‘Finish What We’ve Started’ Market Briefing by Mark Chapman Group CIO, Global Aerospace

1. Associations’ Administration Committee ‘Finish What We’ve Started’ Market Briefingby Mark ChapmanGroup CIO, Global Aerospace 27th October 2009

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?

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

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

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

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)

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

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

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

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

11. Cost to Finish What We Started 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

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)

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

15. Delivery Timescale

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

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

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

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