Following a few failed attempts and years of slow growth, electronic reinsurance placements finally appear to have gained traction in the global marketplace.

The number of cedents, brokers and reinsurers conducting business online continues to increase, showing more acceptance of online exchanges and advanced messaging technology — known as peer-to-peer messaging.

Both methods, which are based on the same Assn. of Cooperative Operations Research & Development standards technology, allow parties to communicate, negotiate, submit and bind contracts electronically, eliminating operational inefficiencies, reducing errors and gaining greater control over workflows, advocates say.

But there is still work to be done, they note. While the technology for the most part is there, culture remains the biggest barrier to wider acceptance.

The pace of change, however, is expected to accelerate with the launch of a new Lloyd's of London messaging hub called the Lloyd's Exchange, which observers say will make it easier for brokers and reinsurers to conduct peer-to-peer messaging (see related story).

"It's been a long, hard slog," said Alex Letts, chief executive officer of RI3K Ltd., a London-based online insurance and reinsurance exchange for brokers and reinsurers that is eight years old. "Part of the battle was persuading the brokers that this actually didn't disintermediate the brokerage houses; it only disintermediated part of the physical process" such as rekeying data.

Today, "there are thousands of risks being bound each month over our own service," Mr. Letts said.

So far in 2008, that amounts to more than $3 billion of premiums, the bulk of which is treaty reinsurance placements, he said.

"The pace of change in the insurance and reinsurance business is never really rapid. It's taken some years" for the market to recognize the benefits of conducting reinsurance business electronically, said Igor Best-Devereux, CEO of eReinsure.com Inc., a nearly 10-year-old Salt Lake City-based online facultative reinsurance negotiation platform.

Today, about 8,000 individual users working for ceding companies, brokers and reinsurers use eReinsure to manage their reinsurance placements, up 20% to 25% over last year, he said. To date, more than 200,000 submissions requesting reinsurance have been managed using the platform, and about 80,000 contracts have been completed, he said.

"The fact that a large number of reinsurers and brokersÖare already using the system means that it's more useful and more easily used by cedents," Mr. Best-Devereux said. "The whole concept of a network becomes very, very powerful when you've got the key participants in the market engaged in it."

While RI3K and eReinsure are thriving, there have been notable failures.

In 2003, London-based online reinsurance platform inreon Ltd. shut down, citing a lower-than-expected number of transactions (BI, May 12, 2003). Swiss Reinsurance Co., Munich Reinsurance Co., consultant Accenture and capital provider Internet Capital Group launched the platform in December 2000. Observers say inreon's demise was in part the result of being owned by the reinsurers that were selling the reinsurance on the platform.

In 2006, Lloyd's of London shut down its electronic platform Kinnect, after five years and an estimated cost of about £70 million ($124.89 million). The platform was intended to enable underwriters and brokers to securely transfer data according to a set of market-agreed business processes, but it never attracted enough interested parties.

Kinnect "didn't just fail because the technology wasn't right; it failed because the people didn't really want it," said Jeff Ward, business development director at TriSystems Ltd., a London-based technology firm that supports electronic reinsurance.

"The London insurance market has always had a traditional resistance to using a single monopoly solution," Mr. Ward said. Since the demise of Kinnect, several different ways of conducting business electronically have emerged that are fundamentally based on the same ACORD communication standards, Mr. Ward said, referring to the Pearl River, N.Y.-based insurance and reinsurance standards association.

"We've all come to the conclusion that you cannot be speaking many different languages. But how you implement and actually use it in dialogue with trading partners is being left to people's preferences," Mr. Ward said.

Some companies may prefer online exchanges or platforms, while others may prefer more of a peer-to-peer messaging or messaging hub model, Mr. Ward said.

In the second quarter of 2007, Aon Re Global U.K. internally mandated that a majority of its reinsurance risks be entered into its electronic distribution system and then uploaded to the RI3K exchange. It uses both the exchange and peer-to-peer messaging via RI3K to place reinsurance business.

To date, about 80% of Aon Re's U.K.-marketed treaty business and 45% of its U.K.-marketed direct and facultative business is conducted electronically, said Ian Summers, the London-based director of change strategy for Aon Re Global and managing director of e-business and market reform for Aon U.K.

"Aon wants to trade with the best markets around the world, but not all of them have made the decision to invest in the messaging infrastructure yet," Mr. Summers said. As a result, Aon Re gives its trading partners the option of working with it on a peer-to-peer basis. If they are not capable of receiving that data, the risks are posted on the exchange and the reinsurer receives an e-mail notifying it of Aon Re's submission with a link to the exchange, he said.

To date, only 20 of Aon Re U.K.'s 170 trading partners have peer-to-peer capabilities, Mr. Summers said. Of those, 18 have just one-way messaging, meaning that while they can receive messages directly from Aon Re, they cannot integrate the data into their own underwriting systems.

At Chubb Commercial Insurance, underwriters are required to first go to eReinsure to secure facultative reinsurance coverage, said Ed Howard, vp and reinsurance manager of Chubb Commercial in White House Station, N.J. If underwriters can't secure acceptable prices, terms and conditions, they can consider an off-platform transaction, but they have to obtain approval from Chubb first, Mr. Howard said, noting that more than 80% of its facultative business is managed on the platform. Those cases typically involve a large amount of capacity where Chubb has "tapped out" the platform, he said.

The biggest benefit to conducting reinsurance placements online is the process efficiencies, Mr. Howard said. Fears that such activity replaces the traditional relationship-driven reinsurance market are unfounded, he said.

The eReinsure platform "was never intended to supersede the interpersonal contact and meetings with reinsurers," Mr. Howard said. "We tell prospective reinsurers that your writings are either going to go up or stagnate based on your ability to market to our branch office force," he said. "It is still relationship-driven; eReinsure happens to be our vehicle to conduct the business."

Indeed, the technology no longer is particularly difficult; it's the culture that inhibits more growth, said TriSystems' Mr. Ward.

"It's the people who have to change. They need to realize that this is not going to take over their jobs. It's going to make their jobs easier. E-mail didn't put people out of work. E-mail made things generally easier for people to do business. This is similar," he said.