1. Update on Market Reform Andy Brookes Market Reform Forum 26 October 2006

2. Market Reform Page 1 Market Reform Update Contract Certainty Back office electronic infrastructure –Accounting and Settlement strategy work –Repository for claims and A&S –ECF, CLASS@Lloyds, Insurers market repository, IUA pilot –Tools to aid A&S performance (Stage 1) Forward agenda for reform – 2007+ Headlines: –Repository rules will get sorted very soon –Publications: CC FAQs; BA and lineslip guidance; A&S strategy docs www.marketreform.co.uk

3. 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 14 November –Industry assessment of success 8 January –CEO meeting and FSA responseLate January –But remember: December means late Feb/March for data

4. Market Reform Page 3 Contract Certainty Other CC related activity: –MR Slip adoption –Binding Authority Slip Guidelines –Lineslip Slip Guidelines –Measurement FAQs –Representing orders on slips – order hereon

5. Market Reform Page 4 MR Slip adoption MR Slip format published June 2006 Adoption mandated for October 2006 inceptions MRS in current use across market Some brokers still amending their templates Therefore adoption mandate put back to November 2006 MRS being used for Contract Documentation Pilot Issue regarding variant (CD format) outstanding Message = press on with MR Slip adoption

6. Market Reform Page 5 Binding Authority Slip Guidelines Model Binding Authority Slip templates published – August 2006 –US (LMA3018 & LMA5058) –Canada(LMA3020) –Ex-US & Canada(LMA3019) A Marine model agreement exists (LMA3005) –A new version is under development by LMA –When completed a revised slip template will be prepared Slip Guidelines now prepared for Binding Authority Agreements –Consistent with MR Slip approach & above model templates –Agreed cross-market & ready for publication (by tomorrow!?) –Can be used immediately –Mandated usage from 1 February 2007 Also for line slips –Templates for first time

7. 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

8. Market Reform Page 7 Lloyds Legacy Policy Analysis Q3 2006

9. Market Reform Page 8 Legacy Priority 1 items continue to be added to the Unsigned Policy Report even where there is no intention to produce a policy –Change request needed to allow current items with AEC not to appear on LUPR –Agreed by LMBC (Concert) –Agreed by Lloyds (& funding) –Agreed by LMA (XRB) – subject to one issue –Should be commissioned shortly, and be in place before year end Small reduction in priority 2/3 items encouraging as the XIS Content Management (purging) facility only recently available Launch pad: Q4 data should improve sharply –G6 writing to brokers with legacy reduction proposals –Brokers writing to managing agents with legacy reduction proposals –LMA and LMBC likely to follow G6 line

10. Market Reform Page 9 Contract Documentation Pilot Checking contract up front –Published set of checks to be completed before the contract is entered into. Rationalised set of checks in pilot QA tool Choice of who does the checks –Allow each managing agent to perform the checks themselves or to place reliance on a leader or a suitable service provider Contract ready to use –At minimum to produce and issue a client copy within 30 days Discretion on branding –Allow managing agents and brokers to agree on branding of the client copy, provided it includes agreed Lloyds branding. Validation by Lloyds –All pilot risks should be submitted

11. Market Reform Page 10 Contract Documentation Pilot Broad support for concept Limited volumes to date Broadening classes added to pilot to increase volumes –International property; D&O; other liability Slip templates an issue plus general lack of awareness MR Slip addendum – under discussion –Proposed changes required to be made to a Market Reform slip for pilot Work underway to raise awareness and resolve blockers –Significant committed volumes by EOY (st. addendum sorted) QA tool –Third phase (of 4) of QA tool was released 2 October –Rest of COBs due to rollout end of October; and for BA. On track

12. Market Reform Page 11 Accounting and Settlement strategy A&S P2P Overview Design A&S Detailed Premium Processes A&S Detailed Claims Processes A&S Detailed Technical Document –Had intended to publish end August. Held off to enable all to be published at same time. Franchisor Data Requirements –Required for any Lloyd's managing agent to go P2P. Had planned for end-Sept. Still working on it with managing agents.

13. Market Reform Page 12 Documentation Key Points Concentrates on End Vision – full implementation of electronic processing using ACORD messaging Deliberately bold Few caveats why difficult or slow to be realised Not prescriptive on implementation paths Optional implementation paths for trading partners to select Will influence MRG end-vision work and hence agenda for 2007

14. Market Reform Page 13 Key Issues Use or otherwise of post placement message – use of such a message will be optional for implementers of P2P framework Claims processing – documentation illustrates how approach to A&S and claims processing can be consistent with hubs and existing claims schemes Statistical and regulatory data – Lloyds is working with managing agents in this area

15. Market Reform Page 14 Use of the Documentation Highlights process flows and message types Not a formal technical design – it is for each firm to produce their own Set in the context of the other Reforms, eg IMR LPAN, firms should: –Assess impact on current process and evolve new ones –Investigate message transport mechanisms –Consider document repository interoperability and its implications –Familiarise with referenced ACORD documentation –Develop a clear strategy for business units and systems to improve A&S processes

16. Market Reform Page 15 ECF Successfully delivered and now live 111 early electronic claims partnerships underway –Using the live system, even though paper file as well; 1200 new claims; 2000 transactions –IUA pilot – extended to end-Q4 Contractual framework being sorted –Key to initial up take; more firms committed to 100% applicable new claims –When it comes out, sign it! Remember this is the initial delivery –Bug fixes in November; more to come in Q1 next year (Binders) Implementation info on MRPO website Optional – really? –Ramp up major priority for Q4 06 and 2007

17. Market Reform Page 16 ECF Partnerships –Firms decide partnerships by class of business / trading relationships –With Lloyds and IUA carriers and XCS –MRPO is monitoring progress New claims and their subsequent transactions –Existing paper based claims (legacy) to be tackled later System Processes and Procedures (SP&P) –Some areas are currently excluded from scope –February CRs will address some of these e.g. Binders; Direct Reporting –See SP&P for full list of areas in scope

18. Market Reform Page 17 ECF Processes & Procedures in MooD 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)

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22. Market Reform Page 21 A&S – the electronic van Successfully delivered and now live –E-mail and direct load –200+ submissions per week already –DRI in testing with four brokers. Live date 7 November Contractual framework –Ditto ECF Further phases –ECF and A&S together – one repository –November (bug fixes); February and now May (utility repository) Implementation info on MRPO website Associations and MRG pushing ramp-up

23. Market Reform Page 22 Resources to support the raising of standards in accounting submissions Delinking possible ahead of end year inceptions for Lloyds business Data on performance Checks – business rules to describe the data –Eg This number for last 3 years of account –LPAN –Taxation –Treaty Statements –Accounting information IUA checks will soon be added To help brokers get it right first time

24. Market Reform Page 23 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 What else? –Talk to your Association and MRPO Use new discussion forum on MRPO website