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LMP – Insurance Documentation Contract Certainty Initial Implementations

LMP – Insurance Documentation Contract Certainty Initial Implementations THIS DOCUMENT APPLIES TO THE INITIAL IMPLEMENTATIONS OF THE CONTRACT CERTAINTY PROPOSALS ONLY, AT THIS STAGE. January 2005. CCSG Membership. Kevin Collins (MPC) Chair + MPC member John Bentley (LMA)

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LMP – Insurance Documentation Contract Certainty Initial Implementations

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  1. LMP – Insurance Documentation Contract Certainty Initial Implementations THIS DOCUMENT APPLIES TO THE INITIAL IMPLEMENTATIONS OF THE CONTRACT CERTAINTY PROPOSALS ONLY, AT THIS STAGE January 2005

  2. CCSG Membership • Kevin Collins (MPC) Chair + MPC member • John Bentley (LMA) • Malcolm Forbes-Wilson (Aon) DOC Chair • Paul Gold (GE Frankona) • Steve Hulm (LMP) Secretary • Roy Laker (LMP) • Jo Langley (JLT) • Malcolm Massie (Amlin) • Dave Matcham (IUA) • Edward Moss (Catlin) MPC member • Rob Myers (XIS) • Mike Reidie (Marsh) DOC + LMSC member • Iain Saville (Lloyd’s) Head of BPR • Phillip Sexton (Hiscox) • Peter Spires (Lloyd’s)

  3. CCSG Has … • Developed the process in detail (4 options): • Contract certainty end-vision. Slip leader confirms policy (may use service provider). Broker/Slip Leader finalise policy. • XIS technical check. Broker/Slip Leader finalise policy. • XIS technical check (early) + signing • XIS technical check (after placing) + signing • Prepared an “Implementation Guide” • Developed an Implementation Strategy & Plans • Gained Lloyd’s feedback on proposals: • Tax & regulatory checking performed by XIS. • Value XIS checks to safeguard licenses • Will review checking performed • Options 3 & 4 can proceed with Lloyd’s markets • Engaged with broker group (DOC) to implement + now engaging with companies & LMA

  4. Key Features (for all options) • Fully-claused placing document • Use of model wordings and clauses, wherever possible • Leader-only agreement, wherever possible • Early agreement and checking of the wording • Early finalisation of the policy • Monitor performance – to demonstrate achievement • Early delivery of an evidence of coverage for the client

  5. DRAFT: Documentation – Process Overview. • Process objectives: • Achieve contract certainty • Evidence to the client • Macro process steps: • Quote • Firm order placement • Provide closing information • Technical & regulatory policy check • Finalise policy & evidence to client • Process outputs: • Contract agreed and documented • Contract evidenced to the client • Process measures: • Wording certainty date versus inception date • Firm order date versus inception date • Contract certainty date versus inception date • Date evidenced to the client versus inception date • Process inputs: • Risk information • Client requirements • Relevant wordings & clauses Start: Client Requests Quotation End: Contract evidenced to client

  6. DRAFT: Documentation – Options 1 & 2. • Option 1 • Broker prepares draft LMP policy & agrees with slip-leader • Slip Leader confirms policy up-front • Service provider may conduct Technical / Regulatory check where required by Slip Leader • Broker/Slip Leader finalise policy after signing-down • Contract certainty can be achieved and evidenced to client by inception date • Option 2 • Broker prepares draft LMP policy & agrees with slip-leader • Slip Leader confirms policy up-front • XLMS conduct Technical/Regulatory check and confirm to Slip Leader & broker • Broker/Slip Leader finalise policy after signing down • Contract certainty can be achieved and evidenced to client by inception date

  7. DRAFT: Documentation – Options 1 & 2. Options 1: Conducted by Slip Leader – or service provider. Option 2: Conducted by XLMS. Options 1 & 2: Conducted by broker/slip leader • Finalise Policy • Confirm technical & regulatory check performed • Add jacket / attestation clause and security schedule • Sign policy • Prepare copies • Issue evidence to client Quote Request quote Draft policy Present & agree policy Quote Review quote(s) Confirm policy Firm Order Placement Firm order Seek & write lines Placing complete Identify changes Provide closing information Signing down Prepare closings Submit / issue closings Submit policy Check closings Technical (& for Lloyd’s Regulatory) policy check - if changes Proceed to Finalise Policy if no change from original draft policy Technical (& for Lloyd’s Regulatory) policy check Options 1: Conducted by Slip Leader – or service provider. Option 2: Conducted by XLMS.

  8. DRAFT: Documentation – Options 3 & 4. • Option 3 • Broker prepares draft LMP policy & agrees with slip-leader • Slip leader invokes XLMS check up-front • XLMS conduct Technical / Regulatory check and confirm to slip-leader & broker • XLMS finalise Policy after signing-down • Contract certainty can be achieved and evidenced to client by inception date • Option 4 • Broker prepares draft LMP policy & agrees with slip-leader • Broker invokes XLMS check after signing down • XLMS conduct Technical / Regulatory check and confirm to slip-leader & broker • XLMS finalise Policy after signing-down • Contract certainty can be achieved and evidenced to client by inception date

  9. DRAFT: Documentation – Options 3 & 4. Option 4: Proceed to Firm order placement from quote Option 4: Conduct Technical & Regulatory review after signing down • Finalise Policy • Confirm technical & regulatory check performed • Add jacket / attestation clause and security schedule • Sign policy • Prepare copies • Issue evidence to client Quote Request quote Draft policy Present & agree policy Quote Review quote(s) Confirm policy Firm Order Placement Firm order Seek & write lines Placing complete Identify changes Provide closing information Signing down Prepare closings Submit / issue closings Submit policy Check closings Technical (& for Lloyd’s Regulatory) policy check Option 3: Proceed to Finalise Policy if no change from original draft policy Technical (& for Lloyd’s Regulatory) policy check Option 3: Review draft policy prior to, or at, Firm order placement

