Mercury is a Willis Towers Watson approved electronic placement platform which provides a link between banks’ or corporates’ trade finance business and the private credit risk insurance market. Existing Mercury clients have been able to use their bespoke master risk policy agreement, which underpins the platform, as a risk mitigant under Basel III, allowing them to benefit from capital relief. Emma Coffin, Managing Director, Head of Broking, Financial Solutions at Willis Towers Watson, explains how the platform has benefitted clients and what happens if there is a claim.
Q: What was the original premise in creating Mercury?
Coffin: Willis Towers Watson has for many years specialised in finding insurance solutions for banks, counting over 30 financial institutions as clients. As such, we could see a need for a more efficient approach to the short-term trade side of the business due to the high volume and fast turnover of these transactions. We placed the first ever letter of credit (LC) facility back in 1994. (It’s hard to believe today, but that was shortly after banks were first allowed by the market to buy credit insurance for their own account.) This facility, and subsequent facilities, worked well in speeding up the process but still involved a lot of manual touchpoints. This led us to think, why not do these digitally? So we created the Mercury platform, developed by Willis Towers Watson, for our clients. It took months to build the technology platform with valuable input from our pilot bank clients throughout the process.
It has now been up and running for 15 years with substantial enhancements added over time to get it to where it is today, and it has been tried and tested by our bank clients. With many individual declarations now bound through Mercury and over 40 insurers signed up to the system, it has been a great success creating efficiency in risk distribution for both insureds and insurers.
Q: Is the use of technology in short-term trade finance a prerequisite for doing business going forward?
Coffin: Yes, absolutely. Our view was that we should lead efficiency improvements and we have done this. Since 2004, a number of trading platforms have been developed to allow financial institutions to connect and transact with buyers and sellers of goods and services and these have focused on providing solutions in the funded arena. Insurance provides an unfunded solution and Mercury allows these entities to distribute credit risk into the private insurance market, executing these trades digitally. Today, the presumption is that digital solutions create business efficiencies, but this is only true when done well. It is easy to get it wrong as IT investors can confirm, but our experience has been positive, and Mercury has shown to create efficiencies for clients.
Q: What have the benefits of Mercury been for clients and for underwriters?
Coffin: Firstly, speed. We designed the initial submission form so that it only takes two minutes to fill in but contains the information insurers normally need to accept the risk. When a bank has a new deal it wants to insure, at the click of a button, it is sent to insurers and a deal can be bound very quickly with all interactions taking place on the system in real time. Deals have been bound in as little as 15 minutes from start to finish.
Secondly, Mercury can help mitigate the operational risk in these transactions. All formal documentation is automatically generated by the system, cutting out manual error. Since all the interactions take place online, there is a full audit trail with all correspondence and formal documentation (including contractual docs) filed on the system. In many cases, the system allows for premiums to be paid in a way which avoids the risk of policy cancellation due to non-payment of premium. And the system automatically generates alerts making sure key dates are not missed. No need for manual diary entries!
Lastly, Mercury provides our clients with management information. The information captured by the system is very useful and banks can interrogate Mercury for details of its submissions, aggregates, exposures, counterparty limits and premium.
These benefits work for insurers as much as insureds so it is a win-win.
Q: How has the platform evolved to suit clients’ needs?
Coffin: Mercury was initially designed to find insurance solutions for defaults under confirmations of LCs so it was bank-to-bank risk only. As our clients began to use the system successfully, they started to ask why they couldn’t cover their short-term corporate credit risks too. So we developed the platform to include corporate obligors and debtors and made further significant upgrades so that corporate insureds could use the system for their transactional business, as well as banks.
Today, both banks and corporates can sign up to the system to mitigate exposure they have to debtors and obligors across many different industries and sectors.
We are also delighted that Mercury has recently received formal accreditation from Lloyd’s of London, recognising it as an approved ePlacement platform.
Q: What happens when there is a claim?
Coffin: Mercury has a great track record! We had a large claim last year which was a syndicated placement supported by five insurers who paid in full and on time. It was the client’s first claim and they were really pleased with the result, which demonstrated the efficacy of the product within the bank. It was helpful to have all the correspondence and contractual documentation filed on Mercury along with the bespoke Mercury master insurance policy agreement which ensured consistency and clarity.
Willis Towers Watson has a specialist claims team headed up by Claire Simpson who was a Political Risk and Credit insurer for over 20 years and a depth of experience dealing with claims on both sides of the fence. Claire sits with us as part of our team and will get involved as soon as there are any signs of a problem on a transaction, leading clients through the claims process. This is all included as part of our service.
Q: How easy is it for an Insured to sign up?
Then we’re ready to push the button…. Mercury can go live.
About Willis Towers Watson
Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 45,000 employees serving more than 140 countries and markets. We design and deliver solutions that manage risk, optimise benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com