2006 Objectives & the LMP Slip Past, Present and Future Market Forum, 26 January 2006 James Willison, Andy Brookes

Market Reform MRG Objectives Contract Certainty Market achievement of monthly volume of certain contracts (30% by Q4 05, 60% by Q2, 85% by Q4) Market slip compliance rated 99% (Q1); 85% of slips fully compliant (Q4) Resolve signed lines, late orders and other outstanding contract certainty issues (Q2) Clear plan for continued improvement of CC in (Q3) Avoid regulatory intervention Build user-friendly front-end for contract quality (CQ) checks (Q1) Market feasibility for next stage of development of CQ tools (Q4) Accounting & Settlement Establish measurement regime (Q1); publish accounting checks (Q1) For ACORD international standard A&S processes: Agree and document outline processes (Q1) Publish detailed technical and business information (Q2) Agree implementation plan (Q2) Secure public commitment to implementation by brokers and carriers; with timetable for migration from old processes (Q4) Implement A&S repository (Q4)

Market Reform MRG Objectives Claims Infrastructure Publish processes and procedures for electronic claims – Lloyds first (Q1); IUA next (Q?) Publish implementation manual for electronic transfer of documents using (ACORD DRI) international standards (Q1) Plan for common claims procedure in London (Q1) Complete IUA repository pilot and agree next steps (Q2) Deliver Lloyd's electronic infrastructure into market testing (Q2) (At least 4) brokers and (9) Lloyds Managing Agents processing 100% of new claims electronically, supported by XCS (Q4) Set strategy for claims infrastructure beyond ECF (Q4) Other Publish legacy Code of Practice (Q1); measured progress against code (Q4) Measure use of new infrastructure and business benefits (on- going) Training: approved courses for contract certainty (Q1); framework for claims training (Q2); participation targets (Q4)

The LMP Slip Past, Present and Future James Willison

Market Reform Past: Objectives of the LMP Slip To aid clarity at contract formation by: –Adopting a standard structure –Clearly stating the contract terms –Avoiding the use of TBA or As amended –Greater use of standard wordings –Non-standard wordings to be included in full Simplify post placing contract management by: –Explicitly defining contract roles and responsibilities –Identification of service providers –Stating agreement parties for contract amendments –Clearly defining claims handling responsibilities

Market Reform Panel 1 – No small print. Must contain the Unique Market Reference Panel 2 – amended to achieve clarity by separation of information into 4 sections: –Risk Details (Headings vary by class of business) –Subscription Agreement (Content fixed) –Information (As required) –Fiscal and Regulatory (Content fixed) Panel 3 – remains unaltered (security detail) Past: LMP Format

Market Reform Past: April 2005 LMP Slip BRAT removed Exemptions updated Structure: ISO codes, stamp conditions, slip provisions Headings: Expert fees, Delegated authority, Non-bureaux arrangements Fiscal and Regulatory section updated: new headings and allow additional headings

Market Reform Past: Recognised Exemptions to LMP All slips incepting from 1st October 2005 must be LMP Slips. The only recognised Exemptions at this time are: –Motor & Term Life processed outside XIS. –Client Exempt All other slips will be processed as LMP Slips

Market Reform Present: Ensuring LMP slip Quality LMP audit team tasked with improving quality –Sample audit of slips placed –Regular market feedback and reports –Monthly league tables published –Regular meetings with Brokers and Underwriters –IUA companies joined audit process

Market Reform Present: Contract certainty attributes of LMP slip

Market Reform Future: Meeting March 2006 LMP target Updated LMP slip Slip Audit ACORD – Global Placing Document

Market Reform Future: meeting March 2006 LMP target 47% 60% 64% 55% 40% 50% 60% 70% 80% 90% 100% Weeks 45-48If Basis of Claims Agreement is clearly identified and If Taxes payable by the underwriter is clearly stated and If Claims agreement parties are clearly identified Fully Compliant Slips Cumulative increment in the % of fully compliant slips as each hotspot is resolved

Market Reform Future: Slip Audit Will continue post March Aligned to market agreed contract certainty checklist Will check pre-bind contract certainty aspects of QA tool Will continue at leader scratch stage More formalised sampling process – 25%?

Market Reform Future: Updated LMP slip Align LMP Slip with Contract Certainty Code of Practice –Default wordings agreement –Document Production –Subjectivities –Line/Stamp conditions –Signing Provisions –Incorporate LMP Policy Guidelines –Review Update panel 1 Due for publication April 2006

Market Reform Future: ACORD – Global Placing Document Work took form of: –COB Practitioner groups –Agreeing universe of headings on slips (including AKAs) and their definitions with international ACORD members –Mapping to RLC placing message GPD published on ACORD website –Includes COB example slips Run in parallel with LMP slip during 2006 Proposed to replace LMP slip 2007

2006 Objectives & the LMP Slip Past, Present and Future Market Forum, 26 January 2006 James Willison, Andy Brookes