Delegated Underwriting The new landscape Paul Brady 17 June 2019 Getting delegated authority flowing Transform Lloyd's Footer here - 2016

The rise of the intangibles The most valuable retailer owns no inventory The leading media company creates no content The largest movie house owns no cinemas The largest phone company owns no telco infrastructure The largest accommodation provider owns no property The world’s largest taxi company owns no taxis New JH slide

Managing General Agents Our fastest growing channel 4,000 £10.4bn 32% premium generated Managing General Agents of Lloyd’s premium

Ready for change Identifying blockages in the delegated authority process Onboarding - Duplicated due-diligence and inefficient reviews slow down applications, while first-time contracts often contain errors Binding risk – The lack of an adequate policy management system can delay new delegated authorities in getting ready to trade Reporting – Data is not standardised making it prone to error and harder to use and share in other parts of the process. Auditing – MGAs and TPAs can be subjected to multiple time consuming audits and compliance queries

Driving sustainable business performance The benefits of a fluid process Quicker business decisions Data entered only once Digital processes Cut down on duplication Richer commercial insights Lower cost of doing business Faster claims payments Oversight is appropriate to your business type Better customer service Enhancing your gold standard status

Speeding up the flow Lloyd’s plans for a single, seamless delegated authority process Onboarding - Applications are triaged and reviewed according to your business type. Due diligence checks are centralised and right-first- time contracts generated digitally. Binding risk – MGAs use a free digital plaform to manage the full placement cycle in line with Lloyd’s market standards, allowing them to monitor progress at all times. Reporting – Data is collected, centralised and shared with relevant parties in line with Lloyd’s approved standards – reducing errors and enabling validated data to be reused Auditing – Lloyd’s coordinate and centralise audits and ongoing compliance meaning MGAs and TPAs only have to supply the information once

Introducing Chorus A new approach to delegated authority oversight A new modern framework Risk based Greater flexibility to future proof Remove barriers to new sustainable business Consistent approach for MGAs & TPAs Supported by Chorus Replaces ATLAS and BAR Centrally manages coverholder and TPA approvals and compliance Register binding authority Optional right-first-time contract creation tool © Lloyd’s

Risk Based Oversight Lloyd’s continues to approve coverholders (and now also delegated claims administrators) Test remains ‘suitability’ but Lloyd’s will apply a risk-based approach to assessing applications Applications can be approved automatically by the system Lloyd’s can now take into account capabilities and competencies of the managing agent © Lloyd’s

New category of delegated authority for underwriting Introduce new category for delegated authority to ‘such other person or class or category of persons as the Franchise Board may permit’ Flexible category allowing Lloyd’s to permit delegation to (1) pre-agreed categories of firms without Lloyd’s prior approval of the firm; or (2) on a case by case basis Delegation must be in accordance with a ‘contact for delegated authority’ that complies with any requirements prescribed by Lloyd’s Criteria for when delegation in this category is permissible to be prescribed by Lloyd’s Initially will be limited to ‘Distributors’ and to facilitate internet trading Registration of (1) all firms and (2) contracts of delegated authority in this category (ie all relationships with managing agents or coverholders (where sub-delegation)) Detailed requirements to be set out in Requirements and Code of Practice – Delegated Authority © Lloyd’s

Sub-delegation Replacing the strict prohibition against sub-delegation with a framework that allows risk-based controls Byelaw allows sub-delegation in all cases where delegation is permitted Managing agents will always be permitted to sub-delegate (under line slip/consortia arrangement) Controls applied through Minimum Standards Service company coverholders, like managing agents, have same full permission to sub-delegate Lloyd’s will impose limits on sub-delegation by coverholders and in ‘distributor’ arrangements Conditions imposed on approved coverholders to limit/prohibit sub-delegation Requirements prohibiting sub-delegation in all cases for ‘distributor’ arrangements In all cases, Lloyd’s will retain discretion as to whether to permit sub-delegation on a case by case basis Controls on how to sub-delegate, where permitted, will be prescribed and best-practice guidance given (eg requirements for appropriate electronic systems) © Lloyd’s

Delegated Claims Administrators (DCA) Regime governing approval and registration of DCAs to mirror regime for coverholders Byelaw imposes a rule against delegation of the determination of claims except as permitted by Lloyd’s DCAs require prior Lloyd’s approval Coverholders with claims handling authority dealt with as part of coverholder approval process Criteria for suitability of DCAs mirrors coverholder suitability criteria Conditions can be imposed limiting the classes, geographies, etc for which approval is given Criteria for DCA contracts of delegation – set out in Requirements Registration of (1) all DCAs and (2) contracts of delegated authority Sub-delegation of DCA authority while allowed by Byelaw - in practice will rarely be considered appropriate and restricted in the Requirements Existing DCAs to be ‘grandfathered’ in. © Lloyd’s