Market Reform and Rüschlikon Initiative

Market Reform ForumAndrew Muir, SWIFT Peter Arbenz, Swiss Re

2 October 2008

2

Agenda

• Goals of Market Reform vs. Rüschlikon Initiative• An Introduction to the Rüschlikon Initiative:

• What? Why? When? Who?• And How?

• An introduction to SWIFT• What is different this time?• Synergies RI and MR• Contacts

3

London Market Reform - Goals

• Identify inefficiencies in London’s processes and develop solutions to deliver a more competitive service• Ensure that London is the market of choice for insurance risks• Assure consistency of direction and cooperation between market players• Meet increased customer expectations re level of information and the speed and quality of services

4

The Rüschlikon Initiative - Goals

• Replace paper by e-data and for reasons of cost, speed and quality

• Avoid proprietary standards and connections and foster an industry solution for the benefit of our clients

• Enable the evolution of the (re)insurance business model

• Enhance the reputation and attractiveness of the insurance industry for investors and other stakeholders

To be avoided To be targetedinsurers

brokers

re-insurers

insurers

brokers

re-insurers

services

insurers

brokers

re-insurers

hub

services

insurers

brokers

re-insurers

5

The Rüschlikon Initiative – What, and Why?

• a vision• to establish a central platform

for automation of (re)insurance transaction processing

• in order to• Increase speed, quality and

transparency of transactions• starting with

• a pilot focussed on eBOT(accounting & settlement)

• a limited rollout• reusing existing componentry

where appropriate• in a scalable and extensible

way

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Central Hub: Vision

Initial Contract Ref.

Premium Account

Claims Movement

Financial Statement of Accounts

Acknowledgement per Message

Payment

1

Central ServiceCedent /

Broker4

5

32

1 4

5

32

Shared process

rules

Single Point of Access

1

2

3

4

5

Reinsurer

Services

Mapping Validation

Routing

Value added Reports

Storing

66

6

7

The Rüschlikon Initiative – When?

• pioneers will join the pilot from April 2009 til March 2010

• early adopters will join during or after the pilot

• the first phase will focus on messaging (data exchange), and will grow to include:– Validation– Matching and pairing– Netting

… and possibly more

8

The Rüschlikon Initiative – Who?

pioneers include:• SwissRe• MunichRe• SCOR• AON• Willis• Benfield• ACORD• SWIFT

some early adopters are already involved

…would you like to join in?

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The Rüschlikon Initiative – How?

milestones:

- Project Definition Document

signed 17.9.08

- Commercial Proposal

due 31.12.08

- Pilot starts

April 2009

- First package of additional functionality

Autumn 2009

- Fully open solution available

March 2010

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SWIFT in three parts:

community standards platform

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The SWIFT community

fund administrators

MA-CUGs

banks founded SWIFT

money brokers

trading institutions

- registrars & transfer agents- custody providers- trust or fiduciary services companies

investment managers

- broker/dealers- central depositories & clearing institutions- exchanges

- payments MIs- proxy voting agencies- non-shareholding financial institutions

- treasury counterparties- treasury ETC service providers

travellers cheque issuers

securities MIs

1987

1988

1989

1990

1973

1992

199519

98

1999

2000

2001

2002

2004securities market data providers

1996

treasury securities ETC service providers

2006corporates

regulators

2007

12

3.5 billion messages per year3.5 billion messages per year

8,332 customers8,332 customers

208 countries208 countries

average daily traffic 14 million messagesaverage daily traffic 14 million messages

peak day of 16.1 million messages peak day of 16.1 million messages 28 September 0728 September 07

SWIFT figures (December 2007)

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SWIFT’s business model

Traffic

Price

Price(EURcent/msg)

Traffic(Millions of messages)

5

10

15

20

25

30

35

40

45

50

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

0

500

1000

1500

2000

2500

3000

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SWIFT in three parts:

community standards platform

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Standards – working with the community

Development and market Development and market practices across all marketspractices across all marketsImplementationImplementation

of standardsof standards

Convergence Convergence UNIFI (ISO 20022)UNIFI (ISO 20022)

SWIFT Standards

enabling STP

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SWIFT Standards development

Business process modelling

SWIFTNetMarket

practiceApplications IntegrationStandards

SWIFT Partners

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W3C

UN/CEFACT

e-bMoU

OMG

ISO/TC68

FPL

ISITCISSA

SMPG

MiFID

FISD/MDDL

G30

GiovanniniTC68/SC4

EPC

ISTH

IFX

RosettaNet/PMP

OAGi

X12.F

SIFMA

EACT

FpML

ISDA

IFSA

OASISBolero

ICC

TC68

/SC7

CEFACT/

TBG

5

IIBLP

UNCITRAL

IFSA

Securities Trade Services

ACORD

TC68/SC4&7

Payments Treasury

GS1

Insurance

UNIFI - ISO 20022

TWIST

Fedwire

CHIPSTCH

NACHA

SWIFT and other Standards bodies

IFSA

IGTA

TC68

/SC7

CEFACT/

TBG

5

WCO

EACT

TWISTX9.D

ACBI

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SWIFT in three parts:

community standards platform

19

SWIFTSolutions

Payments Treasury Trade Securities

Platform – the SWIFT product stackR

esi

lien

ce

Reliability

Quality of service

Se

curity

Directoriesand

InformationServices

Secure IP Network (SIPN)

Standards Rules

Interfaces

SW

IFT

Solutions

Messaging Services

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SWIFT Solution components

RulesRulesRulesRulesIndustry agreed market practice and R&L, with SLAs

StandardsStandardsStandardsStandards Structured standards– SWIFT or others

SWIFTNetSWIFTNetSWIFTNetSWIFTNetSWIFTNet in a SWIFT managed CUGmandatorymandatory

ApplicationApplicationApplicationApplication Provided by FIs or vendors

PartnersPartnersPartnersPartners To enable FI integrationbut alsobut also

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The Deliverable

services

insurers

brokers

re-insurers

insurers

brokers

re-insurers

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Many prior initiatives have failed –What is different this time?

• The maturity of standards and technical solutions is higher than during the times of RINET, the suffering from inadequate processes too

• Focus on non-competitive administration and information processes• Exclusion of all quoting, placing and trading components which are by

nature competitive and potentially in conflict with anti-trust law• Avoidance of big startup investments – use existing data standards,

message forms, interfaces and platform• Choice of an experienced non-for-profit partner from the banking side:

SWIFT • Inclusion of leading brokers in pilot team (Aon, Benfield, Willis)• Structuring as open market initiative without access or exit restrictions

no hidden agenda

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Where can the Rüschlikon Initiative help to reform the London Market?

Short term:• Global implementation of ACORD RLC standards• Availability of joint message transmission platform• Secure transmission of data and files• Many peer-to-peer connections replaced by one SWIFT connection• Acceleration of accounting processes and cash flow

Longer term:• Straight through processing of (re)insurance data• Additional efficiency in the areas of settlement, pairing and payment• Reduction of credit risk• Process statistics and benchmarks• Evolution of the business models (e.g. risk trading)

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Contacts:

andrew.muir@swift.com+44 207 762 2030

peter_arbenz@swissre.com +41 43 285 3358

rlaker@acord.org +44 207 617 6405