PPL - The Only Game In Town?

So, after a fair few delays and what must have been a considerable pile of market money, the launch of PPL's Next Gen placing platform upgrade is imminent with real, live business.

They "refined" the plan again at the 11th hour to iron out some more bugs but I'm not throwing stones in that glass house, thanks. It really must work properly, otherwise a lot of mission critical stuff goes up in smoke. Nothing trivial.

Completely replacing the current technology and supplier, and not even retaining any of the data, it remains to be seen whether the?functionality and support is up to the job but that's not my concern today. No, the question I have is why did Lloyd's and PPL develop Next Gen at all and, seeing as they have, where it will fit into today’s fast-moving technology landscape?

Ever keen to set things into the context of history, let's have a look at how we got here in the first place.

Homer would have been proud (no, not him, the other one)

The London Market’s Heroic Digitalisation Odyssey, or Epic Omnishambles, depending upon your frame of reference, is a long running saga and still some way from the epilogue.?Have a look of this from Lloyd’s List:

“Those interminable queues outside an underwriter's box at Lloyd’s…could disappear within a few years. Instead of wasting time waiting to see one underwriter after another to negotiate a particular risk, insurance brokers may instead send information electronically… Lloyd's is gearing up rapidly for the electronic age.”?

That’s not PPL they were writing about.?No, it’s from an article written way back in 1988 about EPS, Electronic Placing Support, the market’s first failed electronic placement endeavour.

Several subsequent attempts were made over the ensuing years, each one dying from natural causes. Or worse.

The most spectacular misadventure by some considerable margin was the infamous Kinnect, a Lloyd’s-led debacle on a hugely impressive scale that burned a reported ￡75 million before being euthanised in 2006.?Its eulogy stated that “the platform was not optimal in ensuring more efficient business processes for the Lloyd’s and London market”.?It didn't work then.

As Lloyd's was quoted at the time, it "...believes its role should be setting standards rather than creating infrastructure". Remember that one for later.

But in 2013 the planets aligned again, and PPL was born. After securing a body of market support and aligning the brokers and underwriters in the governance, they set out to find a platform to use.

Back then, however, the choices were hugely limited and just two vendors had something that might have worked and been procurable. One of them was Ebix Europe whose Lime-St.com platform, with some of the older Qatarlyst/RI3K system temporarily bolted-on (subsequently excised in 2017), had track-record and support in the all-important big brokers.?

So PPL procured it.

And that was it, job done

Ah, not quite. After some fraught delays, PPL launched in July 2016 and it soon became apparent that practitioners didn’t like it very much and wouldn’t play. Who knew, eh?

But to the huge credit of PPL and its sponsors, they held firm and, despite the user experience gaining a reputation for being clunky, trading volumes slowly grew.

By mid-2018, facing an uprising of apathy, Lloyd’s stepped in with a mandate incentivising syndicates to bind risks electronically, not just on PPL, but on any “Lloyd’s approved” platform.?

That was a very clever move encouraging competition but also one which threatened PPL's monopoly. At the time, though, only the new ultra-slick Whitespace Platform had gained Lloyd's approval and PPL still dominated placement volume.

Within a year, the mandate had increased trading volume to around 50% of in-scope risks but it was still not enough. And the PPL user experience remained unresolved so, in late 2019, they decided to completely “upgrade the technology” by replacing the Ebix Europe Mk-I PPL platform with a brand new system that, crucially, they would develop, own and govern themselves. So off they went to find someone to build it for them.

And in the meantime, the market diligently continued collecting their mandate handouts while looking forward to another gory public execution of the upstart technologists and a welcome return to doing things properly, the way Edward Lloyd had intended.?

Until, that is, 4pm on Thursday 19th March 2020.

Any port in a storm

Which was when (in case you missed it), Lloyd’s and the London insurance market closed its doors in response to the Covid pandemic.

Everyone went home, locked themselves away in terror of the impending cataclysm and learned how to use Zoom. And electronic placement.

PPL users and placements rocketed and it wasn’t long before market luminaries were in the press saying how they were getting along just fine in lockdown with the trading platform they’d been using for years.?An odd way to put it.

According to PPL, 160,346 risks were bound on the platform in 2020 by some 20,000 users but the project to replace it with a Mk-II “Next Generation” system continued apace. And Lloyd’s had bought a chunky stake in PPL to help.

But alas, in June 2021, the project came crashing down and everything except Next Gen's design work got thrown in the bin.

After a brief hiatus, undeterred by Kinnect's ivory elephantine spectre dragging its ball and chain along Lime Street, PPL appointed Deloitte to (re)build Next Gen version 2 and we were told it would be ready by September 2022.?Ambitious, to say the least.

"The choice of Deloitte offers the market the control that it wants on the development of the platform...", said PPL.?

Well, it wasn't ready by September and here we are now, waiting for it to go live some six months later on March 6th. Next Gen, we are assured, looks slick, feels great and has a complete absence of clunkiness. And everyone will seamlessly migrate onto it, and all will be well in the world.

