LLOYD’S INITATIVES IN CLAIMS HANDLING International Federation of Adjusting Associations Annual Conference, London Market, 30 April 2009 “Global Best Practice for Loss Adjusting” Kent Chaplin Head of Claims Lloyd’s

© Lloyd’s2 Agenda 2008 results Lloyd’s profile Why claims? Claims Best Practise Experts! Future claims strategy In closing…

© Lloyd’s3 Lloyd’s 2008 Results

© Lloyd’s Highlights Resilience in testing times Market discipline maintained - strong risk management and effective oversight Solid financial position with strongest ever Central Fund Global reach extended and strengthened Business initiatives continuously improved Lloyd’s Act updated Market ratings affirmed

© Lloyd’s5 Strong results in challenging economic conditions Gross written premiums£16,366m£17,985m Combined ratio84.0%91.3% Investment return£2,007m£957m Profit before tax£3,846m£1,899m Return on capital (pre-tax)29.3%13.7% Source: Lloyd’s pro forma financial statements, Dec 2008

© Lloyd’s6 Lloyd’s profile

© Lloyd’s7 Market profile Source: Lloyd’s 2008 Annual Report Class of business splitGeographical split

© Lloyd’s8 Lloyd’s vision: building the platform of choice “To be the platform of choice for insurance and reinsurance buyers and sellers to access and trade both specialist and large property and casualty risks” Lloyd’s produces a rolling Three-Year Plan, which sets out: a package of benefits for an underwriting business operating at Lloyd’s how we maintain and develop an attractive trading platform for brokers and clients the objectives that we need to meet in order to deliver the benefits and achieve our vision

© Lloyd’s9 Lloyd’s five key operating benefits 1PERFORMANCE FRAMEWORK A performance management framework which supports the achievement of superior operating returns 2 CAPITAL ADVANTAGES Capital advantages in which the benefits of mutuality outweigh the costs 3 SECURITY AND RATINGS Security and strong market ratings capable of attracting specialist insurance business 4MARKET ACCESS Access to major markets supported by a global brand and licence network 5OPERATIONS AND PROCESSES Operations and processes supporting cost-effective, efficient transaction of business Our vision is being delivered through the five principle benefits of operating in the Lloyd’s market

© Lloyd’s10 Why claims?

© Lloyd’s11 The value of claims Effective claims management is at the heart of Lloyd’s

© Lloyd’s12 The changing environment is placing greater pressure on claims Claims Management Increased government intervention ‘Liquidity claims’ Sub prime/ FINC Increased claims frequency & type Broker requirements & business models Natural catastrophes Ike/ California fires/ UK floods Policyholder expectation & performance indices

© Lloyd’s13 Increasing claims frequency “Softer” underwriting environment Economic downturn Potential for a “perfect storm” of claims Source: XCS, as at 31/12/08

© Lloyd’s14 CATs and Major Losses Lloyd’s is a CAT exposed market, particularly to US windstorm losses Managing the underwriting is key, but so is managing the outcome in the event of major events Lloyd’s priorities in the even of a major or CAT loss are to: Ensure that the claims response is prompt and fair Understand the potential exposure as soon as possible Source: XCS, as at 31/12/08

© Lloyd’s15 Claims best practise

© Lloyd’s16 Delivering our core customer promise to pay valid claims promptly Protecting the New Central Fund, Lloyd’s brand, international licences Disciplined cycle management Contributing to business growth by attracting new customers Admission to new territories/ classes of business Benchmarked against global competition What does “claims performance” mean?

© Lloyd’s17 An enforceable performance framework Managing Agents free to choose how to demonstrate position against Standards Evaluation by experienced claims account managers underpinned by commercial common sense Remedial action shaped by materiality of the risk Lloyd’s Claims team customer focus - flexibility and commerciality Raising the bar across the market The Performance Framework

© Lloyd’s18 Claims Management Principles Claims culture: embedded claims philosophy from top to bottom Training & development: appropriate skills & resources Proactive processes: efficient, timely case handling Documentation: appropriate audit trail Reserving: consistent, timely, accurate Expert management: disciplined procurement, proactive management Performance measurement: appropriate, regular Information sharing: effective & co-operative market claims agreement process

© Lloyd’s19 Lloyd’s FPD Claims: technical services Lloyd’s FPD Claims team roles: Effective leadership of major losses Managing key stakeholder relationships Generating informed and positive media coverage Creating claims handling infrastructures for overseas platforms Resolving market disputes

© Lloyd’s20 Electronic Claim Files ECF has created far better visibility around claims processing and payment Not yet the “end game”, but a significant improvement Source: XCS, as at 31/03/09

© Lloyd’s21 Managing Our experts – you!

© Lloyd’s22 Expert Services Lloyd’s market expert spend exceeded GBP600m in 2008 Ensuring appropriate value is obtained from this spend is one of the highest priorities for the Lloyd’s market Managing agents are increasingly: specifying services required, including service standards monitoring services provided insisting on proportionate and competitive price of services Source: XCS, as at 31/12/08

© Lloyd’s23 Our Expectations of Experts Highest standards of customer service Protection of Lloyd’s global brand Clear resolution strategy Prompt and accurate reserves and budgets Efficiency Value for money Understanding the service

© Lloyd’s24 Future claims strategy

© Lloyd’s25 Vision for future claims handling Vision for claims within Lloyd’s market Excellence in underwriting Excellence in claims Supported by Excellence in operations Capital advantages Security and strong market ratings Global brand Lloyd’s competitive advantage Claims on a par with underwriting –Competitive advantage, not back-office –Competence of practitioners Lloyd’s reputation for fast and fair claims handling Build on Lloyd’s reputation for fast and fair claims handling, establishing claims as the market’s competitive advantage on a par with underwriting

© Lloyd’s26 In closing…

© Lloyd’s27 In closing… Lloyd’s performance framework is delivering positive change: Market is performing well vs. claims minimum standards Infrastructure is supporting a world class claims platform Understanding this will help you better advise your clients Changes at Lloyd’s will affect the way you work with us… Work with us to ensure our reputation continues

© Lloyd’s28