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Legacy Market Session

Legacy Market Session. September 2006. Market: James Andlaw (Zurich), Richard Borgonon (JLT), Peter Goddard (BRIT), John Muir (Willis) Xchanging: Rob Myers MRPO: John Harvie, Steve Hulm. Agenda. Introduction John Harvie Legacy Code of Practice & Guidance Steve Hulm

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Legacy Market Session

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  1. Legacy Market Session September 2006 Market: James Andlaw (Zurich), Richard Borgonon (JLT), Peter Goddard (BRIT), John Muir (Willis) Xchanging: Rob Myers MRPO: John Harvie, Steve Hulm

  2. Agenda • Introduction John Harvie • Legacy Code of Practice & Guidance Steve Hulm • Broker Approach Richard Borgonon/ John Muir • Summary John Harvie • Frequently Asked Questions Panel • Open Questions Panel Page 2

  3. Legacy Status • Legacy Statistics • Unsigned Policy Reports (UPR) provide a basis • You may well have your own data • FSA Interest • They have a close interest in the subject • They are likely to focus on the UPR numbers & on your progress • Market Guidance • Legacy Code of Practice & Guidance published • Tools Available (from Xchanging) • Legacy Unsigned Policy Reports • Legacy “Purging” Facility • Change Requests being progressed • Removal of items with alternative evidence of cover from UPR • Now is the time for action! Page 3

  4. Legacy Code of Practice

  5. Legacy Policies Background • Initially not seen as the main priority by some in the market • MRG with encouragement from the FSA, wanted to see if there was any value in some central activity • Instigated a study to find out more • Questionnaire • Consultation with a small number of Brokers and Underwriters • Categorisation of Legacy into priority • Formation of Legacy Policy Group Page 5

  6. Legacy Policies • Legacy Policy Group • Confirmed and refined the priorities for categorising legacy issue • Refined into Code of Practice • Code of Practice • Agreed by MRG and associations • Agreed by non-London practitioners group, including ABI, BIBA and IIB • Published on 17 February 2006 with full UK Insurance Market branding Page 6

  7. Legacy Policies • Code of Practice • Priority 1 - Definition • Business incepting on or after 01/01/05 and any unexpired policies as at 01/01/2005 (current work in progress) • Priority 2 - Definition • 2004 expired short tail and long tail which expired prior to 2005 (priority legacy policies) • Priority 3 - Definition • Expired 2003 and previous short tail (other legacy items) Page 7

  8. Legacy Policies • Guidance - General • G1 - Priority should always be given to meeting a client request for evidence of cover – This is key • G2 - It is for each insurer and broker to determine its own legacy statistics, drawing on a variety of data sources including the bureau records where relevant – “Sizing the problem” • G3 - The broker should determine the requirements of its client for any legacy that is no longer planned for preparation and issuance of appropriate evidence of cover – “Ask the client” • G4 -In absence of any instructions to the contrary brokers should commit to issuing any insurer-approved evidence of cover to its clients – “It doesn’t sit in a drawer!” Page 8

  9. Legacy Policies • Priority 1 - Definition • Business incepting on or after 01/01/05 and any unexpired policies as at 01/01/2005 (current work in progress); • The highest priority is to stop adding to the legacy backlog – Comply with the C/C Code of Practice • Priority 2 - Definition • 2004 expired short tail and long tail which expired prior to 2005 (priority legacy policies); • A decision not to produce an appropriate evidence of cover is the responsibility of the insurer rather than the broker – So the insurer makes the decision. The broker or insurer may initiate the process. • Insurers should assess, among other things, both the intrinsic risk of the contract and the quantum of cover in agreeing priorities for resolution – and makes the risk decision • Particular attention should be paid to any unresolved claims or disputes, and the options for addressing those situations – Reflecting these facts … continued overleaf Page 9

  10. Legacy Policies • Priority 2 – (Continued) • Having made these assessments, insurers should agree guidelines with each broker in respect of the characteristics of legacy policies which are not to be issued – Need not be on a case by case basis • Accordingly following insurers are encouraged in this respect to review and seek to accept the guidelines adopted by the leader – The leader should normally make the decision • Legacy policies should be issued where required, even where the underlying slip is of high quality – Client wishes are paramount • Priority 3 - Definition • Expired 2003 and previous short tail (other legacy items). • All the above principles remain relevant. • As a general principle priority three policies need not be produced. Page 10

  11. The Broker Approach • Approach developed by Willis and JLT independently of each other • Discussed with representatives of the Market:- • Aon, Marsh, Benfield • MRG Chairman • LMBC • LMA • Lloyds CEO • Wide range of Lead Insurers (Lloyds and Companies) • At CEO level • FSA – Senior and CC interview team members Page 11

  12. The Broker Approach –Endorsing the Code of Practice….. • Accept the Code Mechanisms to address Market Legacy: •  I.    Insurance Policy (Bureaux or Company) •  II.   Copy of Complete Slip (Insurer approved Document) •  III.  Certificate of Insurance •  IV.  Broker Insurance Document (Broker Prepared Document) • Accept and Agree FSA/ MRG Prioritisation: • Priority 1 - Definition • Business incepting on or after 01/01/05 and any unexpired policies as at 01/01/2005 (current work in progress) • Priority 2 - Definition • 2004 expired short tail and long tail which expired prior to 2005 (priority legacy policies) • Priority 3 - Definition • Expired 2003 and previous short tail (other legacy items) Page 12

  13. The Brokers approach – A Staged Approach….. • Detailed analysis of Data to establish: • Robustness of Market and Broker Core system data • Volumes within each Priority • Lead Insurer/ References • Recommend appropriate EoC per Contract: • Per Leading Insurer • Capture Client or Leader instruction at time of placement Page 13

  14. The Brokers approach – A Staged Approach….. • Write to Lead Insurers/ Reinsurers at CEO level • Outline Review process undertaken • Consideration given to lead or Client instruction • Attach bordereau containing • Lead Insurer Reference and Signed line • Recommended EoC per contract • Request approval from CEO to action recommended EoC • Time frame stated for response (4 working weeks) • Upon agreement of the above, request Underwriters to purge bureaux data base. Page 14

  15. Summary, Questionsand Close

  16. Summary • Now is the time for action! • You need to: • Adopt the Code of Practice • Set up a legacy project • Determine your legacy position (UPR reports + internal data) • Liaise with your counter-parties (primarily: brokers – leaders) • Agree & implement an action plan • Reduce your UPR numbers (FSA will be looking at this) Page 16

  17. Frequently Asked Questions • Why do I need to devote resource to this issue? • What does the panel think the FSA’s approach to this issue will be? • Who should initiate action on legacy? The broker or the leader? • Are the Unsigned Policy Reports accurate? • What does a follower need to do? Page 17

  18. Open Questions Page 18

  19. Legacy Market Session September 2006 Market: James Andlaw (Zurich), Richard Borgonon (JLT), Peter Goddard (BRIT), John Muir (Willis) Xchanging: Rob Myers MRPO: John Harvie, Steve Hulm

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