Control Framework A warm Welcome to the March market Breakfast Group
Control Framework Breakfast Group agenda 9:00Arrival, breakfast & networkingAll 9:15 WelcomeAli Dove 9:20Audit coordination & ToolsLindsey Davies & Sandra Sherlock Lloyd’s 9:40 Coverholder audits- the challengesCraig Scarr & Adrian Butland Grant Thornton UK LLP 10:00Phase II updateJaana Rouvari 10:15Q & A All 10:30Close
© Lloyd’s Audit coordination project Lindsey Davies 5 March 2014
© Lloyd’s AGENDA ► Vision ► What can we do to help? ► Where are we now? ► What are we doing to help?
© Lloyd’s Vision ► Coverholder experience is improved ► Market experience is improved ► Regulators confidence in DA improved ► Consistent but flexible application of audit questions ► Efficient & effective application of a common audit scope ► Less duplication ► Less compliance for compliance sake
© Lloyd’s what can we do to help? ► Educate and accredit auditors ► Coordinate audits centrally ► Centralise compliance functions, remove market duplication and costs ► Drive standards ► Facilitate and encourage STP
© Lloyd’s WISH LIST FOR 2014 ► Coordinate audits and findings centrally starting with Lloyd’s broker Coverholders – One central system – Audit MI – Test audit scope application
© Lloyd’s where are we now? ► Coordination project running for 2014 – Coverholders identified for 2014 – 2013 Recommendations coordinated – Manual process agreed ► Lloyd’s Broker Coverholder Audits – Top ten LB Coverholders identified – Meetings being arranged – Scope to be agreed centrally with auditors; brokers and MA’s
© Lloyd’s what are we doing to help? ► Conference booked 12 th May ► Accreditation process to be agreed – Conference pre work – Utilisation of tools ► Resource to be allocated ► System for coordination to be sourced
© Lloyd’s assistance with international regulations & taxation requirements ► Risk Locator Tool (RLT) & Crystal ► Register for RLT/Crystal account – Receive international reg & tax updates – Access to international reg & tax requirements ► Complete Crystal Assist – Gain a basic understanding of Lloyd’s licences – Improve knowledge on ‘establishing location of risk’ – International regulatory and tax considerations ► Attend a RLT/Crystal training session – x 30 sessions on GY11 for market participants (keep running subject to demand) – x 4 sessions scheduled for auditors (via Webex) in April 2014
© Lloyd’s RLT/Crystal training session for auditors ► Risk Location – Importance of identify the locations of risk for regulatory and tax purposes – Impact for getting location of risk wrong – Risk location triggers ► Compliance business tools – Risk Locator tool (content & functionality) – Crystal (content & functionality) ► Communications – Monthly updates – What’s new report and archive ► Tax and Regulatory experts available to address auditors questions.
© Lloyd’sCoverholder Management
© 2014 Grant Thornton International Ltd. All rights reserved. Coverholder audits – the challenges Wednesday 5 March 2014
© 2014 Grant Thornton International Ltd. All rights reserved. Agenda Introductions Issues and challenges facing the market –market risks –operational issues Objectives Solutions –options for a solution –solution design Considerations Learning from the past Summary
© 2014 Grant Thornton International Ltd. All rights reserved. Introductions
© 2014 Grant Thornton International Ltd. All rights reserved. Introductions Craig Scarr Craig has worked in the London Market for 27 years. He first qualified as a Chartered Accountant and has since supplemented his qualifications with the Institute of Risk Management, Institute of Internal Audit and Chartered Institute of Insurers. Craig is also a Certified Fraud Examiner and sits on the working party for the UK Fraud Advisory Panel. Craig is also a member of the Chartered Institute of Arbitrators. After starting his career in external audit Craig moved into forensic work and financial crime via secondments to the UK’s Serious Fraud Office as well as the FBI in America. He was then asked to lead the Governance, Risk and Internal Control business line of a London accounting practice. Craig was subsequently appointed the UK Head of Insurance with clients across General, Life and Broking as well as Lloyd’s entities. Craig was appointed Chairman UK Insurance at Grant Thornton UK LLP in Adrian has over 40 years’ experience of working in the Insurance Sector. He originally worked for 9 years on the Underwriting Box of a leading Lloyd’s Marine Syndicate followed by 10 years in the Underwriting Operation of a leading London Market underwriting agency underwriting very large Non-Marine, principally North American Casualty, but also Professional Indemnity and Property risks, on behalf Company Insurers and for four years he was based in the agency’s Bermuda operations. Over the last 23 years, he has been working in the insurance and reinsurance services market, providing specialist consultancy services to Lloyd’s, Lloyd’s Syndicates and large London Market Insurance and Reinsurance Companies. About Grant Thornton Grant Thornton is one of the world's leading organisations of independent assurance, tax and advisory firms. Over 31,000 Grant Thornton people, across 100 countries, are focused on making a difference to clients, colleagues and the communities in which we live and work. In the UK, we are led by more than 200 partners and employ 4,000 of the profession's brightest minds, operating from 27 offices. We provide assurance, tax and specialist advisory services to over 40,000 privately-held businesses, public interest entities and individuals nationwide. Adrian Butland
© 2014 Grant Thornton International Ltd. All rights reserved. The issues and challenges facing the market
