Market Reform

1. Market Reform Solution Providers Forum, 17th March 2006

2. Purpose of this forum • Communication of ….. • Objectives • Progress/ Key messages • Future plans • Interaction • An opportunity for you to discuss reform issues together • Feedback • Not part of the governance i.e. Not a decision making forum Page 1

3. Agenda • MRG Objectives 2006 • Progress / key messages • Contract certainty • Claims infrastructure • A&S • Discussion • Date of next meeting & ideas for agenda Page 2

4. MRG Objectives 2006 Contract Certainty Accounting & Settlement Page 3

5. MRG Objectives 2006 Claims Infrastructure Other Page 4

6. Progress • Contract Certainty • Claims Infrastructure • A&S Page 5

7. Contract Certainty - highlights • LMP Slip Quality • Market target quality of slip rated at 97% for Dec 05 - met • 59% of slips were 100% compliant to the LMP checklist • Market Guidance • All LMA and LMBC members have signed off the CC Code of Practice at Board level + 85% of IUA members • Late Placements & Legacy Code of Practice published • Model Signing Provisions – agreed, subject to legal review • Lloyd’s specific • Policy checks codified (QA Tool) • Confirmation of pre-bind checks underway Market Reform Page 6

8. Contract Certainty - highlights • CC Implementation • The Market is making good progress toward the implementation of the Contract Certainty Code of Practice • This fact is recognised by the FSA • December CC statistics published • Market average (open-market + binders) @ 65% • Encouraging start – but it is only the beginning • Meeting the end 2006 target, however, remains challenging. • FSA Liaison • The FSA is currently in dialogue at senior executive level to assess what its next steps should be. • We will know by the end of March as to whether the FSA will move to consultation around implementation of rules or not. Page 7 Page 7

9. Claims Infrastructure Page 8

10. Claims Infrastructure - Summary • On track for software delivery to allow electronic claims in the Lloyd’s market using ACORD DRI • Early implementation partnerships growing • Substantial testing and implementation task this year • Will change working practices from paper to electronic for many claims practitioners • Named brokers and Lloyd’s managing agents committed to 100% of new Lloyd’s claims from Q4 2006 • IUA coming on board Page 9

11. Electronic Claim Files- a Critical Requirement • Enable parallel presentation to insurers • Reduce overall transaction time • Improve transparency of process • Underwriters can control their own work load • Allow brokers to concentrate on those claims where value is added • Claim file always available to insurers • Fundamental pre-cursor to the LMP objective of streamlined claims agreement Page 11

12. Repositories • Multiple repositories in the London market • Brokers and carriers have their own • Carriers shouldn’t have to learn different brokers’ repository dialects • Insurers’ Market Repository • To hold electronic claim files for carriers • International ACORD Document Repository Interoperability (DRI) standard to exchange documents • CLASS will manage the claims transactions. Page 12

13. Technical Governance • London Market ACORD DRI Technical Implementation Group • Virtual Cross A&S/ECF Project Board Page 13

14. Overall Scope • Deploys CLASS in the Lloyd’s market • acts as a simple workflow manager of claims transactions • Delivers an interactive Insurers’ Market Repository to carriers (a shared electronic filing cabinet) • Interactive service available to brokers subject to XIS contract • Adopts ACORD standards for the transfer of electronic documents • To/From brokers’ repositories (at no charge to brokers) • To/From carriers’ repositories Page 14

15. LMA Project Scope • Implements CLASS at Lloyd’s • To support Lloyd’s Claims Schemes • Integrates CLASS and IMR • a single electronic claims service for Lloyd’s managing agents • Does NOT change CLASS for brokers • Multiple interactive services: one for each market • LIMCLM: operational for IUA • defined and trialled for Lloyd’s IUA Project Scope • 3 month pilot of Insurers’ Market Repository • To identify any additional IUA requirements • Expected start during Q2 2006 • Does NOT • change IUA CLASS (Operational since 1987) • change CLASS for brokers Page 15

16. Implementation • Broker-driven • with Lloyd’s and IUA carriers and XCS • by classes of business and risks • programme office monitoring progress • New claims and their subsequent transactions • Existing paper based claims (legacy) to be tackled later • Early Implementations • Using today’s CLASS and repository in parallel with the enhancements • Gives early experience of electronic work and assess impact on procedures and processes Page 16

17. Early Implementers Brokers • Benfield • Cooper Gay • Guy Carpenter • Marsh • Millers • Willis • Aon (waiting for full DRI) Carriers • Aegis • Amlin • Chaucer • Faraday • Hiscox • Kiln • Limit • MAP • St Paul Travelers • MAP • Markel • Brit Class of Business Marine Hull Aviation Direct Reinsurance PI Non Marine Property Binding Authorities FinPro • Ace • AIG • Advent • Atrium • Well’n • Heritage • Aspen Re • XCS Page 17

18. Allianz Global Aerospace Munich Re Swiss Re Beazley Liberty SVB XL Re Carriers Wanting to Participate (in the pipeline) Page 18

