1. Electronic Placing in the London Market Market Reform Briefing Rob Gillies Lloyd’s Market Association

2. What is electronic placing and what’s in scope Who’s doing what Experiences and lessons so far Current and planned activity

3. “They always say that time changes things, but you actually have to change them yourself” Andy Warhol

5. 1700 2000 2010?

6. Improved efficiency Reduced costs Exploit strategic business opportunities Why change? Global and market change Customer service demands Need for increased return on capital

7. Agents for Change The global marketplace Convergence of insurance and capital markets Growth of self-insurance High transaction costs Market process inefficiencies Restrictive practices (Dennis Mahoney – Acord Forum London, 2007)

8. What is electronic placing? Face to Face Complex Face to Face, Telephone, Electronic Moderate Electronic Simple Negotiation Data Exchange

9. Resource: Electronic Placing Landscape Analysis Electronic Placing Steering Group - Vision The use of electronic processes, compliant with ACORD international data standards, for the submission of risk details, the agreement of terms, and contract formation for all risk placements and contract amendments in the London market, enabling the selective use of negotiation outside the electronic process where required by trading partners. Accelerating the process and efficiency of placement regardless of geographical location, risk type and distribution route Improving the flow of information and quality of data between parties by entering information only once and at source and enabling the integration of data and documents into brokers’ and insurers’ systems Streamlining the placement process through the removal of paper and redundant steps Enabling Underwriters and Brokers to focus on complex negotiation Reducing costs, particularly where arising from London-specific processes, the creation and exchange of paper and redundant steps in the process Reducing operational risk. Why?

10. Strategic Opportunities Increased Regulatory Compliance and Increased Market Transparency Reduced Costs Increased Operational Efficiency Electronic exchange of data and documents Selective use of face-to-face negotiation enables Benefit delivery Improved customer service + Increased return on capital Benefit delivery

11. Improved management information Earlier sight of data and documents Improved access to markets More productive use of time Electronic exchange of data and documents Selective use of face-to-face negotiation enables Brokers (examples)Insurers (examples) Benefit delivery Improving the broker-insurer relationship Resource: Electronic Placing Benefits Model Increased quality negotiating time Opportunity to grow business Increased attention to the customer

12. Who’s doing what? Trading Platforms 160 ‘markets’ reported to be trading with Aon via Ri3K. January saw 1675 written lines and 889 endorsements processed. Resource: Electronic Placing Landscape Analysis Direct Messaging Lloyd’s Brokers 4 trading live 6 investigating and developing Insurance Companies 1 trading live 9 investigating and developing Managing Agents 6 trading live 24 investigating and developing General Much increased general level of interest over 2007

13. Experiences and lessons so far Technological Barriers Upgrading internal core systems Conflict with other projects Conflict with other reform activity Integration with front and back office systems Development of functionality by suppliers Process Barriers Failure to deliver minimum levels of value required by organisations to participate Version control between paper and electronic slips and other documents Duplicate processes – EP and non-EP Slip signature and evidence of cover Predominance of Outlook as user interface and ‘workflow’ tool Differences between London and international processes

14. Other Barriers Absence of market critical mass Absence of key trading partners Absence of leadership (CEO) support and endorsement in firms Failure to recognise the benefits Reluctance to accept the benefits as a convincing business case Failure of firms to simplify the benefits message and relate to the firm Behavioural Barriers Fear of the impact on jobs, work routines, lifestyle, etc Workload Market reform and change burnout ECF and A&S seen as a priority (politically easy ‘back-office’ functions)

15. Other Barriers Absence of market critical mass (1) Absence of key trading partners (2) Benefits not yet fully recognised (3) Lack of leadership (CEO) support and endorsement in firms (5) Reluctance to accept the benefits as a convincing business case Failure of firms to simplify the benefits message and relate to the firm Behavioural Barriers Fear of the impact on jobs, work routines, lifestyle, etc (4) Workload Market reform and change burnout ECF and A&S seen as a priority (politically easy ‘back-office’ functions) Top Five Barriers to Adoption

16. Current and Planned Activity Development Evidence of cover Enhancement of the data message Value of the data Compatibility with accounting and settlement processes Multi-section risks Market Engagement Brokers, Carriers and Suppliers Market wide class of business pilot Alignment with eMRCE work Vision, Objectives and Roadmap Roadmap under development – visibility of the steps along the way Knowing whether we’re getting there; metrics Target driven adoption?

17. 2010? Electronic Placing Accounting and Settlement Electronic Lifecycle of the Risk Claims adjustment and settlement Evidence of Cover Risk Renewal Contract Amendments

18. Rob Gillies Head of Market Processes Lloyd’s Market Association 020 7327 8377 robert.gillies@lmalloyds.com Resources: www.the-lma.com