Control Framework A warm Welcome to the March market Breakfast Group.

Control Framework

A warm Welcome to

the March market Breakfast

Group

Control Framework

Breakfast Group agenda

9:00 Arrival, breakfast & networking All 9:15 Welcome Ali Dove 9:20 Audit coordination & Tools Lindsey Davies &

Sandra SherlockLloyd’s

9:40 Coverholder audits- the challenges Craig Scarr & Adrian Butland Grant Thornton UK LLP

10:00 Phase II update Jaana Rouvari

10:15 Q & A All 10:30 Close

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Audit coordination project

Lindsey Davies 5 March 2014

http://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=xOVf3P58LgtKTM&tbnid=TaLb59dQ2R-ZCM:&ved=0CAUQjRw&url=http://www.zazzle.com/england_expects_every_man_to_do_his_duty_post_card-239316936159297421&ei=yXXnUuGYH4Sp0QXr5IDgBQ&bvm=bv.59930103,d.d2k&psig=AFQjCNG7YlX_uT5twxc5VXai88VTvPfPgQ&ust=1390987059848416

http://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=xOVf3P58LgtKTM&tbnid=TaLb59dQ2R-ZCM:&ved=0CAUQjRw&url=http://www.zazzle.com/england_expects_every_man_to_do_his_duty_post_card-239316936159297421&ei=yXXnUuGYH4Sp0QXr5IDgBQ&bvm=bv.59930103,d.d2k&psig=AFQjCNG7YlX_uT5twxc5VXai88VTvPfPgQ&ust=1390987059848416

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AGENDA ► Vision

► What can we do to help?

► Where are we now?

► What are we doing to help?

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Vision ► Coverholder experience is improved

► Market experience is improved

► Regulators confidence in DA improved

► Consistent but flexible application of audit questions

► Efficient & effective application of a common audit scope

► Less duplication

► Less compliance for compliance sake

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what can we do to help? ► Educate and accredit auditors

► Coordinate audits centrally

► Centralise compliance functions, remove market duplication and costs

► Drive standards

► Facilitate and encourage STP

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WISH LIST FOR 2014

► Coordinate audits and findings centrally starting with Lloyd’s broker Coverholders

– One central system

– Audit MI

– Test audit scope application

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where are we now?

► Coordination project running for 2014

– Coverholders identified for 2014

– 2013 Recommendations coordinated

– Manual process agreed

► Lloyd’s Broker Coverholder Audits

– Top ten LB Coverholders identified

– Meetings being arranged

– Scope to be agreed centrally with auditors; brokers and MA’s

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what are we doing to help?

► Conference booked 12th May

► Accreditation process to be agreed

– Conference pre work

– Utilisation of tools

► Resource to be allocated

► System for coordination to be sourced

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assistance with international regulations & taxation requirements

► Risk Locator Tool (RLT) & Crystal

► Register for RLT/Crystal account

– Receive international reg & tax updates

– Access to international reg & tax requirements

► Complete Crystal Assist

– Gain a basic understanding of Lloyd’s licences

– Improve knowledge on ‘establishing location of risk’

– International regulatory and tax considerations

► Attend a RLT/Crystal training session

– x 30 sessions on GY11 for market participants (keep running subject to demand)

– x 4 sessions scheduled for auditors (via Webex) in April 2014

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RLT/Crystal training session for auditors

► Risk Location– Importance of identify the locations of risk

for regulatory and tax purposes – Impact for getting location of risk wrong– Risk location triggers

► Compliance business tools– Risk Locator tool (content & functionality)– Crystal (content & functionality)

► Communications– Monthly updates– What’s new report and archive

► Tax and Regulatory experts available to address auditors questions.

[email protected]

© 2014 Grant Thornton International Ltd. All rights reserved.

Coverholder audits – the challenges

Wednesday 5 March 2014


Agenda

• Introductions• Issues and challenges facing the market

– market risks– operational issues

• Objectives• Solutions

– options for a solution– solution design

• Considerations• Learning from the past• Summary


Introductions


Introductions

Craig Scarr

Craig has worked in the London Market for 27 years. He first qualified as a Chartered Accountant and has since supplemented his qualifications with the Institute of Risk Management, Institute of Internal Audit and Chartered Institute of Insurers. Craig is also a Certified Fraud Examiner and sits on the working party for the UK Fraud Advisory Panel. Craig is also a member of the Chartered Institute of Arbitrators.

After starting his career in external audit Craig moved into forensic work and financial crime via secondments to the UK’s Serious Fraud Office as well as the FBI in America. He was then asked to lead the Governance , Risk and Internal Control business line of a London accounting practice. Craig was subsequently appointed the UK Head of Insurance with clients across General , Life and Broking as well as Lloyd’s entities.

Craig was appointed Chairman UK Insurance at Grant Thornton UK LLP in 2014.

Adrian has over 40 years’ experience of working in the Insurance Sector.

He originally worked for 9 years on the Underwriting Box of a leading Lloyd’s Marine Syndicate followed by 10 years in the Underwriting Operation of a leading London Market underwriting agency underwriting very large Non-Marine, principally North American Casualty, but also Professional Indemnity and Property risks, on behalf Company Insurers and for four years he was based in the agency’s Bermuda operations.

Over the last 23 years, he has been working in the insurance and reinsurance services market, providing specialist consultancy services to Lloyd’s, Lloyd’s Syndicates and large London Market Insurance and Reinsurance Companies.

