MRC Briefing beginners

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MRC Briefing  beginners Powered By Docstoc
					The Market Reform Contract
          (MRC)


Steve Hulm (MRPO)
                Agenda


                  • Background
                  • Key changes
                  • Implementation arrangements
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                  • Relationship to other work
                     – Contract certainty guidance
                     – Contract documentation
                     – QA Tool
                  • Binders & Line-Slips
                  • Market Reform Contract – future direction
                  • What do you need to do?
                  • Questions
                  • Further assistance
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                Background




                Lloyd’s            First LMP         Third LMP            Market
                standard slip         slip              slip            reform slip
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                introduced
                1971                10/2001               4/2005            6/2006



                          1986                 11/2003             2/2006            6/2007

                                               Second              ACORD          Market
                       Lloyds A4
                                                LMP                 GPD           reform
                          slip
                                              BRAT slip                          contract




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                Background - Why do we need another “slip” version?


                 • Reform activity generates “slip” changes
                 • So do other changes (e.g. regulatory)
                 • This is because the “slip” contains product details,
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                  documentation requirements & processing requirements. If
                  any of these change, it potentially affects the “slip”.

                 • Recent examples:
                     – Contract certainty (expression of period etc. etc. etc.)
                     – Contract Documentation (1 July changes)
                     – Updates from Lloyd’s (Fiscal & Regulatory)
                     – Repository usage: ECF & A&S (Bureaux arrangements)


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                Background – Scope (as for MRS open-market)


                  • This is the standard for open-market business & not (yet) for
                      placing Binding Authority Agreements or Line-Slips.

                  •    All firm quotes and firm order open market insurance and
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                      reinsurance business placed by London Market brokers.

                  • All marine open cargo covers and declarations attaching thereto.
                  • Declarations or off-slips attaching to line-slips.
                  • Applicable declarations off limited binding authority agreements,
                      where the coverholder, broker and insurers agree that it is
                      appropriate.

                  • “Client Exempt” slips do not need to conform to these guidelines,
                      although preferable if they do so as far as possible.


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                Key Changes – Overview 1


                  •   Standard renamed as the Market Reform Contract,
                      recognising that the placing document will often form the
                      final contract documentation.

                  •   Style and format of MRC documentation enhanced,
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                      clarifying the required structure of the contract document.

                  •   Sections and headings re-ordered to make it more
                      appropriate as a client-facing document.

                  •   Supports the possible separation of Subscription
                      Agreement, Fiscal and Regulatory & Broker Remuneration
                      & Deductions. Does not mandate this.

                  •   Insurer Contract Documentation now appears within Risk
                      Details.



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                Key Changes – Overview 2


                  •   Security Details contains all headings related to insurer
                      participations. New (Re)insurer’s liability clause –
                      LMA3333.

                  •   Use of Subscription Agreement & Fiscal & Regulatory
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                      sections clarified.

                  •   New Broker Remuneration & Deductions section.

                  •   Content of headings – little change, some clarification of
                      guidance.

                  •   New “Market Reform Contract – Data Dictionary”




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                Potential separation
                    from client
                  documentation




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                Key Changes - Risk Details


                   •   New heading INSURER CONTRACT DOCUMENTATION which
                       replaces DOCUMENT PRODUCTION
                       •   Broker/Leader can specify placing document to be the contract
                           document; or
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                       •   XIS to sign policy on policy form “xxxx”.
                       •   Separate FORM heading typically not required
                       •   A following insurer may also outline any requirements that are
                           specific to them e.g. need for a policy.

                   •   Headings removed from Risk Details:
                       •   Order Hereon, Several Liability, Signing Provisions (Security
                           Details)
                       •   Brokerage, Other deductions from Premium (Broker Remuneration
                           & Deductions)

                   •   “Typical” order of headings changed – not mandatory

                       •   Based on relevance to client & like fields together
       9           •   INSURERS within heading titles rather than UNDERWRITERS
                Key Changes - Information


                  •   No change in usage from MRS to MRC.

                      •   Guidance expanded in relation to schedule of locations.
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                Key Changes – Security Details


                 •   A new (RE)INSURERS LIABILITY heading containing a new
                     clause (LMA3333). This was based on merged
                     ATTESTATION & SEVERAL LIABILITY clauses avoiding the
                     need for separate LSW1001 & LMA3036A.
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                 •   ORDER HEREON, BASIS OF WRITTEN LINES, BASIS OF
                     SIGNED LINES and SIGNING PROVISIONS have been
                     moved into this section

                 •   Allows page-numbering to restart after Security Details.

                 •   “Stamp conditions should be removed and recorded
                     elsewhere in the contract, where there is provision to do
                     so.”

                 •   Guidance on line conditions – same for MRC as for MRS.

