Built for Speed
In the business of managing risk, the worst of times can be the best of times. It was inevitable that after the collapse of equity markets and the disaster of Sept. 11, 2001, prices for commercial insurance would increase substantially in certain lines of business and there would be limited capacity in the overall market for certain lines of business. Arch Capital Group's leadership foresaw that and decided to do something about it, relates Bruce Brodie, senior vice president, IT and operations services, Arch Capital Services.
Bermuda-based Arch Capital Group came into being in May 2000 after its forerunner Risk Capital Holdings sold off its book of reinsurance business, retaining only surplus operations. After having built and acquired some key businesses, the company then launched an underwriting initiative in October 2001 to position itself as an important provider of insurance and reinsurance capacity. Within a month the firm had raised $750 million in capital from outside investors, as well as $13.2 million invested by members of the management team. Arch also began recruiting top management and underwriting talent. By January 2002, it had recruited former Zurich North America CEO Constantine Iordanou to run its U.S. insurance operations, who in turn recruited Brodie, formerly of BearingPoint (McLean, Va.).
Then came the task of devising the technology architecture for a fast-growing company in its ramp-up phase. It needed to be able to respond with unprecedented rapidity to market opportunities. Brodie holed up with Iordanou in the winter of 2002 to develop strategic technology drivers (see sidebar, p, 40) and a plan that outlined four specific goals.
One was the establishment of a fully Internet-accessible environment, to enable anytime/anyplace access to all employees, partners and customers-granting significant flexibility in hiring employees and locating branch offices. The second goal was the establishment of all business systems-underwriting, policy issuance, claims, actuarial and financial-to support various lines of business and geographic locations. Arch also decided on the establishment of a common infrastructure including the network and computing platforms, telephony, e-mail and document management, with a view toward a paperless environment. The linchpin of the design, however, was to have a large database to serve as a central repository for financial, regulatory and management reporting.
"In the architecture, everything is going through that database-which is very atypical for an insurance company," Brodie remarks. "This isn't necessarily dramatic use of the technology, but it's the kind of thing that becomes an opportunity when you're doing a start-up like this."
While the business began to set up profit centers in Chicago, Atlanta and San Francisco, Brodie recruited a staff of 23 people to work on applications, infrastructure and project management. "During the next couple of months we were laying out the physical infrastructure-network, e-mail and all of the computing capability around the offices we were opening-while simultaneously reviewing the kinds of products in the marketplace we might use to support the businesses."
Through the course of the first year, Arch was operating in what Brodie describes as a semi-automated environment. "We deployed systems-some home-grown-that allowed our underwriters to track the business that they were writing and capture the critical data that we needed to report," he says.
Central "Data Place"
Some of the initial vendor systems deployed included an RMS (Newark, Calif.) application for evaluating property exposure, and Advisen (New York) to provide support for underwriting of D&O business. By the end of 2002, Arch had also implemented Hartford-based Insurity's Commerical Intellisys to price, underwrite and track standard commercial lines business, and had established the physical platform for the critical central database, which came to be known as the Data Place.
"We spent most of our time deploying core infrastructure that would be available into 2003 and beyond," Brodie recalls. A large part of that effort supported the development of an underwriting workstation, which will support underwriting and policy issuance for specialty lines of business: "Everything from account creation to submission of the risk, quoting, binding and issue," Brodie says. The most important elements-creation and clearance-were delivered early in 2003, using Torrance, Calif.-based ePolicy Solutions' ACS. The remaining functionality will be delivered by year's end.
There was no let up during 2003, as IT added 30 more staffers and took on responsibility for supporting additional locations in Los Angeles, Philadelphia, Houston, Denver, Tampa, London, and Morristown, N.J., Brodie recounts. In addition to the ePolicy product, application architecture was further built-out with the deployment of AIGT's (Livingston, N.J.) WINS (through reseller Insurity) for claims and reinsurance accounting, as well as financial and statistical reporting, along with other applications to support specific lines of business.
The pace of work is easily understood by looking at Arch's financial results: in the six months ending June 30, net written premium increased to $1.3 billion, from $503.7 billion over the six-month period ending a year earlier. IT's challenge, Brodie says, is keeping up with that pace.
"At this point we're working in heavy roll-out mode, delivering a lot of functionality week by week, and that's just plain old hard work," Brodie says. But that work has been less onerous given the degree of buy-in on the part of the business. "They see the value of what we're doing and help us in every spot when the going gets rough," he says."
But the going will be smoother for Arch for having been able to build an architecture unburdened by the complexities of so many insurance systems and built in advance for flexibility. That flexibility was demonstrated during the August 14 blackout. The carrier counts on three data bases: one in Minnesota provided by Insurity, one on the West Coast provided by ePolicy, and Arch's Data Place, which runs in an IBM (Armonk, N.Y.) data center on the East Coast. "Simply because we could get a guy to the Internet someplace, we could control our whole infrastructure, and have all our applications available across the network, without a hitch," he explains.
The day-to-day business value of that flexibility is that "because virtually everything is accessible over the Web, we literally can open an office overnight," Brodie says. "The ability to let four guys go to Houston, rent space and be up-and-running virtually immediately lets us be very responsive.
Rapid Evolution
On the application side, the Data Place-centered design, surrounded by large chunks of purchased functionality, allows the quick deployment of "quick-hit" applications according to Brodie, "but in a way that's scalable and provides a unified space to the business users, allowing business applications to evolve very quickly."
The third crucial element is the end-user view, powered by Cognos (Ottawa, Ontario), Brodie explains. "In the old days when you did a big MIS project you spent months or years working with all the business constituencies. The power of this technology is that because the data is in one cohesive place, you've built architectural integrity into data definitions around time and organization, etc., making the creation of end-user reports an easy thing to do on the fly," Brodie says. "It provides an incredibly flexible MIS platform going forward."
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Timing Is Everything
"At this point we're working in heavy roll-out mode, delivering a lot of functionality week by week," says Bruce Brodie, Arch.
COMPANY: Arch Insurance Group (New York), a division of Arch Capital Group, Ltd. (Bermuda, $1.6 billion in equity capital).
LINES OF BUSINESS: Construction and surety, executive assurance, medical professional liability, casualty liability, property, marine and energy, professional liability, program business and alternative risk.
IT STAFF: Approximately 50.
IT BUDGET: Roughly $100 million spent over three years.
KEY EXECUTIVES: Bruce Brodie, SVP, IT and operations services; Scott McClintock, head of applications, and Jeremy Cicurel, head of infrastructure. Pet Hartman, business systems, Tom Musante, PMO office.
TECHNOLOGY INFRASTRUCTURE: MCI (Clinton, Miss.) and AT&T (Bedminster, N.J.) network links; HP (Palo Alto, Calif.) and Sun Microsystems (Santa Clara, Calif.) servers; Veritas (Mountain View, Calif.) backup; StorageTek (Louisville, Colo.) tape library; Oracle (Redwood Shores, Calif.) and Microsoft (Redmond, Wash.) SQL databases.
WHAT IS YOUR GREATEST BUSINESS CHALLENGE?
BRODIE: "Keeping up with the rate of change in the business."
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ARCH STRATEGIC TECHNOLOGY DRIVERS
1. Take advantage of available economies of scale and utilize cost-effective, advanced but proven technologies.
2. Position the company with a variable cost model to enable expenses to grow and/or shrink with revenue.
3. Enable the company to open (or close) remote offices quickly, easily and inexpensively.
4. Enable ready access for potential customers, clients, brokers and employees to pertinent information.
Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio
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