Market ReformProgramme Office

Market Reform Forum

John Harvie, MRPO

Martin Roberts, LMA

25 April 2007

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Market Reform Update

• John Harvie

– Progress since last forum– Contract certainty

– ECF and IMR

– Other projects

• Martin Roberts, Mike Reidie –Documentation and contract checking

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Contract certainty - Headlines• Performance continues to exceed targets – Feb brokers’ achievement

rate – 95%

• Guidance consolidation nearing completion

• Wide consultation just completed and has received high levels of support (including from the non subscription market).

• Reviewed by AIRMIC and the CII, both are supportive.

• Seeking guidance from the FSA on status of revised guidance and will publish it with reference to this status.

• We are planning to continue to update the FSA for the remainder of this year.

• Repeat of market survey will take place in August / September

• Plan to disband CCSC and the other CC related governance groups around September.

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Summary of the guidance re write• Plan to publish a revised contract certainty code of practice in May.

• Consolidates 11 documents into 1

• Modifies the definition to remove the inconsistency and confusion arising from the use of inception date as part of the old definition, removing the need for separate late placements guidance;

• Brings the definition, principles and guidance into a consistent structure;

• Creates principles that are, as far as possible, timeless. Reference to targets, service levels or specific processes has been removed from the principles;

• Provides clarity on how organisations may choose to demonstrate performance (which can encompass 100% checking as well as sample audits and process controls);

• Makes the code generic (i.e. removes London specific terminology) and hence applicable to the whole UK general insurance industry

• Deals with the actions required when the principles of contract certainty are not met. This provides a link between contract certainty and the legacy of un-issued contract documentation;

• Defines the scope of contract certainty.

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Plan for completion

• Issue final draft guidance to Associations to obtain feedback from members. Early April;

• Issue finalised guidance to FSA for comment and arrange to brief FSA representatives. End April;

• MRG /CCPB sign off guidance for publication. End April;

• Develop communications for associations. Early May

• Develop market communication pack. Early May;

• Publish. May; and

• Brief implementation and communication exercise. Mid May to mid June.

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Legacy• Lloyd’s progress continues

– Volume of existing Legacy policies in the Lloyd’s Market in February 07 was 181,222, which was a decrease of 5% compared to January 2007. The index score is 79% compared to Lloyd’s baseline Legacy volume taken in July 2006.

• Company market

– IUA Circular 044/07 (26th March 2007) confirmed the significant Legacy activity amongst IUA members, Commencing with Priority 1 to tackle major potential exposures first

– IUA is now giving further consideration to methods of measuring progress that can be more meaningful for both the market and the FSA than the Xchanging UPR.

Lloyd's legacy index

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Jul 06 Aug 06 Sep 06 Oct 06 Nov 06 Dec 06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07

Lloyd's Target Baseline

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Contract certainty and legacy - Messages to take away

• Contract certainty sponsor or project manager, be prepared to do a gap analysis on your existing systems and controls against the new code of practice; and

• Be prepared to help brokers and underwriters understand any implications of the new code that you believe are important.

• Managing agent continue to work with Lloyd’s to reduce the legacy. Central point of contact Yvonne Bouman

• Company market work with the IUA to reduce the legacy. Central point of contact John Hobbs

• Be prepared to demonstrate to the FSA that your CC systems and controls are in place and working.

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ECF and IMR – more use, more needed• Claims

– All active Managing Agents, 44 Brokers and 1 Service Provider (XCS) signed up to ECF

– 20% of in scope Lloyd’s claims being processed electronically in March – up from January (8%), February (12%)

– Releases 6a and 6b – to allow Binders to be processed electronically - on target

– 6a, in MAT at the moment, Go live 7th May

– 6b, MAT planned for June-August

– IUA planning to come on stream, go live 1st July - delayed

• A&S

– 70,000+ transactions have now been processed electronically

– Release 2 – more DRI functionality – on target for live in August

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ECF and A&S - Messages to take away

• Good progress but more needed.

• Blocks to take up being resolved:

– ACL issue close to resolution.

– Issues around funding of support near resolution

– so shortly no excuse.

Market ReformProgramme Office

Market Reform Update

Other Projects

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Other projects

• Future slip developments

– A new release of the Market Reform Slip July– reflect the approach to be taken to contract documentation (more on this in a

minute)

– to tidy other aspects of the standard

• Testing certification facility

– ACORD standards are key to reform

– TCF now available as a means of insuring that you ACORD messages are consistent

• Contract quality: checking documentation

– Martin Roberts – Contract documentation

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Other projects• De linking

• Carrier are significantly more likely to get paid on time if transaction de linked

Market Reports - Delinked Values and Percentages (2005-2007 Signings)Lloyd's Market

£m Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec2007 Delinked 309 197 148

Total 500 483 3592006 Delinked 212 151 96 146 165 166 223 177 102 123 145 138

Total 427 528 366 330 482 467 496 523 355 286 328 2682005 Delinked 183 144 64 116 104 96 132 104 76 61 94 83

Total 439 536 326 352 389 406 407 446 378 257 323 275

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2005 Delinked % 2006 Delinked % 2007 Delinked % 2005 Mkt Avg 2006 Mkt Avg 2007 Mkt Avg

Prepared by JMD Specialist Insurance Services from information

provided by XIS

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Other projects• Endorsements

– Pilot close to starting, different brokers joining from now until 7th May

– Pilot run through to end July

– 18 Insurers currently signed up to participate

– IUA and LMA briefed and actively involved

– Market briefing back

– Benefits:– Reduce the effort required to handle endorsements in the London Market;

– Improves customer service, speeds up confirmation to policyholder/clients;

– Reduces number of ‘box’ visits / frees up valuable ‘box’ time to see more business;

– Allows Insurers who ‘follow’ to see endorsements earlier, particularly premium movements;

– Increases common business process;

– More reliable audit trail and recording of agreement/acknowledgement;

– Assists with Contract Certainty;

– Parallel (re)insurer agreement process will speed up endorsement agreement.