1. Accounting & Settlement A&S An outline of the Accounting & Settlement Project 14 th December 2004

2. Accounting & Settlement 2 What are the A&S reforms? Modernising the transaction processing infrastructure within the London market by implementing the use of international standards for the communication, and processing of accounting & settlement data (the ACORD RLC XML standards) To move away from bespoke, to international To implement common processes To provide a firm base of infrastructure for the future with flexibility for future business process change

3. Accounting & Settlement 3 Rationale for change Reduces errors and reconciliation issues Enables back office rationalisation Provides data faster/earlier Enables more accurate data – pre validation Aligns with international approaches Provides flexibility Reduces costs

4. Accounting & Settlement 4 What changes are involved? Provision of data electronically using ACORD message standards & repositories from; London brokers, Brokers overseas parents/sister brokers, other intermediaries, including via electronic placing environments. Underwriters receiving and processing ACORD standard messages, for bureau business in place of current bespoke messages for any non-bureau business direct from sender These processes are fully delinked i.e. technical accounting can be separated from settlement and processed much earlier than today for bureau business.

5. Accounting & Settlement 5 ACORD – RLC XML message suite Business NameXML NameUsage for A&S Placement MessagePlacementIssuance of a post placement record to establish contract structure in receiver systems to facilitate subsequent transactions Technical Account Message TechAccountEstablishment of transactional debt for both premiums and claims Financial Account Message SettlementRelease of debt for settlement, agreement to settle. AND as settlement statement Claim Movement Message ClaimMovementEstablishment of claims records and reserve movements Acknowledgement Message AcknowledgementAcknowledging receipt and advising status and responses to messages received. Sent in relation to every individual ACORD message received. De-linked

6. Accounting & Settlement 6 Premium accounting process flows now UWRS XCHANGING (bureau) Paper LPANs Paper Slips Paper Supp Docs DSIGN Paper Closings (non-bureau) USM ILUCSM Paper Slips SNAD BSM BROKERS Paper TTYs Statements (non-bureau)

7. Accounting & Settlement 7 Premium accounting process flows future UWRS XCHANGING (bureau) ACORD msgs Electronic Slips Electr Supp Docs ACORD messages (non-bureau) ACORD msgs ACORD Acknmnts BROKERS ACORD Acknowledgements (non-bureau)

8. Accounting & Settlement 8 Claim accounting process flows now BROKERS UWRS XCHANGING (bureau) Paper LCCFs Paper Claim Files Paper Supp Docs USM Paper Claim Closings (non-bureau) SCM DSIGN ILUCSM LIMCLMs SNAD BSM CLASS on-line Statements (non-bureau)

9. Accounting & Settlement 9 Claim accounting process flows future UWRS XCHANGING (bureau) ACORD msgs Electr Claim Files Electr Supp Docs ACORD messages (non-bureau) ACORD msgs ACORD Acknmnt BROKERS ACORD acknowledgements (non-bureau)

10. Accounting & Settlement 10 Scope The process covers: Direct Reinsurance Facultative, proportional and non-proportional Lloyds and London companies Bureau and non-bureau London broker, other broker, client Premiums and claims Inward and outward transactions Out of scope are: Placing processes (However does use Placement Message as start of A&S process) Claim agreement processes (although use of ACORD messages to support claim agreement are part of the Xchanging development)

11. Accounting & Settlement 11 Governance (above A&S Board) Market Reform Group (MRG) STRATEGY approving strategy commitment setting priorities chairmen and reform champions LMA, LMBC,IUA, Lloyds MRG Executive proposing strategy market-wide buy-in managing resources defining projects feasibility LMA CEO, Lloyds COO/s, IUA CEO, LMBC CEO, franchisor MR Implementation Board Major brokers, major managing agents, major companies, Xchanging IMPLEMENTATION market wide implementation scope creep conflict resolution DESIGN A & S PROJECT BOARD LMA Board LMBC Board IUA Board Franchise Board / Council Influences Reports to PROJECT

12. Accounting & Settlement 12 Board Membership A&S Project Board Design & development Delivery of functionality Proposals to MRIB on implementation Members Andy Brookes –(Chair) Lloyds BPR Roy Alexander - Chaucer Stephen Anderson – Catlin John Bacon – Guy Carpenter Mark Barwick - LMBC Mick Dempsey – Global Aero Geoff Kennard – Xchanging Dave Matcham – IUA Rob Myers – Xchanging Mike Reidie - Marsh Phil Romano – Kiln Ian Summers – Aon Pat Talbot – Alea David Williams – QBE John Wingrove – Project Manager MRIB Implementation approach Delivery of own firm and hence market Members Iain Saville (Chair) Lloyds Tom Bartleet – Willis Andy Brookes – Lloyds Clive Buesnel – Xchanging David Harris – Amlin Hugh Maltby – BRIT Andy McDonald – Benfield Patrick Mina – Marsh Edward Moss – Catlin Paul Moss – QBE Bill Oram – Aon Chris Rawson – Lloyds & ACORD Chris Smith – Limit Alan Tasker – Global Aerospace Tim Riley - Alea

13. Accounting & Settlement 13 Next Steps Implementation plan from MRIB, with Project Board input Development of Technical Information to support Business Design (over next few months – planning underway) 2005: first phases of the build – premium related transactions likely to be first 2006: Further build phases and grow volumes of use to critical mass

14. Accounting & Settlement 14 Summary The detailed business design is now complete, quick sign-off by Associations expected Cost split of £8m between IUA and LMA sorted; broker contribution Governance in place Progress Individual firm contributions for funding nearing completion Sign off of any cost changes to be completed Issues Implementation plan from MRIB, with Project Board input Development of Technical Information to support Business Design (next few months) 2005: first phases of the build – premium related transactions likely to be first, 2006: grow volumes of use to critical mass Further work © £7-8m for XIS © £70m – £80m guestimate for the London market Improved processing efficiency Common processes Substantial London Market cost savings (£50m pa) Firm base for future change Implementing the use of international standards for the communication, and processing of accounting & settlement data (the ACORD RLC XML standards) Purpose BenefitImplementation Cost

15. Accounting & Settlement 15 So what should you do now? Establish who in your organisation should be your driver for these reforms Ensure that you have a good understanding of the new processes and the implications to your business Discuss and agree within your organisation What you need to do to your processes to support the changes How these will interact with your systems What other opportunities that the new process enables do you wish to take advantage of and how/when you will develop these opportunities Discuss the changes with your software supplier (in-house or external) and establish their ability to support the changes and their potential delivery schedule Agree within your organisation the delivery path and timetable that you wish to follow

16. Accounting & Settlement 16 Questions?