Presentation on theme: "Update on business reform"— Presentation transcript:
1 Update on business reform Market Reform ForumUpdate on business reform30 June 2005Andy BrookesLMP/Lloyd’s BPR
2 Objective: up to speed in half an hour…… Contract CertaintyLMP slipsCC ImplementationsEvidence of coverSupporting projects, including KinnectBack office electronic infrastructureAccounting and SettlementElectronic Claims FilesWhat you should be doingSpecial topic: electronic placing - Ri3KContract cert; electronic infrastructure.Where are we – ramping up. Moving from aspirational to “get it done”. Tiner speech
3 Why do this? The challenge In London sufficient talent (underwriting, broking,advisory) meets sufficient capital to create “a market”But business is mobile and…..cost of business process is too highoperational risk is too highlack of audit trail, lack of proper/timely documentationLondon does not meet increasing regulatory standardsSpitzer – transparency; Tiner – certaintySo, London (including Lloyd’s) must improve its processes toReduce costReduce riskIncrease transparency
4 The aims of market reform London’s competitive positionIncludes defending market share in traditional markets and promoting growth in new marketsContract CertaintyClarity of contract, leading to certainty of coverage, fewer disputes, less time wasted, a reduction in legal bills and improvements in downstream processing.Process EfficiencyEfficient capturing, storing and reuse of data, reduced error rates, and quicker premium payment processes. Lower costs.Service to the clientTo adopt processes that speed up the agreement of the contracts, the issuance of documentation and the subsequent agreement of claims.Global standardsTo facilitate adherence to (or creation of) accepted internationally standards for accounting, message/business flows, and technology.
5 Principles underpinning reform Reduce ‘Londonisms’: international firms must buy-in – governance roleChange requires authority and a degree of neutrality: individual firms cannot do it alone; Lloyd’s and the Associations will leadCommitment to co-operate essential, on design and implementationNetwork effects: a convoy for implementationCost / benefit case is rarely convincing on its own.FSATransparency
6 Vision for market processes Exchange of data and progress of transaction is captured in collaborative electronic systemsPlacing process built into electronic systemPlacing data to international standardsStandard slip generated by electronic system. Ditto, the policy. slip/policy distinction blursPolicy based on model wordings; changes tracked and audited electronically. Or auditable bespoke wording created.Checking in real timePlacing systems retain the data and audit trailClaims: international standard messages for data and claims management. Repositories for simultaneous accessAccounting and settlement: ditto
7 Approach measure and manage To support each stage in the life cycle of a contract:simplified, harmonised business processstandardised datastructured electronic messagescommunity infrastructure platforms - minimise interfacing costs and enforce disciplineWhy?Drive changes – including behaviour - within firms. Hence- reduce risk- reduce cost- make process transparent to market users so that they canKinnect only now has the first one.measure and manage
8 Contract certainty: FSA challenge Tiner’s speech: end to “deal now, detail later”End 2006 deadlineLit the already smouldering platformAnswering the FSA requires:clear plan pulling together componentsmeasurable progress against that planyour participation
9 Contract certainty: Market Game Plan MRG endorsed the following, for implementation by end 2006:Agree insuring clauses via a fully claused  slip or LMP policy (which also meets LMP Standards) before inceptionDefine process measurements and quality standardsUnderstand standards and apply themRaise standard through independent QAPlay back errors and publish league tables typically by reference, rather than all wordings spelt out
10 Contract certainty: the programme Key projectsImprove LMP slips CC score95% June 2005; 99% March 2006During bind: agree wordings; get checking doneCCI process30% of business end 2005; 85% end 2006Evidence of cover – within 30 daysSupporting projectsPolicy checking by XchangingModel wordingMRG sponsoring project to improve CCLegacy (not strictly CC, but close cousin)Kinnect/placement systemsConsistent with all this, but reduce compliance cost