But hold on there, it's not 2016 any longer. It's 2023.

That was then and this is now

Back then in those halcyon pre-Covid days, nobody knew for sure if electronic placement would be accepted. It had to be implemented at scale with widespread support and considerable expense, so a central platform managed, funded and marketed by a London market body was vital.?

Providing an essential political flagpole for everyone to stand around and, hand on heart, swear allegiance to the mission in front of their peers, PPL had the reach, the mandate and blessing of the great and the good.?

And, even then, it was really, really difficult both for PPL, its sponsors and for Ebix Europe too.?Probably the most complex technological and working practice change project ever undertaken by the market in a single hit.

Make no mistake, without PPL there would be no electronic placement in London today.?None of this could have been done by a technology company alone.

This, to my mind, is an indisputable fact.

But how about now, almost seven years on, when electronic placement is largely BAU? Now that Lloyd's has discontinued the electronic placement mandate and practitioners don't need to be cajoled.

Now there is choice.

Do market firms still need a central market monopoly platform and a market body to manage it? A generic platform they haven’t chosen for themselves to support their specific classes, use cases and workflows? One governed by the inertia of market committees and owned, in part, by Lloyd’s??

Choice is the new No Choice

In the placing platform drought of 2014, it was essentially Ebix vs. Xchanging vs. Nobody Else. PPL was indeed the only game in town.

But now the world is awash with platforms.?

The two most obvious ones come from Ebix Europe themselves, with their new PlacingHub, and from Verisk/Whitespace with their Whitespace Platform. Like many, I know them both and think they are superb. Next Gen will need to be exceptionally good to hold a credible candle to either of them.

Just a few years ago, that would have pretty much been the end of the options list but not any longer. I was going to précis them here but there’s simply not enough room. Suffice to say that there are reportedly around 30 companies out there now with electronic placement, marketplace and exchange technology. Thirty!

Not all are suitable for use here in London, but many are. Some of them come from technology vendors, available for all to use, and others from broking and underwriting firms themselves for their own private use.?

A few are optimised for specific types of business and provide laser-focussed data integration and functionality to support it. Others are more generic, allowing the platform to be adopted across an entire organisation, reducing the overhead of managing multiple vendors, integrations and user interfaces.

Plenty to choose from then.?

The new direction of travel

The Lloyd's Mandate for electronic placement using "any approved platform" set in play a future of the market's trading technology landscape which welcomed competition, horses for courses, platforms serving specific types, classes and use cases, to support the many diverse subsections of business and process that make up the London Market.

This is the market that Next Gen is launching into now and it’s going in a very different direction to the market PPL Mk-I launched into seven years ago.?

And those other platforms come from firms that are free to develop functionality that they want, when they want it.?Without a penny of central market funding, they are unencumbered by the asphyxiating stranglehold of market governance, multiple stakeholder influence and committees dictating their product roadmaps, adding inertia to the detriment of agility and cost.

They will surely continue to grow, consuming trading volume market share as they do, causing PPL’s revenues, influence and raison d'être to be reduced pro-rata.?PPL risks becoming more and more a competitor - and an unagile and expensive one at that.

With its own sizeable fixed costs, two big-budget build projects to repay together with the ongoing support operation from Deloitte, how far can its revenues fall without it needing anti-competitive funding from market money? Not just in 2023 as it strives to ramp-up Next Gen, but in the coming few years when it needs to maintain critical mass against ever-growing competition delivering better user experiences and financial savings.

It's time to get back to building railways

PPL's original mission has been accomplished with unqualified success, bringing to a close the 30-year litany of embarrassing and costly market failure and supporting it through the darkest lockdown days of 2020/21.

But I fear that Next Gen’s launch might not be the start of a new chapter for PPL but may instead be the beginning of its epilogue.

A market-funded quasi monopoly is almost certainly no longer a necessity. Moreover, it may no longer be desirable as its continued existence could stifle competition to the long-term detriment of customer choice and market technological progress.

I believe that PPL and Lloyd's should instead look to exit the business of providing market trading functionality and hand it over to those with the commercial incentive and skills to survive and prosper from it.?

Which means selling Next Gen to a technology company better equipped to take the risk of its long-term commercial viability, and to cut its cost base to something altogether more realistic to make it competitive without resorting to central market funds.

Then Lloyd's, together with the Data Council and its market association partners, can focus its efforts and budget on the most important mission of all.?Which is one that only they can do.?And that is the development and maintenance of the data and API standards which every trading platform must be mandated to use, to bring data from the market’s customers and supply chain and pass it on into the underwriters' core systems and processes.

The job of central government is, after all, to provide roads and railways.

Not cars and trains.

?? Jeff Ward, 2023

#lloydsoflondon #insurtech #ppl #nextgen #onlygameintown

Other articles from Jeff Ward:

Are we ready for Data? (No) https://www.dhirubhai.net/pulse/we-ready-data-jeff-ward/

Future at Lloyd’s - Wider Canals? Or Railways? https://www.dhirubhai.net/pulse/future-lloyds-wider-canals-railways-jeff-ward/