Update on Market Reform

1. Update on Market Reform Andy Brookes Market Reform Forum 26 October 2006

2. Market Reform Update • Contract Certainty • Back office electronic infrastructure • Accounting and Settlement strategy work • Repository for claims and A&S • ECF, CLASS@Lloyd’s, Insurer’s market repository, IUA pilot • Tools to aid A&S performance (“Stage 1”) • Forward agenda for reform – 2007+ • Headlines: • Repository rules will get sorted very soon • Publications: CC FAQs; BA and lineslip guidance; A&S strategy docs Page 1 www.marketreform.co.uk

3. Contract Certainty • Market still on target to achieve 2006 milestones • FSA Liaison: • They remain satisfied with progress to date, subject to: • Quality & robustness of data • Reduction in exceptions, including measure of value • Legacy reduction • Timetable for future activity • John Tiner speech 14 November • “Industry assessment of success” 8 January • CEO meeting and FSA response Late January • But remember: ‘December’ means late Feb/March for data Page 2

4. Contract Certainty • Other CC related activity: • MR Slip adoption • Binding Authority Slip Guidelines • Lineslip Slip Guidelines • Measurement FAQs • Representing orders on slips – “order hereon” Page 3

5. MR Slip adoption • MR Slip format published June 2006 • Adoption mandated for October 2006 inceptions • MRS in current use across market • Some brokers still amending their templates • Therefore adoption mandate put back to November 2006 • MRS being used for Contract Documentation Pilot • Issue regarding variant (CD format) outstanding • Message = press on with MR Slip adoption Page 4

6. Binding Authority Slip Guidelines • Model Binding Authority Slip templates published – August 2006 • US (LMA3018 & LMA5058) • Canada (LMA3020) • Ex-US & Canada (LMA3019) • A Marine model agreement exists (LMA3005) • A new version is under development by LMA • When completed a revised slip template will be prepared • Slip Guidelines now prepared for Binding Authority Agreements • Consistent with MR Slip approach & above model templates • Agreed cross-market & ready for publication (by tomorrow!?) • Can be used immediately • Mandated usage from 1 February 2007 • Also for line slips • Templates for first time Page 5

7. Measurement FAQs • What is the issue? • It has become clear that organisations are interpreting the CoP & Checklist in different ways • This results in inconsistency of measurement • What are we doing? • Clarifying the recommended approach wherever possible (via FAQs). Publication imminent • Reviewing the Code of Practice/Checklist for consistency for end 2006 • Examples • Using own checklist: audit trail • Late placements: a fail? Up to you • Service of suit: not required for CC pass, but do it anyway Page 6

8. Lloyd’s Legacy Policy Analysis Q3 2006 Page 7

9. Legacy • Priority 1 items continue to be added to the Unsigned Policy Report even where there is no intention to produce a policy • Change request needed to allow current items with AEC not to appear on LUPR • Agreed by LMBC (Concert) • Agreed by Lloyd’s (& funding) • Agreed by LMA (XRB) – subject to one issue • Should be commissioned shortly, and be in place before year end • Small reduction in priority 2/3 items encouraging as the XIS Content Management (purging) facility only recently available • “Launch pad”: Q4 data should improve sharply • G6writing to brokers with legacy reduction proposals • Brokers writing to managing agents with legacy reduction proposals • LMA and LMBC likely to follow G6 line Page 8

10. Contract Documentation Pilot • Checking contract up front • Published set of checks to be completed before the contract is entered into. Rationalised set of checks in pilot QA tool • Choice of who does the checks • Allow each managing agent to perform the checks themselves or to place reliance on a leader or a suitable service provider • Contract ready to use • At minimum to produce and issue a client copy within 30 days • Discretion on branding • Allow managing agents and brokers to agree on branding of the client copy, provided it includes agreed Lloyd’s branding. • Validation by Lloyd’s • All pilot risks should be submitted Page 9

