Market Reform “from the top” Andy Brookes, Market Reform Programme Office 4 July 2007

Market Reform Page 1 Agenda 9.30 – 10.00“Market Reform from the top” Andy Brookes, MRPO - programme so far, current priorities, future plans – 11.00Insurers’ Market Repository Adam Stafford, Lloyd’s - the whys and wherefores of electronic premium & claims settlement – 11.15Break – 11.45Electronic processing, the role ofRob Campbell, MRPO messaging and ACORDPhil Brown, ACORD – 12.15Contract Certainty, MRC & LegacySteve Hulm, MRPO - embedding good practice and cleaning up the past – 12.45Endorsements pilotStuart Dean, Willis - the new approach to post bind changes to contracts – 13.00Wrap upChristopher Croft, MRPO

Market Reform Page 2 Market reform overview Why reform? Origins and drivers of the programme Who does what and how? The key players What is the vision? And what does that mean… What has happened so far? What is planned for 2007 and beyond?

Market Reform Page 3 Why reform? Sharpen London’s competitive edge and client service Competitive pressure –From other insurance centres (Marine 32% 1988, 15% 2006; Bermuda has grown at 7x the rate of London since 2000) –From other financial services sectors (eg bond markets) –‘Smouldering’ platform Customers dissatisfied with the speed of processing –Lloyd’s customer survey - market poor on: speed of contract documentation; information about claims; speed of claims settlement Regulatory pressure –Dec 2004: FSA CEO John Tiner challenges market to put an end to “deal now, detail later” culture –Emphasis on achieving contract certainty or face rules to enforce it

Market Reform Page 4 Why reform? All three drivers at least in part attributable to inefficient processes Highlight aspects that make London an expensive market in which to do business => create barriers to business coming here Customers value ability to place complex business but “one size fits all” approach reduces the business coming here

Market Reform Page 5 Why reform? Deliver more for less… Reverse the trend and make London the market of choice Collaboration between firms can deliver a larger, more competitive market Addressing inefficiencies will reduce costs and remove barriers to business coming to London Reform is aimed at delivering more profitable business to London => delivering to your bottom line

Market Reform Page 6 Who is involved? You –Nothing will change unless the market participants change; except, perhaps, that there will be no more market But some support to help you: –Market Reform Group (MRG) –Market Reform Programme Office (MRPO) Market Associations: –International Underwriters Association (IUA) –Lloyd’s –Lloyd’s Market Association (LMA) –London Insurance Market Brokers’ Committee (LMBC)

Market Reform Page 7 Who is involved?

Market Reform Page 8 Four chapters in the reform story… Where will it all lead? – the vision What has happened so far? – genuine progress Key priorities for 2007 – for all firms The next ‘wave’ - watch this space

Market Reform Page 9 Market reform vision London to be the market of choice – which means further addressing the problem highlighted to deliver: –First class client service –Early receipt of high quality contracts –Rapid claims processing and communications with clients –Rapid movement of premium and claims monies –‘Right first time’ processing –Increased efficiency with lower operational cost –Lower operational risk –Flexibility to support bespoke business

Market Reform Page 10 Market reform vision – how? Deliver these benefits by maximising electronic processing in the market –All risk submissions sent electronically; wholly electronic trading for some simple risks with no manual intervention; face-to-face when required for large and complex risks –All claims processed and agreed electronically; face-to-face negotiation only when required for large and complex risks –All accounting and settlement of risks performed electronically

Market Reform Page 11 What has happened so far? “Unstoppable momentum” – Standard and Poor’s LMP/MR slip –Standard way of introducing business to the market –LMP slip introduced 2003 –MR slip – enhanced version – mandated in 2006 –Market Reform Contract June 2007 Contract certainty –Initiated by John Tiner challenge –Market led response to avoid FSA prescription –Achieved market target of 85% by December 2006 –Challenge for 2007 – enhance and embed –New Code of Practice – June 2007

Market Reform Page 12 What has happened so far? Insurers’ Market Repository –Developed during 2005 and 2006; went live 10 September –Supports Electronic Claims File (ECF) and electronic Accounting and Settlement (A&S) –Removes the need to shift paper from London to Chatham => “devanning” –All active managing agents and 50+ brokers signed to use ECF –2007 challenge – increase use

Market Reform Page 13 Reform priorities and targets for 2007: Progress so far Contract certainty – solidly above 90%: on track –March broker number 94%; insurers’ data similar –CC Code of Practice rewrite published; Market Reform Contract (= updated slip) published Legacy – mid-’06 = 100; reduce to 60 by mid-’07; 40 by end-’07: on track –Lloyd’s reduced to 54% (May); –Company market initial measurement 74% (April) Market Reform Contract (MRC) – published 18 th June – on target –New version of placing document –Reflects the fact this will commonly be final documentation sent to client Electronic claims – 100% of new claims: on track, but demanding –Lloyd’s initial notifications: ©25% and rising –IUA companies coming on board; some already live Electronic A&S submissions – 80+%: behind the run rate, but will pick up –©15 -20% at present –Rollout resources now in place for all brokers to go live this year Delinking – 80+%: on track –©50% in Q1 Error rate on bureau submissions – at least halved: on hold –Inadequate data

Market Reform Page 14 Other reform initiatives including pilots 2007: Progress so far Placement – build on G6 work –LMA now leading in information dissemination –ACORD (implementation) standard developed –Suppliers very active Improve endorsements processing – pilot –Pilot well underway –© 20 insurers participating LMA led contract documentation improvements –Starts 1 July, with end of Stage 2 checking –Guidance published by Associations and Xchanging; MRC enables Test Certification Facility –Delivered by ACORD to help ensure messages are to standard Electronic policies –Xchanging delivering,Enables electronic ‘out’ from XIS in response to electronic ‘in’ Insurers Market Repository –Software Improvements deliverd/on track (6a and 6b for claims; 2 and 3 for A&S)