1. ‘Finish What We’ve Started’ Market Briefing by Mark Chapman Group CIO, Global Aerospace 27 th October 2009 Associations’ Administration Committee

2. This Presentation  What is it we started and need to finish?  What benefits will these the changes bring?  How much will the programme cost, when will it be delivered and how will it be funded?  How was the procurement done and does the programme deliver fair value for money?  Have we got the right governance in place to successfully deliver the programme?  How does this position the London Market for the future? 2

3. What do We Need to Finish?  All accounting submissions within the scope of IMR  As close to full usage of ECF for all claims as is practicable  A significantly better user experience for ECF/CLASS  Support the move to use of structured ACORD standard data for accounting 3

4. Why finish? Reap the full benefit from the investment thus far:  ECF quicker than paper but not all claims in scope  A&S via the repository is quicker than paper but structured data will be quicker still  Structured data will help reduce queries and rejections for accounting submissions  Transfer of accounting splits work from broker to insurer brings London into line with international markets 4

5. Stakes in the Ground Why continue to invest in “old” London Bureaux systems?  Current systems landscape will be with us for at least four years  It is unrealistic to expect to have moved off legacy bureau systems to a new strategic solution until after 2012  Finishing What We’ve Started can not be achieved without systems investment  To protect our investment, wherever possible change is focused on newer systems, such as IMR and ECF, and uses ACORD standards for data exchange 5

6. IMR Security Model What needs to be added to the IMR?  Mid-term Broker and Market Changes  3rd Party Access  Conflict of Interest  Confidential terms What does it deliver?  All accounting submissions within the scope of IMR  Increases in-scope claims for ECF by circa 7%  Brings in scope Vertical Placements (e.g. Aviation) 6

7. What needs to be changed in ECF?  ECF delivered a basic, functioning system  Two years live experience has unearthed significant usability improvements that would aid processing and encourage further take-up:  Convince some players that are yet to be convinced  Address weaknesses in ECF’s usability identified by cross- market user group  Simplify current system where some still have to use up to three versions of CLASS  Hide CLASS, including Company Market CLASS – a 20 year- old green-screen museum piece 7

8. What does ECF2 deliver?  Fast on-line viewing of IMR documents  An electronic claim file containing all documents for a claim  Ability to text search within this file  Removal of CLASS from the carriers’ business processes  Allow claims handlers to respond to all claims via browser screen without the need to use CLASS  One common approach/system for Lloyd’s & Companies  Claims Workflow Management  Provides transparency about the status of each claim  Puts claims handlers in control of their work  Allows managers to balance workload within their teams  Data Warehouse to provide service performance information, data exploration capability and audit trail 8

9. What needs to be changed with A&S?  A&S via the IMR was always viewed as a stepping stone  Removed “van time” but still involved the exchange of scanned documents  eAccounts moves to use of ACORD standard structured data in line with other markets (e.g. continental reinsurers)  Transfer of calculation on non-fundamental accounting splits from broker to insurer brings London into line with other markets 9

10. Benefits of eAccounts  Elimination of re-keying, fewer errors and less rework by both the broker and XIS in the premium process, leading to the potential to improve cash flow to carriers  Delays in current process cost insurers circa £3.5m pa in lost investment income (based on 2% interest rate) [source JMD]  An accounting interface (eBOT) that is in line with international markets (e.g. Europe)  Easier electronic access to the London Market for Brokers in remote locations  Leverages market’s existing investment in IMR and DRI  No systems disruption for Carriers 10

11. Cost to Finish What We Started 11 Build Estimate IMR Security Model£1.3 m ECF2£4.4 m e-Accounts£3.1 m Total Build Estimate£8.8 m Operating costs (2010-12) IMR Security Model No additional cost ECF2£4.9 m e-Accounts No additional cost Total Operating Costs£4.9 m Total£13.7m These figures exclude a 20% contingency budget held by AAC and LMG

12. Contract and Funding  Contract will between XIS, LMA and the IUA  Funding:  The costs will be split 62.5% to LMA and 37.5% to IUA, consistent with previous build projects  LMA Board has formally requested that the Corporation of Lloyd’s provides the money to fund its share of the build costs  IUA Board has confirmed that it will meet its commitment without further recourse to its members  Operating costs to be met by transactions charges to be agreed by the respective Associations 12

13. Procurement Process  Using Xchanging, as the incumbent supplier, to make changes to their systems reduces the risk of failure  Challenge was how to reduce the risk of uncompetitive pricing for the work  Two stage process:  Engaged third party (DMW Group) to audit XIS’s costs, work estimates and technology proposal to assure appropriate technical price  Deployed a market-led commercial negotiation team (Shirine Khoury-Haq, Catlin; Chris Smith, LMA and John Hobbs, IUA – supported by Lewis Love III, Aon) 13

14. Negotiation  Unprecedented access given to DMW Group and the commercial team  Costs reflects a substantial discount on XIS’s “card rate”  Cost estimates believed to be accurate to +/- 20%  While XIS is delivering this programme close to “cost”, the Xchanging group will be making a modest profit  Overall we have established this is a fair price 14

15. Delivery Timescale 15 ProgrammeImplementation date IMR Security ModelNovember 2009 eAccounts - Release 1November 2009 Support for ACORD messaging ECF 2June 2010 eAccounts - Release 2July 2010 Support for non-fundamental splits

16. Programme Governance  London Market Group  Overall responsibility for programme  Strategy and budget setting  Associations Admin Committee  Budget holder for each project  Oversight of programme delivery  Market communications  Programme Manager  Management of programme delivery  Resolution of conflicts between projects  Primary point of contact for Xchanging senior management  Client-side Project Managers  Management of project delivery  Monitoring cost, scope, quality and timescale  Key contact for XIS project managers  Management of market input to projects 16

17. What is not currently in scope  Solution for claims for binders – proposal to be made to LMG in early 2010  Replacement of current EDI messages to insurers with ACORD messages  Changes to support Lloyd’s claims transformation project pilot  Future improvements to IMR, ECF and eAccounts 17

18. The Future  FWWS programme moves the market forward, delivering real and important benefits in the short term  Gives the market 3-year breathing space to plan and implement future systems, allowing freedom to exercise choice in its selection of technology and service providers  Use of ACORD standards reduces our reliance on Xchanging and protects the carrier and broker communities in their technology investment  So while FWWS isn’t the future, it reduces the barriers to moving to a new generation of market systems and infrastructure 18

19. 19 Questions and Answers ‘Finish What We’ve Started’ Market Briefing