11. Contract Documentation Pilot • Broad support for concept • Limited volumes to date • Broadening classes added to pilot to increase volumes • International property; D&O; other liability • Slip templates an issue plus general lack of awareness • MR Slip addendum – under discussion • Proposed changes required to be made to a Market Reform slip for pilot • Work underway to raise awareness and resolve blockers • Significant committed volumes by EOY (st. addendum sorted) • QA tool • Third phase (of 4) of QA tool was released 2 October • Rest of COBs due to rollout end of October; and for BA. On track Page 10

12. Accounting and Settlement strategy • A&S P2P Overview Design • A&S Detailed Premium Processes • A&S Detailed Claims Processes • A&S Detailed Technical Document • Had intended to publish end August. Held off to enable all to be published at same time. • Franchisor Data Requirements • Required for any Lloyd's managing agent to go P2P. Had planned for end-Sept. Still working on it with managing agents. Page 11

13. Documentation Key Points • Concentrates on End Vision – full implementation of electronic processing using ACORD messaging • Deliberately bold • Few caveats why difficult or slow to be realised • Not prescriptive on implementation paths • Optional implementation paths for trading partners to select • Will influence MRG end-vision work and hence agenda for 2007 Page 12

14. Key Issues • Use or otherwise of “post placement” message – use of such a message will be optional for implementers of P2P framework • Claims processing – documentation illustrates how approach to A&S and claims processing can be consistent with hubs and existing claims schemes • Statistical and regulatory data – Lloyd’s is working with managing agents in this area Page 13

15. Use of the Documentation • Highlights process flows and message types • Not a formal technical design – it is for each firm to produce their own • Set in the context of the other Reforms, eg IMR LPAN, firms should: • Assess impact on current process and evolve new ones • Investigate message transport mechanisms • Consider document repository interoperability and its implications • Familiarise with referenced ACORD documentation • Develop a clear strategy for business units and systems to improve A&S processes Page 14

16. ECF • Successfully delivered and now live • 111 early electronic claims partnerships underway • Using the live system, even though paper file as well; 1200 new claims; 2000 transactions • IUA pilot – extended to end-Q4 • Contractual framework being sorted • Key to initial up take; more firms committed to 100% applicable new claims • When it comes out, sign it! • Remember this is the initial delivery • Bug fixes in November; more to come in Q1 next year (Binders) • Implementation info on MRPO website • “Optional” – really? • Ramp up major priority for Q4 ’06 and 2007 Page 15

17. ECF • Partnerships • Firms decide partnerships by class of business / trading relationships • With Lloyd’s and IUA carriers and XCS • MRPO is monitoring progress • New claims and their subsequent transactions • Existing paper based claims (legacy) to be tackled later • System Processes and Procedures (SP&P) • Some areas are currently excluded from scope • February CR’s will address some of these e.g. Binders; Direct Reporting • See SP&P for full list of areas in scope Page 16

18. ECF Processes & Procedures in MooD • Reformatting of the SP&P doc to make it more easily accessible • MooD is a business process modelling tool used to support this work • Allows process maps to be published (& navigated) on the web and: • Replace texts with diagrams (processes) where possible • Allow users to ‘drill down’ from high level info to more detail • Place information in context • Display information by role e.g. applicable to Broker only • Once ready the ECF Processes & Procedures Guide will be published to the Market Reform website (access is free) Page 17

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22. A&S – the ‘electronic van’ • Successfully delivered and now live • E-mail and direct load • 200+ submissions per week already • DRI in testing with four brokers. Live date 7 November • Contractual framework • Ditto ECF • Further phases • ECF and A&S together – one repository • November (bug fixes); February and now May (utility repository) • Implementation info on MRPO website • Associations and MRG pushing ramp-up Page 21

23. Resources to support the raising of standards in accounting submissions • Delinking possible ahead of end year inceptions for Lloyd’s business • Data on performance • ‘Checks’ – business rules to describe the data • Eg “This number for last 3 years of account” • LPAN • Taxation • Treaty Statements • Accounting information • IUA checks will soon be added To help brokers get it right first time Page 22

24. MRG forward looking agenda • 2007 laminate • Keep doing the “blindingly obvious” • FSA will not go away on CC and legacy • New infrastructure: ramp-up use; oversee changes • What else? • Talk to your Association and MRPO • Use new discussion forum on MRPO website Page 23