Time is of the essence

As market conditions remain tough, and insurers seek to improve the efficiency of their business, there is no better time for the implementation of Netsett, as Paul Duffy, director, Capital Markets and Treasury Solutions, and Emmanuel de Rességuier, global head of Working Capital Advisory, Insurance at Deutsche Bank explained to Intelligent Insurer.

“Improving efficiency and cutting cost has become an important part of an insurer’s job, and making inroads to that cause is essential,” says Paul Duffy, director, Capital Markets and Treasury Solutions at Deutsche Bank, who also says that the bank’s new product in partnership with Xchanging will be “transformational” to the sector.

“Accuracy is also a key factor in Netsett’s development, as the technology takes away any ambiguity between differing opinions, bringing integrity, and ‘one version of the truth’ to the process.” Paul Duffy

Netsett, which provides global accounting and net settlement through the use of structured data, will facilitate the transfer of claims and premium data within global insurance groups and between global cedants, brokers and carriers, bringing the two together for the first time on the open market.

“Netsett is a global utility that offers two things to the insurance industry: automated central accounting/reporting and a settlement process,” explains Emmanuel de Rességuier, global head of Working Capital Advisory, Insurance.

A number of brokers and carriers around the world are now using a standardised accounting reconciliation process, known as e-accounting, which follows the Ruschlikon Acord message process. These industry practitioners are already benefiting from this reconciliation methodology, which means no paper-based processes and therefore a reduced likelihood of misinterpretation.

“Netsett is a global platform, so it’s ideal to launch it the week prior to the RVS and follow it up with specific sessions during the event." Emmanuel de Rességuier

However, while many have opened up to the process of e-accounting, which enables a financial accounting function within an insurance group and broker to reconcile, they still have to go through a settlement process, which is manual and doesn’t offer multilateral netting of different transactions between market participants.

“If you look at the way the Lloyd’s or companies market works in London, there is the Bureau and Central Settlement in Lloyd’s. This takes all of the market’s transactions, reconciles, and nets them off and ultimately settles them. This creates huge efficiency and liquidity benefits. This doesn’t exist in the open market,” says de Rességuier.

Time to fly

Netsett, which is a unique offering, provides operational efficiency, increasing transparency and control; enhanced regulatory reporting, by way of reducing the timely reconciliation process; and liquidity benefits by way of netting off incoming funds.

However, as industry demands have increased, the market, which has been historically slow to adopt technology, is opening its eyes to a product which could reduce business processes by half.

“Netsett has come to the fore by the fact that the London insurance market has something similar in place, but the rest of the global market hasn’t,” says Duffy.

“Historically, the insurance market has been very slow to embrace change, because it’s a risk-averse industry by nature, and change equals risk, it’s been slow to adopt new technologies.

“However, current processes are far too inefficient and people are beginning to realise this.”

As investment returns remain at a low, pressure to write profitable insurance has mounted, forcing insurers to consider cost efficiency more than ever before.

“In the past you could write your technical account business at a loss knowing that you’d make it up on the investment account. However, those days are gone, so you have to write insurance business at a profit, which means that you have to focus on cost, as we’re seeing now,” says Duffy.

“Accuracy is also a key factor in Netsett’s development, as the technology takes away any ambiguity between differing opinions, bringing integrity, and ‘one version of the truth’ to the process.”

Acord messaging, which can be used in conjunction with Netsett, features set data fields, allowing users to reconcile and then net and settle, thus resulting in further accuracy.

Who can it help?

The global nature of the insurance industry has meant that big global insurers that move both money and risk within their own organisations, require an efficient and solid reconciliation process, which is where Netsett comes in.

“Take a commercial airline company, for example, which operates all over the world. If they came to an insurer and said that they wanted to insure their entire fleet, they would require policies to be issued locally under local regulation, because if there’s a claim, the local regulator would want to know that it’s a locally regulated insurer who is going to meet that claim,” says Duffy.

“So when the airline asks for a global programme, they will need a local policy for each destination. The master policy will be written in London, for example, if it’s a UK corporate. Then an insurer, such as Royal Sun Alliance (RSA), will issue a master programme out of London, but will ‘front’ risk across its global network in lots of different locations and transfer that risk back to London.

“This requires a lot of risk being transferred within one group, which requires an effective and reliable accounting reconciliation process. With Netsett, we’re saying we can offer you both the accounting reconciliation and the capability to net and settle all the exposures that take place.”

Implementation

The standard implementation process for Netsett takes around two to three months; this process may vary depending on the insurer’s internal systems and IT considerations.

Beginning with a due diligence process, Deutsche Bank and Xchanging will apply an ‘as/is—to/be’ process which allows the bank to assess the current processes in place and calculate how Netsett could enhance these processes.

“Every company has different internal challenges and systems, but as Netsett doesn’t replace any existing accounting or treasury systems, instead simply sitting on top of and interfacing with them to create those benefits, it brings additional bespoke flexibility,” says Duffy.

“With RSA for example, we mapped out their process steps and then looked at how many steps would be required after Netsett, which revealed that it would reduce their process by approximately 50 percent—a substantial amount for any business.

“One factor we have come up against is the interaction between separate departments—namely treasury, financial accounting, risk and compliance—that do not usually work together on a day-to-day basis. Netsett performs across these three areas, creating a unified approach, which ultimately speeds things up.”

Netsett is a global product that allows users to pay or receive in all currencies. With this in mind, Deutsche Bank decided that the perfect time to roll this out would be at the Rendez-Vous de Septembre (RVS).

“Netsett is a global platform, so it’s ideal to launch it the week prior to the RVS and follow it up with specific sessions during the event,” says de Rességuier.

We are keen to show the product to the insurance industry and then interact with potential clients at one of the sector’s biggest events.”

Intelligent Insurer Global Award for DB

Deutsche Bank was recognised as one of four leading banks in the cash management category of the 2014 Intelligent Insurer Global Awards which, de Rességuier felt, demonstrated the company’s dedication to the sector.

“Over the last 18 months to two years, we’ve focused on the insurance industry, so we are really pleased that we’ve gone from a bank that wasn’t in the awards last year, to being close to winning it.

“It’s our ambition and desire to continue to bring the best that we can to our clients so that we can be the preeminent transaction cash management bank to the insurance sector in the world.

“Being at the forefront of an awards process in a well-recognised publication is a real achievement for us and could help in getting our ambition and profile across to the sector.”