MRG Endorsements Initiatives Rob Campbell (for Stuart Dean), 23 January 2008

1. MRG Endorsements Initiatives Rob Campbell (for Stuart Dean), 23 January 2008

2. Content Background Project Summary Approach to delivering Endorsement initiatives • Market Reform Contract Endorsements (MRCE) • Electronic Endorsements roll-out of (e-mail) revised process Benefits/success/risks and issues – “business case” Next steps

3. Background • Endorsement is generic term for all mid-term contract changes from simple vessel name change to adding a construction project for Olympic development in London • Endorsement is a binding agreement on insurers and policyholder and has to be evidenced in writing • There are on average 3 endorsements for every contract, they can be administratively ‘heavy’ and in the London Market, many agreed by a face-to-face ‘broke’ • Clients can regard them as ‘hygiene’, ranking them below policy issuance and claims negotiation in importance/value • Goal is therefore to reduce time and effort spent of agreeing endorsements and reduce turnaround time from the insured’s instructions to confirmation to the insured of agreement

4. Approach to delivering Endorsements initiatives • The work has been split into three main initiatives: • The introduction and implementation of Market Reform Contract – Endorsements (MRCE) standards to mandate the form and use of Endorsement documentation and agreement methodologies. This was published 3/12/07 for adoption as the Market Standard by 31 March 2008 • The introduction and implementation of revised remote agreement process using email agreement and other messaging communications (e-MRCE). This will start in Q4 2007 and continue through 2008. • To co-ordinate endorsement activity with other Market forums with particular emphasis on input and adherence to ACORD standards for Endorsements and compliment the work of the MRG/LMA Electronic Placing Group. This will be accomplished via the Endorsements Steering Group as part of its general remit.

5. MRCE – Key elements • Why Guidance • No prior definitive guide to Endorsements • Standardise the Endorsement format • Formal launch of new style documentation • Benefits • Supports the principles of Contract Certainty by speeding up the prompt provision to the insured of contract change documentation • Reduces the effort required to handle contract endorsements • Encourages the document format to be consistent with that used in the original contract (MRC) • Provides an unambiguous Settlement Due Date default position • Facilitation • Sets out that the revised documentation can streamline the submission and agreement of non-complex contract changes • Can be used as part of an electronic process for submission and agreement

6. ‘Old’ Honeycomb style

7. Cover Note Addendum

8. Market Reform Contract Endorsement (MRCE) CONTRACT ENDORSEMENT UMR: B123412345678 Endorsement Ref: 001 Type: All Risks of Physical Loss or Damage Reinsured: ABC Insurance Ltd Original Insured: XYZ Ltd The contract is amended as follows: Effective Date: 00.01 hours 1 August 2007 local standard time as the location of the property insured Situation: Amended to include the insured’s location at: 1 Lime Street London EC3M 7HA Sum Insured: GBP 100,000.00 any one loss in respect of the above location Premium Additional Premium due in respect of these changes is GBP 100.00 Tax payable by insured 5% UK Insurance premium Tax and administered by Insurers All other terms and conditions remain unchanged. Risk Identification and Endorsement Details section - Additional details may be included Contract Change(s) Section using MRC format and headings

9. Market Reform Contract Endorsement (MRCE) CONTRACT ENDORSEMENT UMR: B123412345678 Endorsement Ref: 001 Type: All Risks of Physical Loss or Damage Reinsured: ABC Insurance Ltd Original Insured: XYZ Ltd The contract is amended as follows: Effective Date: 00.01 hours 1 August 2007 local standard time as the location of the property insured Situation: Amended to include the insured’s location at: 1 Lime Street London EC3M 7HA Sum Insured: GBP 100,000.00 any one loss in respect of the above location Premium Additional Premium due in respect of these changes is GBP 100.00 Tax payable by insured 5% UK Insurance premium Tax and administered by Insurers All other terms and conditions remain unchanged. Contract Administration and Advisory Section (mandatory where applicable) Settlement Due Date default position (always include on APs) Agreement Section – GUA Example Agreement Boxes – ensure date of agreement is captured

10. MRCE Structure

11. + Cover NoteAddendum Honeycomb MRCE MRCE Summary • Logical extension to MRC – consistent format, client documentation • No prior definitive guide to Endorsements • Supports the principles of Contract Certainty by speeding up the prompt provision to the insured of contract change documentation • Reduces the effort required to handle contract endorsements • Open Market, *Line Slips and *Binding Authorities* Forthcoming attraction!

