Update on Market Reform Andy Brookes, Brian Austin Market Reform Forum 23 November 2006

Market Reform Page 1 Market Reform Update Contract Certainty Back office electronic infrastructure –Accounting and Settlement strategy work – todays special topic –Repository for claims and A&S –Measurement and tools to aid A&S performance (Stage 1) Forward agenda for reform – Headlines: –Repository rules sorted. Have you signed them? –Publications: Little new this month.…CC reverse flow business –….but last month: CC FAQs; BA and lineslip guidance; A&S strategy

Market Reform Page 2 Contract Certainty Market still on target to achieve 2006 milestones FSA Liaison: –They remain satisfied with progress to date, subject to: –Quality & robustness of data –Reduction in exceptions, including measure of value –Legacy reduction –Timetable for future activity –John Tiner speech Nothing released14 November –Industry assessment of success 8 January –CEO meeting and FSA response25 January –But remember: December means late Feb/March for data –FSA looking for clear plans for 2007+….

Market Reform Page 3 Brokers score for open market 84%, from 86% in July. Brokers score for certificates of insurance 92% certain, 93% in July. Overall, 88% in August Broker Contract Certainty Report for August 2006 (reported in Oct 2006)

Market Reform Page 4 Evidence of cover within 30 days score 83%, up 2% on July Broker Contract Certainty Report for August 2006 (reported in Oct 2006)

Market Reform Page 5 Broker Contract Certainty Returns for August 2006 – breakdown for incomplete and late placements Contract certainty 88% in August for open contracts and certificates Order completed by inception 72% Order completed after inception at 5% Firm order post inception at 10%

Market Reform Page 6 Measurement FAQs What is the issue? –It has become clear that organisations are interpreting the CoP & Checklist in different ways –This results in inconsistency of measurement What are we doing? –Clarifying the recommended approach wherever possible (via FAQs). Publication imminent –Reviewing the Code of Practice/Checklist for consistency for end 2006 Examples –Using own checklist: audit trail –Late placements: a fail? Up to you –Service of suit: not required for CC pass, but do it anyway

Market Reform Page 7 Lloyds Legacy Policy Analysis Q3 2006

Market Reform Page 8 Contract Certainty Other CC related activity: –MR Slip adoption –Binding Authority Slip Guidelines –Lineslip Slip Guidelines –Representing orders on slips – order hereon

Market Reform Page 9 Contract documentation pilot: Objectives To improve efficiency and client service Richard Ward, May 2006 Slip checking prior to signing The slip as final contractual document Published set of checks MAs empowered to perform checks Addendum to MR slip This will be achieved through.. Action needed to achieve these outcomes..

Market Reform Page 10 Outcomes for Contract Documentation For Carriers: Minimal error rates resulting in processing cost reduction Protection of licences Improved operational efficiency For Brokers: More efficient marketplace to bring business Reduced cost due to reduced/eliminated need for stage 2 checking Better client service Contract document produced within 30 days, therefore no need for a cover note For Capital Providers: Reduced operational risk Improved customer proposition Improved operational efficiency For the Insured: Lessens uncertainty in case of early claims arising Contract received within 30 days of inception Clarity of contractual terms which also results in faster payment of claims

Market Reform Page 11 Pilot Participants (as at 22/11) Brokers Aon Benfield Glencairn Guest-Krieger Guy Carpenter JLT Marsh Miller Willis Hayward Aviation Managing Agents Ace Advent Amlin Brit Beazley Catlin Chaucer Canopius Hiscox SA Meacock Talbot Kiln Limit Wellington Novae St Paul Travelers

Market Reform Page 12 Pilot Latest Low volumes, but starting to pick up –More Brokers/MAs are participating Awareness raising activity being planned for early December –Improved reference material on website –Promotional material MR Slip Addendum – under discussion –Minor variant of the Market Reform Slip required

Market Reform Page 13 Pilot Latest - QA Tool All Classes of Business live from end October Mapping to Lloyds Risk Codes – spreadsheet now available online Functional change under development for delivery mid- December: –Reclassify checks as Contract Certainty, Regulatory and Taxation or Risk Management –Filtering to match the above –Exporting in a user-friendly format –Selecting Reinsurance type separately to Class of Business –Addition of guidance on how to carry out each check

Market Reform Page 14 Need more information on the pilot? Or visit ance_tool/QA_Tool_pilot.htm

Market Reform Page 15 ECF Now Live and Ramp Up underway

Market Reform Page 16 Repository Rules Signatories (as at 22/11) Brokers Managing Agents Aon ARB Intl Benfield Cooper Gay Corrie Bauckham Batts Corrie & Ptrs Guy Carp Harman Kemp North America Marsh Miller NMB SBJ Stow and Croton Ltd Amlin Argenta Atrium Beazley Brit Insurance Catlin Chaucer CMGL Faraday Hiscox Illium Kiln Liberty Marketform Mitsui St Paul Travelers Wellington (and XCS as Service Provider)

Market Reform Page 17 ECF Processes & Procedures on line Reformatting of the SP&P doc to make it more easily accessible MooD is a business process modelling tool used to support this work Allows process maps to be published (& navigated) on the web and: –Replace texts with diagrams (processes) where possible –Allow users to drill down from high level info to more detail –Place information in context –Display information by role e.g. applicable to Broker only Once ready the ECF Processes & Procedures Guide will be published to the Market Reform website (access is free) Should be up early December

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Market Reform Page 20 Need more information on ECF? Or Speak to Adam Stafford at the end of the session. Or Visit

Market Reform Page 21 MRG forward looking agenda 2007 laminate Keep doing the blindingly obvious –FSA will not go away on CC and legacy –New infrastructure: ramp-up use; oversee changes Vision and road map What else? –Talk to your Association and MRPO