© 2014 Grant Thornton International Ltd. All rights reserved. Market risks Lloyd’s –Excess capital –Coverholder growth Risk issues and governance –Expansion within Board risk appetite –Solvency II –Control framework
© 2014 Grant Thornton International Ltd. All rights reserved. Operational issues Cost effective Impact on Coverholders Audit co-ordination Regulatory requirements –Lloyd’s –Prudential Regulation Authority/ Financial Conduct Authority Benchmarking Timescale Verifiable
© 2014 Grant Thornton International Ltd. All rights reserved. Objectives
© 2014 Grant Thornton International Ltd. All rights reserved. Objectives Proactive management of Coverholders Regulatory requirements Lloyd’s control framework for regulatory and tax reporting (Phase II) –Board assurance Lloyd’s minimum standards – underwriting Benchmarking of Coverholders Simple to do business with. Lloyd’s
© 2014 Grant Thornton International Ltd. All rights reserved. Solutions
© 2014 Grant Thornton International Ltd. All rights reserved. Options for a solution Core requirements: –System based product –Simple to understand work product –Cost effective
© 2014 Grant Thornton International Ltd. All rights reserved. Options for a solution (continued) Providing: –Comfort to insurers –Evidence based assurance for Managing Agents Boards to meet control framework requirements –Ease of reporting to regulators –Peer organisation benchmarking –Ease of reporting to following markets –Minimum disruption to Coverholders
© 2014 Grant Thornton International Ltd. All rights reserved. Solution design Verifiable Standard scope and report Cost effective Integrated System based Audit timescale Coverholder self assessment
© 2014 Grant Thornton International Ltd. All rights reserved. Considerations
© 2014 Grant Thornton International Ltd. All rights reserved. Considerations Audit opinion Future liability Client Following Market Regulatory Solvency II Future market Use of work product Legal considerations Costs
© 2014 Grant Thornton International Ltd. All rights reserved. Learning from the past
© 2014 Grant Thornton International Ltd. All rights reserved. Lessons learned Banking sector Lack of planning Basel II Basel III
© 2014 Grant Thornton International Ltd. All rights reserved. Summary
© 2014 Grant Thornton International Ltd. All rights reserved. To summarise Planning Comprehensive system specification Short term Medium term Long term Market involvement
© 2014 Grant Thornton International Ltd. All rights reserved. ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton UK LLP is a member firm of Grant Thornton International Ltd (GTIL).GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate, one another and are not liable for one another’s acts or omissions. T: E: Craig Scarr Chair of UK Insurance Adrian Butland T: E: Should you require any further information, please do not hesitate to contact:
© Lloyd’s Control framework Phase II update by Jaana Rouvari 33 Control Framework
© Lloyd’s Topics for today 34 Control Framework 1.Challenges in setting a sign-off deadline 2.New roadmap 3.How Lloyd’s will support managing agents and brokers 4.Communications and next steps
© Lloyd’s Challenges in setting a deadline 35 Control Framework Individual extensions for managing agents vs. market wide extension? Treating managing agents equally Align with other Lloyd’s initiatives Allow enough time to complete a quality piece of work Avoid slowing down the process to achieve sign-off
© Lloyd’s36 Control Framework New market deadline for Board sign off for all managing agents is December 2015 Lloyd’s worked with those managing agents requesting extension to the deadline to agree plan and deliverables for December 2014 New deadline No re-planning required by managing agents, assume existing plans will stand Sign-off can be provided by a managing agent at ANY point prior to deadline
© Lloyd’s Delivery roadmap 37 Control Framework Q1 – Q Assess risk, identify controls and gaps Q1 – Q Develop and implement Controls Q3 – Q Review, monitor and Sign-off Outputs Checkpoints Review of risk ratings and audit plans Agree on engagement and communications with brokers/ coverholders Complete risk assessment and detailed analysis to identify gaps Conduct coverholder audits, Review results and address remediation Inputs/ Activities Test controls and procedures in operation Confirm evidence for sign off For each managing agent: Completed delivery roadmap Completed risk assessment Completed gap analysis Remediation plan for review For each managing agent: Managing agent evidence of coverholder compliance and board sign off to Lloyd’s 6. Agreed plan/deliverables for up to end of 2014 (agreed between Lloyd’s and each managing agent) 7. Agreement within managing agents on engagement and communications with brokers/coverholders 8. Assess risks; identify controls and gaps 9. Evidence remediation plan 10. Agree assurance to be shared with Lloyd’s 11. Formal sign off
© Lloyd’s38 Control Framework Support available from Lloyd’s Continued meetings with managing agents Continued meetings with brokers where Control Framework impact is high Continued engagement with LIIBA and its BOLT group QUARTERLY market breakfast meetings Control Framework news letter Fully updated web pages and downloads on lloyds.com/controlframework Phase II will transition to the Delegated Authorities Department at Lloyd’s from January 2015
© Lloyd’s39 Control Framework Communications & Next steps Control Framework updated in March BOLT meeting Followed by LIIBA circular on Control Framework March coverholder news letter to include tax and regs message Control Framework broker and managing agent contact details/ introduction available from the project team to those involved in project delivery
© Lloyd’s Q & A 40 Control Framework
© Lloyd’s41 Control Framework Close Further information on Control Framework – Next Breakfast Meeting – 3 rd June