  10. DRAFT: Process Charts - Key. • Key: • Process flow (data transfer): • Prime process flow • Alternative process flow • Decision point • System or Database • Process Step • Document ? 1.1 Request Quote Policy W Wording Certainty (amber provisional) Firm Order Contract Certainty (amber provisional) Date Evidenced to Client F C D

  11. DRAFT: Interim approach for Lloyd’s and Companies pending Lloyd’s review of XLMS activities - Option 3. ? 1.1 Request Quote 5.3 Receive Evidence F 2.1 Firm Order 1.2 Draft, Present & Agree Policy 1.4 Select Quote 1.5 Confirm Policy Client Policy 3.2 Prepare Closings D 5.2 Issue Evidence 2.3 Placing Complete 3.1 Sign Down 3.3 SubmitClosings 2.2 Request & Write Line(s) Placing Broker ? ? 3.4 SubmitPolicy ? 2.4 Identify Changes FDO S&A 1.3 Quotes/Support Quotes Stage 2 ? ? ? ? Slip Leader(s) W C Following Underwriters If changes applied 3.5 Check Closings 4.1 Technical (& Regulatory) Check ? Bureau/Service Provider W 5.1 Finalise Client Policy XLMS 4.2 Technical (& Regulatory) Check XLMS W Inception Inception TIME C

  12. DRAFT: Interim approach for Lloyd’s and Companies pending Lloyd’s review of XLMS activities - Option 4. ? 1.1 Request Quote 5.3 Receive Evidence F 2.1 Firm Order 1.2 Draft, Present & Agree Policy 1.4 Select Quote 1.5 Confirm Policy Client Policy 3.2 Prepare Closings D 5.2 Issue Evidence 2.3 Placing Complete 3.1 Sign Down 3.3 SubmitClosings 2.2 Request & Write Line(s) Placing Broker ? ? 3.4 SubmitPolicy ? 2.4 Identify Changes FDO S&A 1.3 Quotes/Support Quotes Stage 2 ? Slip Leader(s) W C Following Underwriters If changes applied 3.5 Check Closings ? Bureau/Service Provider 5.1 Finalise Client Policy 4.2 Technical (& Regulatory) Check XLMS W Inception Inception TIME C

  13. DRAFT: Documentation – Summary. Key Differences: • Option 3 • Broker prepares fully-claused draft LMP policy & agrees with slip-leader • Slip leader invokes XLMS check up-front • XLMS conduct Technical / Regulatory check and confirm to slip-leader & broker • XLMS finalise Policy after signing-down • Contract certainty can be achieved and evidenced to client by inception date • Option 4 • Broker prepares fully-claused draft LMP policy & agrees with slip-leader • Broker invokes XLMS check after signing down • XLMS conduct Technical / Regulatory check and confirm to slip-leader & broker • XLMS finalise Policy after signing-down • Contract certainty can be achieved and evidenced to client by inception date • Both options 3 & 4 can meet our objectives: • Contract Certainty by inception • Evidence of Coverage by inception • After the Lloyd’s Review: • Options 1 & 2 could offer potential for streamlining the process

  14. Process Failures – what can go wrong ? • Significant risk factors: • Changes are applied during placing AND either: • It is not reflected in all documentation • It is wrongly applied • Insufficient agreement is gained • XLMS technical check not satisfactorily completed due to either: • Rejections/queries not being resolved • Unable to complete in a timely fashion due to e.g. • Submitted too late • File queried/rejected • Seasonal peaks • Lack of resource • File lost

  15. CCSG Implementation Planning • Initial Implementations Q1-Q2 2005. 200-300 risks across all classes. • Process options 3 & 4 for Managing Agents. • 1 & 2 possible for companies ? • Classes identified: Aviation (Hull, War, Aviation General); PI; D&O; NA Property Fac R/I; Treaty; Binders; Marine • Performance Monitoring in parallel (broker spreadsheet returns) to monitor key dates achieved. • Brokers identifying possible risks to be processed within initial implementations: Aon, Benfield, Heath Lambert, JLT, Marsh, Miller, Willis • Now engaging with markets (via IUA, LMA & non-IUA companies)

  16. Implementation Timetable • Publish implementation guide (options 3&4) Dec 2004 CCSG • Confirm participants Dec 2004 CCSG • Initial implementations Q1–Q2 2005 CCSG • Initial performance monitoring Q1–Q2 2005 LMSC • Lloyd’s review of checking Q1-Q2 2005 Lloyd’s/XIS • Amend Lloyd’s underwriting req’ts TBC Lloyd’s • Review LMP Policy Guidelines Q1 2005 LMP • Determine impact of Lloyd’s findings Q2 2005 CCSG/MRGE • Publish initial performance results Q1-Q2 2005 MRGE • Evaluate initial implementations Q1-Q2 2005 CCSG/MRGE/XIS • Define strategic technology solution(s) end Q2 2005 CCSG/MRGE • Review service change requests Q3 2005 TBC IUA/LMA/XIS • Publish implementation guide (other options) Q3 2005 TBC CCSG/MRGE • Plan & prepare further implementations Q3 2005 TBC CCSG/MRGE • Commence further implementations Q3-Q4 2005 TBC CCSG

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