CC sponsors and PMs John Harvie, Steve Hulm MRPO 25 April 2007

Market Reform Page 2 Contract certainty - Headlines Performance continues to exceed targets – Feb brokers’ achievement rate – 95% Guidance consolidation task is nearing completion Wide consultation across the industry just completed and has received high levels of support (including from the non subscription market). It has also been reviewed by AIRMIC and the CII, both are supportive. Seeking guidance from the FSA on status of revised guidance and will publish it with reference to this status. We are planning to continue to update the FSA via with progress and latest data for the remainder of this year. Repeat of market survey will take place in August / September We believe that by September the market will have demonstrated conclusively that CC has moved to business as usual and consequently we are likely to disband CCSC and the other CC related governance groups at that point.

Market Reform Page 3 Summary of the guidance re write Plan to publish a revised contract certainty code of practice in May. Consolidates 11 documents into 1 Modifies the definition to remove the inconsistency and confusion arising from the use of inception date as part of the old definition, removing the need for separate late placement guidance; Brings the definition, principles and guidance into a consistent structure; Creates principles that are, as far as possible, timeless. Reference to targets, service levels or specific processes has been removed from the principles; Provides clarity on how organisations may choose to demonstrate performance (which can encompass 100% checking as well as sample audits and process controls); Makes the code generic (i.e. removes London specific terminology) and hence applicable to the whole UK general insurance industry Deals with the actions required when the principles of contract certainty are not met. This provides a link between contract certainty and the legacy of un- issued contract documentation; Defines the scope of contract certainty.

Market Reform Page 4 The new CC definition Contract certainty is achieved by the complete and final agreement of all terms between the insured and insurer by the time that they enter into the contract, with contract documentation provided promptly thereafter.

Market Reform Page 5 The structure of CC

Market Reform Page 6 Demonstrating performance C:Insurers and brokers must be able to demonstrate their achievement of principles A and B. Examples of how contract certainty can be demonstrated include: Verification against a checklist Sample or File audits System or Process controls

Market Reform Page 7 Where the principles have not been met G:The insurer and broker (where applicable) have a responsibility to resolve exceptions to any of the above principles as soon as practicable and without undue delay..

Market Reform Page 8 The scope of contract certainty This guidance applies to general insurance[1] contracts either entered into by an FSA-regulated insurer[2], or arranged through an FSA-regulated intermediary.[1][2] [1] See FSA definition of general insurance. Insurers and brokers must be able to justify the criteria used to establish any exemptions from this scope. [1] [2] The guidance applies equally to reinsurance, insurer may also be read as reinsurer and insured as reinsured throughout. [2]

Market Reform Page 9 Plan for completion Issue final draft guidance to Associations to obtain feedback from members. Early April; Issue final draft guidance to obtain feedback from non-subscription market. Early April; Deadline for feedback 13th April CCSC review draft 17th April CCPB/Non-Subscription group review feedback & sign off guidance for publication. End April Issue finalised guidance to FSA for comment and arrange to brief FSA representatives. end April; MRG /CCPB sign off guidance for publication. End April; Develop communications for associations. Early May Develop market communication pack. Early May; Publish. May; and Brief implementation and communication exercise. Mid May to mid June.

Market Reform Page 10 Legacy Lloyd’s progress continues –Volume of existing Legacy policies in the Lloyd’s Market in February 07 was 181,222, which was a decrease of 5% compared to January The index score is 79% compared to Lloyd’s baseline Legacy volume taken in July Company market figures now available –IUA Circular 044/07 (26th March 2007) confirmed the significant Legacy activity amongst IUA members, together with the varying risk based approaches that members are taking to meet their particular requirements. Typically these include: –Commencing with Priority 1 to tackle major potential exposures first –Maintaining a ‘leader equivalent’ position on policy requirements, based on original line conditions –IUA is now giving further consideration to methods of measuring progress that can be more meaningful for both the market and the FSA than the Xchanging UPR.