Ki – collaboration between Brit and Google Cloud
We are excited to support the launch of Brit’s innovative technology-led syndicate which embraces many of the concepts of the Future at Lloyd’s and has the potential to transform the market. The Franchise Board gave in principle approval on 28th April for Brit to establish Ki (pronounced “key”) which is a new, distinctly branded syndicate that will underwrite on a ‘follow-only’ algorithmic basis. The target start date for the syndicate is 1 January 2021. At start up, all business will be sourced through risks shown to Brit’s main syndicate 2987 underwriters and processed through a digital broker portal. Over time, as the model becomes more refined and data capture increasingly advanced, Brit propose to grow the portfolio by writing open market risks led by other Lloyd’s syndicates. The digitisation of risk removes manual processes and human error, consequently increasing efficiency and accuracy and will also provide brokers and customers with a much smoother experience. Ki will create a structured data format for all risks, providing the inputs necessary to complete a digital exchange. This will help to ‘set the tone’ for a future Lloyd’s marketplace, where straight-through processing and risk trading is ubiquitous. Brit’s proposal is closely aligned to the Future at Lloyd’s aims to reduce the market’s expense base as well as aligning to the lead / follow workstream. The syndicate’s planned overall expense ratio is substantially below the market average due to lower than average fixed operating costs.
The algorithmic model
Brit have been developing the algorithm for around a year in partnership with Google and UCL. As the managing agent of one of the largest syndicates at Lloyd’s, Brit already has access to a substantial pool of data which they have harvested and used through the development of their algorithmic model to date. Development of the algorithm has incorporated a weighting that is not just price-driven, but also applies other weighting factors (e.g. risk location) to calculate the Ki syndicate line.
Lloyd’s lead/follow workstream
Over the last few months the Lead Follow team has gathered input from market participants and worked alongside the Lloyd’s oversight teams and the LMA in re-drafting the Lloyd’s minimum standards with the purpose of improving market performance and seeking to differentiate Lloyd’s expectations and requirements of Leaders and Followers. The Lead Follow team has endeavoured throughout this process to ensure that the redrafted standards will enable the set up of syndicates like Ki. In preparation for the changes to standards, as well as seeking to identify the classes that they wish to continue to lead in, existing businesses are also considering how they might reduce costs by selecting classes that could adopt a follow-only model. There is a recognition that it may take 2-3 years before the full cost savings can be realised. Ki will provide Lloyd’s with a good opportunity to quickly test the assumption that the new standards will enable a reduction in fixed costs, without compromising underwriting controls and profitability. If successful, we hope Ki will act as a catalyst for business model innovation across the market, encouraging mature syndicates to realise the savings more quickly.