Reform Update Market Forum, 22 February 2006 James Willison

Contract Certainty The Market is making good progress toward the implementation of the Contract Certainty Code of Practice –This fact is recognised by the FSA –Data on the Market's achievement of the first target will be available in March –Based on broker data received thus far we anticipate that this target will be achieved Meeting the end 2006 target, however, remains challenging. –Further guidance to assist the Market in moving towards this target will be released by the end of February:  Model Signing Provisions  Late Placements 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. Contract Certainty Page 1

Accounting & Settlement Page 2 Contract Certainty Market target quality of slip rated at 97% for Dec 05 met 59% of slips were 100% compliant to the LMP checklist All LMA and LMBC members have signed off the CC Code of Practice at Board level QA tool pre-bind rationalisation Legacy Code of Practice published 17th February Contract Certainty Page 2

Accounting & Settlement Page 3 Electronic Claims File On track for software delivery to allow electronic claims in the Lloyd’s market 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 Q IUA coming on board Electronic Claims File Page 3

Electronic Claims File SP&P on target for completion by end of Q1 (includes market input from managing agents, brokers, XCS, XIS and MRPO). London Market ACORD DRI Technical Implementation Group progressing well with work on manual for electronic transfer of documents using (ACORD DRI) international standards for end Q Plan for common claims procedure in London (Q1 update). Electronic Claims File Page 4

Accounting & Settlement Page 5 Electronic Claims File Deliver Lloyd's electronic infrastructure into market testing (Q2). On target to start MAT on Monday 15th May Press Release on firms committing to process 100% of new claims electronically due out next month. Will include a minimum of four large brokers and nine Lloyd's Managing Agents (with XCS support). LMA presentation to its members on Tuesday 21st March, LMBC presentation to its members on Thursday 20th April (both Old Library). Next forum Wednesday 22 nd March Electronic Claims File Page 5

Accounting & Settlement The Way Forward John Wingrove

Accounting & Settlement Page 7 Restatement of A&S objectives Workstreams –Measurement –Repository –Radical/ Strategy Questions Agenda

Accounting & Settlement Page 8 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

Accounting & Settlement Page 9 Measurement Repository Strategy/ Radical Three A&S Workstreams

Accounting & Settlement Page 10 Measurement Introduction of benchmarking and monitoring of market performance in area of accounting, will begin with existing Stage One process –Covers both the timeliness and quality of broker submissions Accounting checks will be documented and published, via a QA Tool and within the design documentation –MRPO documents for measurement and strategy/radical will include procedures for submissions, replacing elements of LPSO and LPC manuals We will strive for quick wins in performance and adoption of A&S principles ahead of full A&S implementation

Accounting & Settlement Page 11 Measurement Benefits and Implications The validation and processing rules that the Market needs to work to will be available fully to both brokers and carriers Updated documentation will also assist those not familiar with London market, especially the newer overseas brokers 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 Potential for faster premium processing due to less rejections Reduced reconciliation errors on receipt of signing messages due to improved data quality

Accounting & Settlement Page 12 Measurement Timescales Benchmarking & monitoring performance graphs to be available during March Accounting checks to be available approx end 1 st Qtr Procedures for paper, repository and electronic submissions to be available by end of 2 nd Qtr

Accounting & Settlement Page 13 Measurement Repository Strategy/ Radical

Accounting & Settlement Page 14 Repository MRG and A&S PB have approved Xchanging as supplier Broker loads slip, LPANs and supporting documentation to repository thereby removing paper (and vans) Carriers can gain access DRI enabled repository that also enables direct loading and enquiries to: –deliver documents to Xchanging Ins-Sure Services for checking –deliver documents directly between brokers and carriers i.e. in support of non-bureau or P2P processes

Accounting & Settlement Page 15 Resultant Bureau Premium Submission Processes

Accounting & Settlement Page 16 Repository Benefits and Implications Faster turnaround times for documentation since “van time” is eliminated. No “van time” and speedier query resolution means signed lines available quicker DRI functionality consistent with ECF. Brokers have options on how to connect, DRI Push, DRI Pull or Direct load (or additionally for delivery to Xchanging for checking) Gives insurers access to a copy of the slip and other premium submission documentation in the repository Utility function of the repository, without XIS processing, allows broker to distribute documents in a controlled manner to specified parties

Accounting & Settlement Page 17 Repository Timescales Project documentation sign off – Date TBA Build time - this is being delivered in three releases Release 1 –MAT Dates - June 2006 for release 1 –Go Live dates - September 2006 for release 1 Releases 2 & 3 tba

Accounting & Settlement Page 18 Measurement Repository Strategy/ Radical

Accounting & Settlement Page 19 Strategy / Radical Review instigated by the MRG The A&S Board confirmed they were committed to the vision of adopting ACORD standards for messaging The Board short listed eight implementation options and carried out analysis and evaluation They concluded the Market should adopt a model based on a global point to point solution, allowing each carrier their choice of service provider. In essence this is today’s non- bureau process The MRG requested that the model should be proposed to Market Associations for agreement. Market Association responses favourable – “Move to next stage”

Accounting & Settlement Page 20 Strategy / Radical 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 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)

Accounting & Settlement Page 21 Strategy / Radical Benefits of approach - Brokers Promotes process efficiencies –Potential to implement straight through processing –Re-use of broker keyed data reduces re-keying and reconciliation –Consistent data usage makes supporting clients more efficient –Validation at source reduces rejections and frictional costs –Faster payment cycles and reduced administration costs Reduces barriers to business e.g. removes Londonism’s –International data interchange standards ensures business can be transacted consistently throughout the world –Movement of non fundamental accounting splits reduces administration costs –Deferred treated as individual instalments, released as funds received

Accounting & Settlement Page 22 Strategy / Radical Benefits of Approach - Carriers No large investment in central infrastructure envisaged Promotes process efficiencies –Allows 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 received from around the world –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

Accounting & Settlement Page 23 Strategy / Radical Challenges Encouraging broker and carrier investment in change and their acceptance of transition costs Identifying early adopters and progressing take up Legacy business processing between trading partners adopting at a different speed Implications of a long tail from first to last adopter Accreditation of service providers and smooth interaction of multiple service providers Impact on other initiatives and business relationships, such as A&S Repository, Claims, XCS, Contract Certainty Impact on claims agreement practices and Lloyd’s claims scheme Ability to continue to support reporting [mainly Lloyd’s] needs in a new environment

Accounting & Settlement Page 24 Strategy / Radical Next Steps Continue to raise general awareness and validate the proposals more widely (December 2005/January - February 2006) Develop plan for service provider accreditation (1 st Qtr 2006) Update Detailed Business Design and Technical Information documents (before end of 2 nd Qtr 2006) Document and design Implementation, Transition and Legacy processes (before end of 2 nd Qtr 2006) Confirm the role of trading partnerships in implementation and roll out (tba) Identify Implementation Champions (tba)

Accounting & Settlement Page 25 Now Or offline to: Measurement Brian Austin A&S Repository Elaine Nutton Radical/ Strategy Paul Tuvey Questions