11 Contract certainty: market progress MRG agreement onTerms and wordings have to be agreed before inception; [MRG considering the exact definition]Measurement: “a good thing”, so expect more of it. Checks prior to inception for CC. [Are are XIS checks part of CC?]Governance sortedCC Project Board in placeReporting to FSA regularlyAll firms have received CC briefingMajority registered with LMP OfficeIf not, FSA may be interested…..More detailed planning with bigger firmsTraining material in pipeline, with CII
12 Contract certainty: each firm LMP slip score on contract certaintyWill you hit 95% in June? And 99% in March ’06?CCI processHow will your firm achieve 30% of risks by end year?And 85% by end next year?Use CCI guidance materialCCI means: sort out the contract, including wording, before you scratchEither full wording or references?All lines/cob or focussed?But quality matters, not just volume (hence checks)
13 LMP Slips – wider and deeper CC score for open market: 93.5% MayUp from 92% in March, 93% in April…..June target is 95%CC score for binder LMP Slips: 95% April; the June targetMay out shortly; need to maintain performanceContinue to check 25% of Lloyd’s slips in IUA timetable set for companies; first slips receivedLMP Slip 2005published in AprilExtending to lineslipsLMP standard for lineslips published in June1 October mandate for Lloyd’s marketIncludes off-slipsSome brokers and U/Ws hitting 95%Eg changes to slip exemptions – bindersMonitoring usage of FSA headings (not in BSA)XIS rejection rates – coverholder signing before fully placed (that’s wrong, should wait till fully placed); broker’s failing to produce signing schedule for non-100% business
15 Contract certainty: checking Policy checking Xchanging: Prudential Practice RequirementsBindersTwo binder rejection reports for Q1 ‘05 issued to poorer performing firms (12 Lloyd’s; 12 brokers)QA tool re-issued in MayXIS started checking to this list in JuneResultant checking data likely in JulyOpen market – similar approach to bindersPublishing open market checks Due now -end-June; likely to be next weekRejection report for Q Q1 2005XIS start checking to this list in JulyStats in August (narrative);Better stats in Q4 2005
16 Legacy MRG agreed cross-market priority rules Rules available from the Programme OfficeInvestigating new Unsigned Policy Listin accord with new rulesRecalculate stats; agree next steps (if any)Should there be market focussed effort in particular cob?Is it worth it? Is it doable?
17 Kinnect Another customer announced in June Beaufort follows Chaucer, Cathedral, Limit/QBE in MayThree brokers and seventeen carriersNew release 1 June live as plannedEnhanced placing functionalitySlip creation by brokers in Kinnect for August inceptionsOne-way data flow initially but appetite for two-wayRisk class expansionNorth American property NowTerrorism Live – August inceptionsInternational property Q4.Further risk classes agreed for 2006Data light template for any risk class in designEndorsements now in 2006, not Oct 2005, following ITT for future supplier and review of platform development requirements
18 End Game Fully-claused placing document (using LMP Slip and policy) Increased use of model wordings and clauses (as basis for negotiation)Wording/technical staff involved in placing processEarly agreement and checking of the slip/draft policy by all parties and the back office QA functionInteraction, wordings, risk details, negotiation undertaken partly through, and all logged in, Kinnect – the “single version of the truth”Early delivery of evidence of coverage for the client – ideally before inception but within 30 days of inception – from Kinnect, so no transcription riskBinder placings evidenced by issuance of approved certificates
19 Accounting & Settlement Technical and data information: Phase 1, published in AprilWho is digesting it in your firm/supplier? Views pleasePhase 2 likely to be July (was May) – claims, ORIMRG and Project Board addressingContent, sequence and dates for what nextKey issue is risk appetite and management: dearer or slower?Don’t doubt commitment to progressHad planned to publish in Q1, will miss Q2Measurement of process will be key feature
20 Electronic Claims File XIS development workPhase 1 - Operational in FebruaryPhase 2 - Now liveOverall business process spec being signed-off later than plannedBetter end outcome for practitioners; but pressure on timelines in Q1 ‘06Phase 3 DRI design signed-offWider functionality issues; LMA, LMBC and Claims Infrastructure Project Board managingImplementation6 partnerships operational in MayRelatively low volumes – testing out electronic infrastructure57 (and rising potential) partnerships identifiedLive issuesCross market procedures and practices
21 Update on business reform Market Reform ForumUpdate on business reform30 June 2005Andy BrookesLMP/Lloyd’s BPR
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