https://www.insurerbrain.com/w/index.php?action=history&feed=atom&title=Definition%3ASole_sourcingDefinition:Sole sourcing - Revision history2026-06-18T05:30:42ZRevision history for this page on the wikiMediaWiki 1.43.8https://www.insurerbrain.com/w/index.php?title=Definition:Sole_sourcing&diff=20947&oldid=prevPlumBot: Bot: Creating new article from JSON2026-03-19T13:39:13Z<p>Bot: Creating new article from JSON</p>
<p><b>New page</b></p><div>🔒 '''Sole sourcing''' describes a [[Definition:Procurement | procurement]] situation in which only one supplier can provide the required product, service, or capability, leaving the buying organization with no competitive alternatives. In the insurance industry, sole sourcing arises when a carrier or [[Definition:Broker | broker]] depends on a vendor whose offering is genuinely unique — for example, a proprietary [[Definition:Catastrophe model | catastrophe modeling]] platform with no functional equivalent, a regulatory reporting tool built exclusively for a specific jurisdiction's requirements, or a legacy [[Definition:Policy administration system | policy administration system]] whose replacement would involve prohibitive migration costs. The distinction from [[Definition:Single sourcing | single sourcing]] is critical: sole sourcing is driven by market constraints rather than buyer preference.<br />
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⚙️ Because competitive bidding is impractical or impossible, sole-source procurement typically follows an abbreviated process. The insurance organization documents why no alternatives exist — often required by internal [[Definition:Governance | governance]] policies and, in some markets, by regulatory guidelines on [[Definition:Outsourcing | outsourcing]] and vendor selection. Negotiation still occurs, but the buyer's leverage is inherently limited. To mitigate this imbalance, insurers commonly structure contracts with caps on annual price increases, clearly defined [[Definition:Service-level agreement (SLA) | service-level agreements]], and provisions for periodic benchmarking against market norms. In the [[Definition:Lloyd's | Lloyd's]] market, for instance, certain centralized services and platforms function as sole-source arrangements by design, with governance mechanisms substituting for competitive pressure.<br />
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⚠️ The risk profile of sole sourcing demands particular attention from insurance executives and [[Definition:Chief procurement officer (CPO) | procurement leaders]]. Dependence on a single, irreplaceable vendor amplifies [[Definition:Operational risk | operational risk]] — a concern that regulators in [[Definition:Solvency II | Solvency II]] jurisdictions, the United States, and major Asian markets increasingly flag in supervisory reviews. If the sole-source provider suffers a service outage, undergoes a change of control, or exits the market, the insurer may face costly and time-consuming transitions. Best practice calls for maintaining detailed exit plans, investing in interoperability standards that reduce switching costs over time, and conducting regular [[Definition:Spend analysis | spend analysis]] to identify opportunities where emerging competitors or [[Definition:Insurtech | insurtech]] entrants may have created alternatives that did not previously exist.<br />
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'''Related concepts:'''<br />
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* [[Definition:Single sourcing]]<br />
* [[Definition:Vendor management]]<br />
* [[Definition:Operational risk]]<br />
* [[Definition:Procurement]]<br />
* [[Definition:Outsourcing]]<br />
* [[Definition:Concentration risk]]<br />
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