About Grant ThorntonGrant Thornton is one of the world's leading organisations of independent assurance, tax and advisory firms. Over 31,000 Grant Thornton people, across 100 countries, are focused on making a difference to clients, colleagues and the communities in which we live and work.

In the UK, we are led by more than 200 partners and employ 4,000 of the profession's brightest minds, operating from 27 offices. We provide assurance, tax and specialist advisory services to over 40,000 privately-held businesses, public interest entities and individuals nationwide.

Adrian Butland


The issues and challenges facing the market


Market risks

• Lloyd’s– Excess capital – Coverholder growth

• Risk issues and governance– Expansion within Board risk appetite– Solvency II– Control framework


Operational issues

• Cost effective• Impact on Coverholders• Audit co-ordination• Regulatory requirements

– Lloyd’s– Prudential Regulation Authority/

Financial Conduct Authority• Benchmarking• Timescale• Verifiable


Objectives


Objectives

• Proactive management of Coverholders

• Regulatory requirements• Lloyd’s control framework for

regulatory and tax reporting (Phase II)– Board assurance

• Lloyd’s minimum standards – underwriting

• Benchmarking of Coverholders

Simple to do business with.

Lloyd’s


Solutions


Options for a solution

• Core requirements:– System based product– Simple to understand work product– Cost effective


Options for a solution (continued)

• Providing:– Comfort to insurers– Evidence based assurance for

Managing Agents Boards to meet control framework requirements

– Ease of reporting to regulators– Peer organisation benchmarking– Ease of reporting to following markets– Minimum disruption to Coverholders


Solution design

Verifiable

Standard scopeand report

Cost effective

Integrated

System based

Audit timescale

Coverholder self assessment


Considerations


Considerations

• Audit opinion• Future liability

• Client• Following Market• Regulatory• Solvency II• Future market

Use of work product

Legal considerations

Costs


Learning from the past


Lessons learned

Bankingsector

Lack ofplanning

Basel II

Basel III


Summary


To summarise

Planning

Comprehensive system specification• Short term• Medium term• Long term

Market involvement


‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires.

Grant Thornton UK LLP is a member firm of Grant Thornton International Ltd (GTIL).GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate, one another and are not liable for one another’s acts or omissions.

T:E:

0779 292 [email protected]

Craig ScarrChair of UK Insurance

Adrian Butland

T:E:

0797 148 [email protected]

Should you require any further information, please do not hesitate to contact:

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Topics for today

34

Control Framework

1. Challenges in setting a sign-off deadline

2. New roadmap

3. How Lloyd’s will support managing agents and brokers

4. Communications and next steps

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Challenges in setting a deadline

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Control Framework

Individual extensions for managing agents vs. market wide extension?

• Treating managing agents equally

• Align with other Lloyd’s initiatives

• Allow enough time to complete a quality piece of work

• Avoid slowing down the process to achieve sign-off

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Control Framework

New market deadline for Board sign off for all managing agents is December 2015

Lloyd’s worked with those managing agents requesting extension to the deadline to agree plan and deliverables for December 2014

New deadline

No re-planning required by managing agents, assume existing plans will stand

Sign-off can be provided by a managing agent at ANY point prior to deadline

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2014-2015 Delivery roadmap

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Control Framework

Q1 – Q4 2014

Assess risk, identify controls and gaps

Q1 – Q2 2015

Develop and implementControls

Q3 – Q4 2015

Review, monitor and Sign-off

Ou

tpu

tsC

heck

poin

ts

Review of risk ratings and audit plansAgree on engagement and communications with brokers/ coverholdersComplete risk assessment and detailed analysis to identify gapsConduct coverholder audits, Review results and address remediation

Inp

uts

/ A

ctiv

itie

s

Test controls and procedures in operationConfirm evidence for sign off

For each managing agent: • Completed delivery roadmap• Completed risk assessment• Completed gap analysis• Remediation plan for review

For each managing agent: • Managing agent

evidence of coverholder compliance and board sign off to Lloyd’s

6. Agreed plan/deliverables for up to end of 2014 (agreed between Lloyd’s and each managing agent)

7. Agreement within managing agents on engagement and communications with brokers/coverholders

8. Assess risks; identify controls and gaps 9. Evidence remediation plan10. Agree assurance to be shared with Lloyd’s

11. Formal sign off

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Control Framework

Support available from Lloyd’s

• Continued 1-2-1 meetings with managing agents

• Continued 1-2-1 meetings with brokers where Control Framework impact is high

• Continued engagement with LIIBA and its BOLT group

• QUARTERLY market breakfast meetings

• Control Framework news letter

• Fully updated web pages and downloads on lloyds.com/controlframework

Phase II will transition to the Delegated Authorities Department at Lloyd’s from January 2015

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Control Framework

Communications & Next steps

• Control Framework updated in March BOLT meeting

• Followed by LIIBA circular on Control Framework

• March coverholder news letter to include tax and regs message

• Control Framework broker and managing agent contact details/ introduction available from the project team to those involved in project delivery

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Control Framework

Close

Further information on Control Framework – [email protected]

Next Breakfast Meeting – 3rd June

www.lloyds.com/controlframework

Control Framework A warm Welcome to the March market Breakfast Group.

Documents

Transcript of Control Framework A warm Welcome to the March market Breakfast Group.