Operational resilience – strength from within

Monique Alder, chief operating officer at Volante Global, considers the operational shift in the London market driven by the pandemic and considers how it might alter the operating environment moving forward.

The shift from the office workspace to remote working and from a marketplace built on paper and face-to-face relationships to a digital trading environment – virtually overnight – has tested the operational resilience of every organisation within the London market. Yet, the market has taken the strain and despite the exceptional conditions created by the Covid-19 pandemic has continued to function effectively throughout.

That does not of course mean that the market itself has not experienced challenges or remains challenged by the need to modernise and streamline its operating approach and upgrade its digital infrastructure. However, there has been a general acknowledgement of the way in which London has adapted to remote working and a very different operating environment.

The question now is how will companies emerge into a post-Covid-19 world? Will they embrace the lessons learned and evolve their operational approach, or will the temptation to revert to pre-pandemic practices prove too great?

It is unlikely, in my opinion, that we will see companies simply transition back to the way things were. Some elements of the changes that organisations have undergone will inevitably carry through into an evolved and hopefully enhanced operating environment – what those elements will be remains uncertain.

However, what the last year has shown us is that our marketplace can function without reams of paper being passed around and without the need for numerous face-to-face meetings – and can function well. That is not to say that we will now simply adopt a virtual working environment, but what it has shown us is that our market machine still turns without these lubricating factors that have for years been considered critical.

At a fundamental level there is no real substitute for building relationships in person – and that will undoubtedly continue to be a mainstay of how the London market operates. Yet, virtual technology has offered in some ways a better and more efficient way for underwriters and brokers to stay connected between those key face-to-face meetings. Therefore, what may be required moving forward is a reassessment of how that relationship functions, particularly as we strive to create a more efficient marketplace that also considers its impact on the planet.

Inevitably, technology must now become a more integral and integrated part of how the London market operates – it has demonstrated its worth over the last year, and we must capitalise on the value that it creates.

A core driver of this will be how companies balance remote and office-based working, especially those committed to long lease terms on large premises. There is a general recognition that remote working will be a core part of the modus operandi for many organisations moving forward – and from an operational resilience perspective, companies have demonstrated the viability of this. At Volante, for example, we operate a fully cloud-based IT estate – a factor that was critical to our ability to flex our service capabilities quickly in response to the pandemic. Our strategy moving forward will be centred on remote working, while our global offices will provide hubs for client meetings, collaboration and development rather than a base for our day-to-day activities. To support this operating model shift, we have also taken steps to ramp up our cyber security measures by integrating the multi-layered cyber security software solution that underpins our recently launched Cyber Lockout insurance product into every device across our organisation.

Digital resilience is a key focus area for the Prudential Regulation Authority. The combination of more remote working and an increasingly digitalised environment places an onus on companies to get their cyber security house in order. Having staff working from home potentially exposes more vulnerabilities, for which there is no silver bullet but requires a suite of risk mitigations, including heavy reliance on staff training, awareness and discipline. Managing a cyber attack across a much more widely dispersed workforce creates multiple practical challenges and will require companies to view the cyber threat from a fresh perspective.

From an MGA perspective, it is highly likely that as we transition into a changed or changing market environment, one aspect that will not change is the re-evaluation by carriers of the MGA model that was ongoing prior to the emergence of Covid-19. In fact, it is likely that the operational shift necessitated by the pandemic, but now likely to become part of business as usual, will heighten the focus on the efficiency, effectiveness and resilience of the operating framework maintained by MGAs.

As companies strive to run leaner operations, the light will inevitably shine brighter on the ongoing viability of the remuneration model. The commission-based model is simply not sustainable, and carriers are likely to look to those companies that focus on profit rather than commission. The chain of intermediaries between the insured and insurer must be shortened to minimise whatever commission is needed to cover costs. Leaner operating environments will be required to further ensure that costs are kept to a minimum, through greater centralisation and rationalisation, the careful balance of in-house and outsourced capabilities and the more effective use of technology to deliver enhanced performance. While in tandem, service levels will need to be elevated, ensuring local knowledge is leveraged to meet the specific needs of local insureds.

The operational agility that enabled a rapid response to the imposition of lockdown will also become a more relevant MGA criterion. Maintaining an agile IT estate and capitalising on the expansive capabilities of the cloud will be required if MGAs are to deliver the increased responsiveness that carriers will demand in a fast-evolving, fast-advancing marketplace.

There is no doubt that the London market has experienced an operational shift of incredible magnitude in a short space of time. In many ways, it has shifted the market in a direction that it was already moving in but at a much faster pace. While the momentum will inevitably slow, it is important that it continues and that the market integrates the valuable lessons that have been learned during this challenging period and, as a result, emerges stronger and more resilient.