12. Endorsement process map – Open Market

13. Endorsement process map – Binding Authorities (SCHEDULE CHANGES)

14. e-MRCE Project Approach • Primary target audience - the vast number of easy (non-complex) endorsements • As many as possible as quickly as possible • Attaching an MRCE to an e-mail or message for agreement and return to the broker • Formal adoption criteria to join initiative • Measurement • E-mail being used as an interim stage (minimum entry requirement)

15. Adoption • Assign a Project Champion • Actively promote the change in culture and behaviour • Determine which technology (if in doubt start with e-mail) • Start in an easy place • Single agreement endorsements • Contracts with ‘regular’ endorsements • Know the process e.g., dealing with “Urgent’s” and slow responses • Workflow considerations • Changing roles and responsibilities in the organisation • Simple measurement – collated by MRO

16. Benefits Clients • Align the relative low value that clients place on brokers and insurers handling easy (non-complex) Contract Endorsements with the actual expense to the Market • This means embedding a more cost effective and efficient process for all • Clients should benefit from quicker turnaround of agreement process and therefore receive Contract documentation earlier – supports achieving Contract Certainty Regulator • Code of practice states “Contract Changes need to be certain and documented promptly”

17. Benefits Insurers • Allows insurers to apply “triage” to incoming endorsements • Free up box time for more important , significant, productive and valuable business • Free up “line” underwriters time by matching materiality and value with appropriate level of insurer personnel and personnel location • “Following” markets see full audit trail and could be much more easily notified when not an Agreement Party • Much easier to get “agreed” endorsements into insurer’s systems • Use the consistency of presentation and data to integrate into insurer’s systems

18. Benefits Brokers • Reduce time spent on delivering endorsements to insurers • Provides more control and clearer accountability • Reduces hand-off between “Account Handlers” and “Market Brokers” • Simplifies onward confirmation of agreement to the Contract Change(s) to the client • Allows for parallel insurer agreement process which will speed up endorsement agreement • Affords the technology opportunity from the use of consistent presentation/data to integrate into broker’s systems • Encourages confidence in electronic trading in the London Market and its growth and development

19. e-mail template • From: Dean, Stuart Sent: 30 July 2007 10:48To: 123 underwriting • Subject:ABC Insurance Ltd / B123412345678 / End001/lead • Effective Date: 1 August 2007 • Your Ref: ASDF1234 • Please find attached an endorsement request from ABC Insurance Ltd. As Slip Leader you are being requested for a formal response to this endorsement. Response request: • Agree  • Decline • Request negotiation • If your response is "Agree", please send us by e-mail your agreed response and Leader response to the GUA details below: • GUA Details:         GUA present on slip:  Yes • Leader Response:  • Part One:                Y/N                                   • Part Two:                  Y/N                                       • Part Three:                Y/N                             • If you have any questions, please contact the undersigned.   ACORD Standards

20. e-MRCE Summary • Email : a quick win and a step towards ACORD messaging • Benefits • Improves efficiency, lowers the costs and speeds the processing • Promotes early, contemporaneous visibility of endorsements for followers • Non-complex – “endorsements suited to email” • Existing technology, existing business practices • Cultural + process change • workflow, central email addresses • Measurement • Base line + Monthly / Broker + Insurer • Commercial and legal issues • Technology choices • Email, print+scan • Optional supporting technology MRCE attached to a standardised email

21. Benefits Matrix for MRCE and Remote Agreements

22. Benefits Accumulation Data Integration Application/ Platform Benefits Accumulation E-mail agreement E-mail delivery MRCE Face to Face Implementation phase Benefit increments not to scale!!

23. What are the risks and issues? Key Risks and issues Resolution/mitigation • Have to change the Culture and Behaviour • No formal written guidance for Endorsements other than Contract Certainty code of Practice statement • Varying views from Brokers/Insurers on method of deploying electronic endorsements can act as barrier to take-up • No common infrastructure or (placing) systems platform that facilitates endorsement agreements • Endorsement numbers are not currently officially monitored. For proper and accurate measurement of the penetration and success of the initiative, market-wide endorsement statistics will be required and centrally monitored • Requires commitment from each organisation to adopt and adhere to new practices and procedures • Introduce the MRCE • Being mitigated by Implementation Pack guidance and the work of the Electronic Placing Steering Group • Standards and common processes from usage scenarios. Service Providers are already building Endorsement solutions • Simple measurement approach for now; count what is sent “remotely” and what is agreed “remotely”

24. Next Steps • December 2007, January and February 2008 • Finalise “starter” pack • Definitive e-mail guidance • Overview of remote agreement processes • Adoption and implementation considerations • Measurement • Market guidance and presentations early 2008 • Insurer Briefings • Broker Briefings • Build-up market endorsement framework via cross-market representation for: • Usage scenarios – Practitioners • Messaging standards – Associations/ACORD • Build systems around market framework – Technology providers

25. MRG Endorsements Initiatives Rob Campbell (for Stuart Dean), 23 January 2008