                 •   Expression of Orders – guidance note issued in Q1 2007
                     incorporated into MRC.
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                Key Changes – Security Details (LMA3333)


                 •   Establishes several liability of each (re)insurer.

                 •   Where a Lloyd’s syndicate is involved establishes the
                     several liability of each member.
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                 •   Confirms how the (re)insured can obtain the
                     membership of a syndicate (now Lloyd’s not LPSO).

                 •   Clarifies the relationship between written and signed
                     lines, and that a schedule of signed lines may be
                     appended.

                 •   Allows for signing-down & signing-up clauses used
                     (e.g. up to 5% subject to leader agreement).

                 •   Corrects grammatical discrepancies within original
                     LMA3060.
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                Key Changes – Subscription Agreement


                 •   Guidance notes (Q1 2007) incorporated into MRC

                 •   Headings re-ordered – like fields together

                 •
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                     New heading called AGREEMENT PARTIES FOR
                     CONTRACT CHANGES FOR THEIR OWN PROPORTION
                     ONLY, for those that want to agree their own endorsements

                 •   Usage of renamed heading, OTHER AGREEMENT PARTIES
                     FOR CONTRACT CHANGES FOR PART 2 GUA CHANGES
                     ONLY, clarified

                 •   Renamed - INSTALMENT PREMIUM PERIOD OF CREDIT

                     •   Not just applicable to deferred scheme.




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                Key Changes - Fiscal & Regulatory


                  •   Guidance notes (issued Q1 2007) incorporated into MRC

                  •   LICENSE INFORMATION heading withdrawn

                  •
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                      TAXES PAYABLE BY UNDERWRITER becomes TAXES PAYABLE
                      BY INSURERS




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                Key Changes - Broker Remuneration & Deductions


                  •   New section

                  •   Can be used to express either TOTAL BROKERAGE or RETAIL &
                      WHOLESALE BROKERAGE
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                  •   Also includes FEE PAYABLE BY CLIENT? & OTHER
                      DEDUCTIONS FROM PREMIUM




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                Key Changes – MRC Data Dictionary


                  •   New publication (c.f. MRS). Based upon Global Placing Document
                      (GPD) documentation

                  •   MRC identifies usage & content of key headings (within
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                      Appendices)

                  •   Data Dictionary

                      •   Lists usage of all headings
                      •   Identifies heading name variations (not exhaustive)
                      •   Shows whether heading mandatory, conditional or optional
                      •   Maps the content onto ACORD Reinsurance & Large
                          Commercial (RLC) Placement XML message data items
                      •   This is of value in developing electronic processing solutions,
                          because it enables electronic messages & paper documents
                          to operate in parallel.
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                Relationship to other work


                 •   QA Tool

                     •   MRC, the QA Tool, Crystal and the CC checklist material
                         all set out requirements of relevance to checking the
                         placing document.
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                     •   The MRC standard applies to the whole London Market.
                     •   MRC maintained by MRPO on behalf of all of the Market
                         Associations and Lloyd’s.
                     •   The QA Tool applies to Lloyd’s participations (although
                         many of the requirements could apply equally to
                         companies)
                     •   The QA Tool is maintained by Lloyd’s, on behalf of
                         Managing Agents.
                     •   The QA Tool incorporates the original CC checklist.


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                Binders & Line-Slips


                 •   The MRC standard currently only applies to open-market
                     business, as defined in the scope.

                 •   For placing Binding Authority Agreements and Line-Slips
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                     the current MRS-style standards should continue to be used
                     for now.




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                Market Reform Contract – future direction


                  • Recognise implementation costs of new standards – but
                    need to reflect changes occurring in market.

                  • Aim to have no more than one update each year, avoiding
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                    implementation within peak renewal periods (for the
                    majority of business).

                  • The standards for Binding Authority Agreements and Line-
                    Slips will remain consistent with the open-market standard.




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                Evidence of Cover to the Client

                 •   The LMA board have agreed that some sections of MRC (including
                     broker remuneration) can be removed and it remains Insurer
                     authorised. If there are any changes to the authorised section this
                     becomes a BID.

                 •   The IUA board endorses the MRC as an insurer approved evidence
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                     of cover, subject to:

                     - The inclusion of, and no changes to the Risk Details, Information
                     and Security sections, save for the addition of signed lines.

                     and recommends

                     - Either the inclusion of the broker remuneration section, or
                     reference in the Risk Details section to the client’s rights to request
                     remuneration details.

                 •   Any additions or extra documents have BID status.

                 •   Broker Insurance Documents (BIDs) are a valid evidence of cover,
                     but should not be referenced within MRC.

                 •   The contents/title of a BID are a matter for the broker except that
                     they must not be represented as insurer authorised.
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The Market Reform Contract
          (MRC)

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