1. Accounting & Settlement The Way Forward

2. Accounting & Settlement Page 1 Restatement of A&S objectives Work streams commissioned by MRG –Repository –Strategy –Measurement Questions Agenda

3. Accounting & Settlement Page 2 Restatement of 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 –Introduce flexibility - process the way the business requires rather than the business being driven by constraints Implement international standards for the communication and processing of accounting & settlement data (the ACORD XML RLC standards) Provide a firm base for the future

4. Accounting & Settlement Page 3 Repository Strategy Measurement Three A&S Workstreams

5. Accounting & Settlement Page 4 Repository MRG and A&S Project Board commissioned Xchanging as supplier with Market as paying customer Builds on ECF, The Insurers Market Repository Broker loads slip, LPANs and supporting documentation to repository thereby removing paper (and vans)

6. Accounting & Settlement Page 5 Repository Benefits and Implications Faster turnaround times, initial delivery and query resolution Consistent with ECF, brokers have options; DRI Push, DRI Pull or Direct load (or email for delivery to Xchanging for checking) Carriers have access to slip and other submission documentation Carriers can be notified as a slip is loaded allowing signed lines to be communicated sooner Utility function allows users to distribute documents to specified parties

7. Accounting & Settlement Page 6 Repository Timescales Being delivered in three stages: Release 1 –Live E:mail and Direct Load –Pilot DRI November 06/Go-live slipped from Nov to early December –Some 5.800 LPANs have been submitted as at 15 th Nov –Average 400 per day –Anticipate increase in activity for the 2007 renewals Release 2 –Planned MAT Feb 07 –Includes application of supplied ACLs, the store of all document metadata, ability to close simultaneous settlements Release 3 –Planned MAT May 07 –Includes the utility area plus the ability to close treaty statements

8. Accounting & Settlement Page 7 Repository Strategy Measurement Three A&S Workstreams

9. Accounting & Settlement Page 8 Strategy Review commissioned by the MRG to analyse strategic options for A&S in the London Market following stall due to: – implementation complexity and – rising estimated cost of changing central infrastructure. The A&S Board confirmed they were committed to the vision of adopting ACORD standards for messaging Recommendation was to adopt a global point to point solution, allowing carrier choice of service provider. In essence this is todays non-bureau process Market Association responses – Move to next stage – ie complete design documentation

10. Accounting & Settlement Page 9 Strategy Key Features of Approach The broker will deal directly with the carrier(s) The carrier(s) will have the choice to retain in-house or outsource services where they view a business benefit. This will be transparent to brokers Supports early adopters by enabling migration with trading partners as soon as they are able Mirrors the Electronic Claims File implementation of broker to carrier trading partnerships Significant departures from todays 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)

11. Accounting & Settlement Page 10 Key Features

12. Accounting & Settlement Page 11 Strategy Benefits of Approach No large investment in central infrastructure envisaged Promotes process efficiencies –Allows straight through processing, with greater automation, –Re-use and consistent use of data –Faster payment cycles and reduced administration costs Reduces barriers to business –International data interchange standards (ACORD) will ensure business can be received from around the world –Carrier adoption of non fundamental accounting removes Londonism and cost for business producers –Deferred treated as individual instalments, released as funds received 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

13. Accounting & Settlement Page 12 Recently Published Design Documentation on MRPO Site The Business documents are intended to help firms by spelling out the process flows and message types by which the end vision can be achieved The Technical documents are intended to support the above and include detailed information to help implementations across the market to be completed in a consistent manner. In more detail these documents contain…

14. Accounting & Settlement Page 13 Recently Published Documentation – Business Documents Letter from Chair of A&S Board –A covering letter to the document sent from the chair of the A&S board on behalf of MRG Index Document –Allowing reader to ascertain quickly which information is included in which of the series of documents Overview Document –Shows at high level the entire end vision for A&S incorporating both premiums and claims outlining the difference between todays processes and those envisaged for the end state Detailed Premium Flows –Takes this information down to a lower level of information and explains how each transaction type would flow, which messages in what sequence etc. This also covers generic processes such as queries and rejections Detailed Claims Flows –As above but for claims. This also covers how claims would be agreed as it was felt to be a necessary requirement to include Claims agreement when changing the processes by which Claims are accounted and settled [

15. Accounting & Settlement Page 14 Recently Published Documentation Technical Section 1Message Process Flows –Contains UML sequence diagrams to support the end state and transition states for Premiums Claims and Outward reinsurance Section 2Message Structure –Contains details of the structure of the messages. It identifies the hierarchy of the messages, how messages are referenced and cross refer to each other Section 3Message Data Specifications –Contains information surrounding the data principles used within the messages, an introduction to the detailed data specifications and the approaches that have been taken to validation Section 4Message Management –Contains information required to manage, issue and control messages as they are transported between trading partners Data Spreadsheet –Identifies the data usage requirements for each business message the completion and validation instructions These are not to be viewed as a technical design but as a central resource of information that can assist implementers in creating their technical designs in a way that should be interoperable with their trading partners

16. Accounting & Settlement Page 15 What this document set is/does A set of documents that have been created by market business and technical groups with publication agreed by the A&S Board and MRG Concentrates on the end vision – Full implementation of electronic processing using ACORD A document set that will allow organisations to –Assess the impact on current business processes and start to evolve new ones –Develop a clear strategy for business units and systems to improve A&S processes

17. Accounting & Settlement Page 16 What this document set is not/does not Formally accepted (explicitly signed off) design Prescriptive on implementation paths; there are a number of optional implementation steps which trading partners could take, rather than moving straight to the end vision approach A formal technical design; individual market participants will have to complete their own technical design which will vary depending on their own systems.

18. Accounting & Settlement Page 17 What next Lead implementers are a key feature of successful market reform It is for leading market firms to decide the pace at which the market should move in the direction of this end vision. This documentation includes only limited thinking on implementation issues and are included only to assist early implementers, but it is for them to work out how best to address these issues.

19. Accounting & Settlement Page 18 Repository Strategy Measurement Three A&S Workstreams

20. Accounting & Settlement Page 19 Measurement Now Availalable Benchmarking & monitoring performance graphs at a market level Accounting, procedural and tax checks, covering Lloyds and IUA Procedures for LPAN completion All of the above can be found on market-reforms.co.uk Working with XIS to ensure brokers receive play back of references of checks failed

21. Accounting & Settlement Page 20 Now Or offline to: MRPO via accandset@LMPoffice.com Questions

22. Accounting & Settlement Page 21

23. Accounting & Settlement Page 22 Example Graph – De-linking Take Up

24. Accounting & Settlement Page 23 Example Graph – Technical Account Timeliness