19. Public Commitment to 100% Target Page 19

20. Next Steps • Phase 5 delivery to MAT mid-May 2006 • Delivers first version • of an integrated electronic claims service for Lloyd’s • replicating existing file electronically • with improvements where possible • companies and syndicates can see the same claim • Things change and we won’t have thought of everything • There will be more issues and enhancements Page 20

21. Accounting and Settlement Page 21

22. A&S Objectives • Rationalise and streamline business processes, specifically: • Speed up premium and claims payment • Remove reliance on paper • Reduce errors and reconciliation by capturing richer data once • Enable back office rationalisation • Implement international standards for the communication and processing of accounting & settlement data (the ACORD XML RLC standards) Three workstreams …… • Measurement & checks • Strategy - ACORD messaging • Repository Page 22

23. A&S Measurement & Checks • Introduction of benchmarking and monitoring of market performance in area of accounting, will begin with existing Stage One process • Accounting checks will be documented and published, via a QA Tool and within the design documentation • The validation and processing rules that the Market needs to work to will be available fully to both brokers and carriers • Brokers should build the documented validation checks into their systems to prevent errors at source • Improving presentation quality and reducing rejections drives down costs for all and gives potential for faster premium processing due to less rejections • Reduced reconciliation errors on receipt of signing messages due to improved data quality Page 23

24. A&S Measurement & Checks • Benchmarking & monitoring performance graphs to be available end of March • Accounting checks to be available approx end 1st Qtr – initial delivery; further delivery Q2 • Procedures for paper, repository and electronic submissions to be available by end of 2nd Qtr Page 24

25. A&S Strategy - Key Features of Approach • The broker will deal directly with the carrier(s) using electronic (ACORD) messages • The carrier(s) will have the choice to retain in-house or outsource services where they view a business benefit. Thiswill be transparent to brokers • Supports early adopters by enabling migration with trading partners as soon as they are able • Significant departures from today’s environment are: • There can be one or many service providers operating in the market • Service providers will “sit behind” the carrier • Roles will move to the appropriate responsible parties (e.g. Risk carriers become responsible for accounting splits) Page 25

26. StrategyBenefits of Approach • Promotes process efficiencies • Potential for straight through processing, with greater automation • Re-use of data captured at source reduces re-keying and reconciliation • Consistent data definition makes interfaces more efficient • Faster payment cycles and reduced administration costs • Reduces barriers to business • International data interchange standards will ensure business can be transacted consistently with other markets • Carrier adoption of non fundamental accounting removes Londonism and cost for business producers • Promotes competition • Competition amongst additional service providers should lead to competitive pricing structures and service levels • Current service provider can re-position offerings for new approach Page 26

27. Strategy Challenges • Encouraging broker and carrier investment in change and their acceptance of transition costs • Identifying early adopters and progressing take up and managing legacy. Implications of a long tail from first to last adopter • Role of service providers and smooth interaction of multiple service providers • Impact on claims agreement practices and Lloyd’s claims scheme i.e. how to run a P2P approach along with a claims scheme • Ability to continue to support reporting needs [mainly Lloyd’s] in the new environment Page 27

28. StrategyNext Steps • Update Detailed Business Design and Technical Information documents (end of 2nd Qtr 2006) • Document and design; Implementation, Transition and Legacy processes (end of 2nd Qtr 2006) • Confirm the role of trading partnerships in implementation and roll out (tba) • Identify Implementation Champions (tba) Page 28

29. Repository • Broker loads slip, LPANs and supporting documentation to the repository thereby removing paper and the inherent transportation issues • Gives insurers access to a copy of the slip and other premium submission documentation in the repository • DRI enabled repository that also enables direct loading and enquiries to: • deliver documents to Xchanging Ins-Sure Services for checking • the Utility function of the repository, without XIS processing, allows brokers to distribute documents in a controlled manner to specified parties i.e. in support of non-bureau or P2P processes • It is the same physical repository as used for ECF • DRI functionality consistent with ECF. Brokers have options on how to connect, DRI Push, DRI Pull or Direct load (or additionally email for delivery to Xchanging for checking) • Faster turnaround times for documentation, and speedier query resolution means signed lines available quicker Page 29

30. Repository • Project documentation sign off – Imminent • Build is being delivered in three releases • Release 1 • MAT Dates - June/July 2006 • Go Live dates - September 2006 • Releases 2 • TBA • Release 3 • TBA Page 30

31. WHAT MIGHT YOU NEED TO THINK ABOUT OR TAKE ACTION ON NOW? Page 31

32. Key thoughts for suppliers - Repository • Early review of documentation – when published (on website) • Consider – with your customers – how they initially wish to connect and what their path to ultimate connection would be • How and when you can deliver to assist them; how will your systems work alongside? • How you can assist your customers to participate in testing? • Are you members of ACORD? • Are you familiar with the ACORD DRI standards? • Do you understand the ACORD certification process? Page 32

33. Discussion / Questions? Page 33

34. Next meeting • Date • Ideas for agenda www.marketreform.co.uk Page 34