputable record of what representations were made.
“Frankly the FSA is going to look pretty prescient with its challenge to the UK industry to have process in place to achieve greater contract certainty,” he continued. “I think the US authorities will be shocked by the forthcoming legal disputes and will follow the lead of the FSA for reform in this area.”
The FSA has made greater contract certainty one of its primary goals. However, unlike U.S. regulators, it has left how to accomplish this largely up to the people who operate the London market. The FSA hopes to avoid long lists of rules, which its head of insurance regulation, David Strachan, has characterized as “checking boxes.” Letts indicated that the FSA wants the market to “sort itself out and doesn’t intend to make a lot of rules.” However, it’s sometimes difficult to know exactly what the FSA wants. RI3K has had several meetings to discuss the subject. “We’re making every effort to align our thinking with what the FSA wants,” Letts said.
A preliminary compliance meeting with leading London brokers and carriers is set for Dec. 7. The FSA has set Dec. 31, 2006 as the final deadline when they must be in place and it will start enforcing them through fines and suspensions.
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