Market Reform Group Market Reform “from the top”: Overview & Status Christopher Croft Market Reform Office 22 November 2007

Market Reform Page 2 Agenda 9.15 – 9.30Registration & introductions 9.30 – 10.00“Market Reform from the top” - Christopher Croft, programme so far, current priorities, future plansMarket Reform Office – Electronic processing Rob Campbell, MRO the role of standards and how it all fits together – Market Reform ContractSteve Hulm, MRO contract standards to facilitate placing – Break – Insurers’ Market Repository – Chris Mears & Simon Collins, electronic premium & claims settlement Repository Project Team, Lloyd’s – EndorsementsStuart Dean, Willis streamlining the process for contract changes – E-PlacingRob Gillies, LMA electronic support for risk placement – 1.00Wrap up and discussionChristopher Croft

Market Reform Page 3 Market reform overview Why reform? Origins and drivers of the programme What is the vision? What has happened so far? Lessons learned What is planned for 2007 and beyond?

Market Reform Page 4 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 Cat bond markets, Gallagher Re etc) –‘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 5 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 6 Why Reform? First class client service Early receipt of high quality contracts Rapid claims processing and communication with clients Rapid movement of premium and claim monies ‘Right first time’ processing Increased efficiency with lower operational cost Lower operational risk Flexibility to support bespoke business

Market Reform Page 7 Where are we going? MRG vision All risk submissions sent electronicallyAll claims processed and agreed electronicallyAll accounting and settlement of risks performed electronically – London to be the market of choice

Market Reform Page 8 Slip creation guidelines providing certain and consistent placing documentation MRC - complete Clear, unambiguous contracts agreed at formation Improving the speed of premium processing - delinked premiums IMR in use Delinking 57% (Aug) Contract Certainty - complete Early delivery of single insurance document to client Contract Certainty - complete PLACING & SETTLEMENT What have we achieved so far ?

Market Reform Page 9 65% 74% 95% 91% 94% 90% 85% 95% What have we achieved so far ?

Market Reform Page 10 65% 77% 91% 86% 92% 84% 80% What have we achieved so far ?

Market Reform Page 11 Endorsements Claims IMR in use Electronic storing of documents allowing simultaneous access Pilot stage complete Project being implemented Improved speed of endorsement processing A&S OP only What have we achieved so far ?

Market Reform Page 12 IMR Usage A&S OP only JanFebMarAprilMayJuneJulyAugSepOct 45% 30% 40% ECF 10% 16% 21% 14% 11% 6% 57% 36% 28%24% 21% 22% 19% 17% A&S OP only 35% 37% What have we achieved so far ?

Market Reform Page 13 Reform – lessons learned Collaboration works Decentralisation works Senior commitment vital - Need all constituents – brokers, companies & Lloyd’s - The era of large, expensive, centralised, single solutions is over - Standards and frameworks a better approach - Change must come from the top - MRG needs the key decision makers in the room

Market Reform Page 14 Reform – lessons learned Keep it simple Lead implementers Measure - Small is beautiful; one step at a time - G6 et al - Rigorously Targets - Demanding Communicate constantly at all levels

Market Reform Page Projects Progress highlights Contract Certainty Legacy Market Reform Contract (MRC) Electronic Claim Files (ECF) Accounting & Settlement (A&S) Electronic Placing Support

Market Reform Page Progress Highlights: Contract certainty – solidly above 90%: on track –August broker numbers 96%; insurers’ data similar –Market Reform Contract implemented; CC Code of Practice rewrite adopted –Survey re-run. Proposal to FSA to stop central measurement. Legacy – mid-’06 = 100; reduce to 60 mid-’07; 40 by end-’07: ahead of target –Lloyd’s reduced to 37% (September); –Company market reduce to 41% (August) Electronic claims – 100% of new claims: just behind target, demanding –Lloyd’s initial notifications: ©60% of in-scope –© 20 IUA companies live or near live; but slower than planned Electronic A&S submissions – 80+%: behind the run rate, disappointing –©42% October (OPs); 29% incl. RPs and APs –93% of brokers live (by volume); rest by Jan 2008 Delinking – 80+%: rising, but behind target –©55% in Q3; ©10% up on 2006 Error rate on bureau submissions – at least halved: project postponed –Inadequate data

Market Reform Page Progress Highlights: Placement – LMA building on G6 work –Resources published: Whose doing what; benefits model; ACORD standard –Suppliers active; but volume still low Improve endorsements processing –Pilot successful –Transitioning to market roll-out; MRCE to be published; e-options set out LMA and Lloyd’s contract documentation improvements –End of Stage 2 checking; MRC enables –Lloyd’s PBQA tool upgraded Test Certification Facility –Delivered by ACORD to help ensure messages are to standard Electronic policies –Electronic ‘in’ to XIS becomes electronic ‘out’. Willis live. Others testing Insurers’ Market Repository –Software Improvements delivered/on track (6a and 6b for claims; 2 and 3 for A&S)

Market Reform Page 18 Market Reform 2008 Plans ECF –100% –Upgrade software to increase scope –Hit legacy claims –Plus service standards and measurement A&S –100% (OPs by 1/4) –Include all RPs and APs –Further software releases –Note: expect to keep investing in IMR Legacy policies –Finish – new target

Market Reform Page 19 Market Reform 2008 Plans Endorsements –MRCE for all –E-endorsements; measure and target Placing: electronic support –Appetite –Measurement –Targets A&S –ACORD business messages to bureau and non-bureau –Premium Payment – implement any deal –Delinking for all

Market Reform Page 20 Market Reform 2008 Plans Third rank – useful but not headline –E-Policies for all (who want them) –MRC for binders and lineslips –Non-fundamental splits (MAs willing to pay?) Planning the next wave –Claims: ACORDising CLASS; end of LIMCLMS? –Documentation quality : PBQA +? Use for A&S? Underpinned by……… –Benchmarking and measurement –Standards and support: how much –‘Grain of the market’

Market Reform Page 21 What does the future hold? Further change is a given not an option –To maintain London’s competitiveness with other insurance centres –To maintain insurance industry’s competitiveness with increasingly sophisticated alternatives Embrace the new world which is and should be transparent and auditable –Don’t re-employ bad practice into electronic format Build on the successes of the last 3 years and learn the lessons of things that have not gone as well

Market Reform Page 22 Measure & target Resource it Use standards don’t tweak Sponsor it Reform – What should it mean to you? Internal change programmes are the key to benefits realisation

Market Reform Page 23 Challenges ahead Current reform is only a stepping stone Insurance is a global business, reform needs to be seen in that context Need to preserve the advantages of the physical market place in an electronic world Insidious creep of complacency