Xchanging and Deutsche Bank Launch Netsett Settlement Engine for Insurers
The long-running Project Sorrento discussions in London finally bore fruit when Xchanging, and its project partners Deutsche Bank and ACORD, unveiled the Netsett multilateral netting and settlement engine for the global insurance market.
The ‘soft launch’ of the new platform, however, means that Netsett is unlikely to be fully rolled out until next year. It therefore came with a plea for brokers, carriers and others in the insurance and reinsurance sector to use the market utility once the netting and settlement engine becomes available in 2013.
As Max Pell, managing director of the London market business for Xchanging, explained at the press conference the pricing for the market utility is yet to be announced because each package will be sold to reflect the value created for participants. The idea of the ‘soft launch’ is obviously to get this process started and to attract users as quickly as possible, so that a virtuous circle of high volumes and consequently low prices can be established before the funding runs out. In this way the platform will work in a similar way to SWIFT’s payments messaging platform, with Xchanging obviously taking its cut as the operator.
“It’s a volume play we’re launching as want to establish a large global utility,” says Pell. “We’ve a very scalable platform that means as volumes rise, prices can fall as benchmarks are reached. Our intention is to be cheaper than the London bureau.” The new platform will operate on a subscription and transaction charging basis.
Preparing to Launch
Netsett is open standard and uses ACORD’s standardised insurance sector messaging technology, allied to Deutsche Bank’s clearing, netting and settlement engine capabilities. The latter will be the bank’s main contribution to the project, in addition to its foreign exchange (FX) services and optional value-adding cash management services.
A pilot phrase is now underway for Netsett with the RSA insurance group using the new platform for the remainder of the year to:
According to Pell, the London market processed £54bn last year but only £11bn actually moved because of netting. Netting off saves on bank transaction charges and inefficiencies, offering crucial benefits to corporate treasurers and businesses across all spectrums. “This happens in London at the moment and we want to make this global,” adds Pell, when discussing the purpose of the platform.
There are three key technology elements to the Netsett platform, covering:
As Paul Duffy, director of capital markets and treasury solutions at Deutsche Bank, explained during the Q&A session: “We process something like $1.4 trillion to $1.5 trillion in payments every day so there should be no concerns about Deutsche Bank’s ability to deliver on the promise of this platform.”
All that is needed now is the volume and the users. It didn’t help that the presentational video broke down during the ‘soft launch’ this morning but that is the problem with all live technology, of course, and the partners involved from the operators Xchanging, to ACORD and Deutsche Bank are all long-standing players with well-established offerings and platforms. Next year will be the crucial test as we wait to see which players flock towards the hoped for global market utility.
Tim Yorke, the programme director at Xchanging, sums it up nicely. Skirting the pricing issue, he says that, of course, the firm is targeting brokers. “We need carriers to get brokers and vice versa, and we are talking to both, as we want both on our platform. There is no point having the only telephone in the world. This is a [planned] market utility that needs everyone.”