market reform newsletter June 2007 issue 27
View from the Company Mar- For further information
ket... MRPO Contacts
I’m pleased to have the opportunity to introduce this month’s Market Reform Contract Certainty & Legacy
Newsletter, and to provide an overview of the latest reform activities and pro- Steve Hulm
gress within the Company community of the London Market.
Telephone: 020 7327 5249
To say the last few months – and June in particular – have been hectic would Email: email@example.com
be a gross understatement! The consolidated Contract Certainty Code of
Practice, second release of the Market Reform Slip (now Market Reform Con- Technical Architecture
tract) and our liaison with LMBC to facilitate a London Market approach to Rob Campbell
LMA’s announced intentions on contract checking and documentation have all Telephone: 020 7327 5932
reached a conclusion during this month. We have also finalised the Company Email: firstname.lastname@example.org
market’s approach to monitoring progress on Legacy (see below), and contin-
ued to advance the four key imperatives to broadening Company take up of Programme and Communications
the Electronic Claims File (ECF). IUA activities are also underway to promote
de-linked accounting messages and the electronic endorsement project.
Telephone: 020 7327 5278
ECF is currently our number one reform priority, and there is a separate article Email: email@example.com
by John Hobbs later in this newsletter. You will also see an item on the con-
solidated Contract Certainty Code of Practice, with which IUA member practi-
tioners have been heavily engaged. Similarly there has been wide consulta- Lloyd’s Contacts
tion with our members on the development of the Market Reform Contract and
we are pleased with the way that this has again evolved to reflect better the Contract Certainty & Legacy
needs of the whole London Market.
With regard to contract checking and documentation, there is broad consensus Telephone: 020 7327 5685
amongst IUA members that the intentions announced by the LMA are equally Email: firstname.lastname@example.org
applicable to Company market bureau business, and align with the Company
non-bureau business model in many areas. Subsequent discussions involving Repository (A&S/ECF)
the IUA, LMBC and Lloyd’s have introduced the potential for significant sav- Adam Stafford/Simon Collins
ings in document production and these are currently being refined. Telephone: 020 7327 6634/6513
Finding an effective way to best demonstrate Company market progress in Email: email@example.com
dealing with Legacy has been a major challenge. Liaison with the Legacy pro- firstname.lastname@example.org
ject managers of member firms confirmed significant activity, but also high-
lighted varying risk based approaches that compromised the extent to which
the Company unsigned policy reports (UPR) from XIS could reflect the true
position. These include:
LMA - www.the-lma.com
• Commencing with ‘Priority 1’ to tackle major potential exposures first.
LMBC - www.lmbc.co.uk
• Enforcing line conditions as a ‘follower’ agreement party to policy re-
IUA - www.IUA.co.uk
quirements, which the XIS ‘purging’ facility cannot presently accommo-
ACORD - www.acord.org
date at individual insurer / risk level.
MRG/MRPO - www.marketreform.co.uk
• Using in house records often linked to non-bureau business, with little
or no interaction with the XIS LUPR service. (continued overleaf)
Company Market Legacy Reduction
Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec-
07 07 07 07 07 07 07 07 07 07 07 07
Legacy index MRG Targets
market reform newsletter
Continued from page 1 MRPO pair fly the nest...
The conclusion has been to invite member Companies to submit
their individual legacy statistics to the IUA. These are then be- The next month sees the departure for pastures new
ing aggregated and presented as an overall Legacy ‘index’, as of two stalwarts of the market reform programme.
per the recognised mechanism for tracking progress across the John Harvie, who has accepted a role with ATOS Con-
London Market as a whole. The latest position (April 2007) is
sulting, has played a lead role over the past two years
illustrated in the graph on page 1, showing a Company index of
74 - well on the way to the half year target of 60. in ensuring the market met its commitments to FSA
with regard to Contract Certainty. He has also this
Finally, this edition of the newsletter also contains a further fea-
ture focussing on market firms’ real experiences in implementing year led the labour of love that has been the consoli-
reform initiatives. Here, Willis shares its experience in using the dation of the Contract Certainty principles and guid-
direct load mechanism for presenting accounting and settlement ance into a single, timeless, document (see article
data. opposite). He goes with our best wishes.
Dave Matcham, Chief Executive, International Underwriting Asso-
Steve Hulm is a reform veteran. This is not a cheap
jibe aimed at his advancing years but merely a reflec-
tion that he has been part of MRPO since its LMP
Maintaining the foundations incarnation. His five years of reform have seen him
involved in a myriad of improvement projects but his
As the market progresses, it is important that we ensure that the
lasting legacy (using the word in a positive sense, not
core foundations of the reform programme progress with it. This
month has seen two significant publications to ensure this the “you must reduce it” interpretation we are used to)
– a new, consolidated Code of Practice for Contract Cer- will be the new Market Reform Contract—again see
tainty and a new version of the slip – rechristened the Mar- the article opposite. Steve has shown remarkable
ket Reform Contract.
patience and skill in negotiating this document to
The new Code of Practice is the latest phase of the UK’s drive to agreement with all parties. Steve is joining Lloyd’s full
embed Contract Certainty into the day-to-day processes of its time where he will continue to be involved in reform
insurance industry. The code brings together all Contract Cer-
tainty guidance issued over the last two years and is the first work—not least as the recipient of cries for help from
ever from a UK market body to cover both the subscription and his former colleagues faced with MRC queries.
non-subscription insurance markets.
The Financial Services Authority (FSA) has welcomed the Code
of Practice which has been endorsed by all the UK’s leading
insurance industry bodies. Dane Douetil, Chair of MRG, said:
“Following the industry’s success in meeting the FSA’s chal- Market Reform Contract (MRC)
lenge to materially achieve Contract Certainty by the end of
2006, the market continues to make excellent progress and is Hot on the heels of the code of practice came a new ver-
successfully embedding Contract Certainty in its day-to-day op- sion of the placing document, replacing the MR Slip. The
erations. The code marks the next phase of that work. Devel- change of name reflects the fact that this document will
oped following industry-wide consultation, it builds on the les- often form the final contract documentation sent to the
sons of the last two years, creating an easy-to-follow guide to client. Key changes incorporated in the MRC are:
best practice.” • A reordering of the Sections and Headings to make
MRC more appropriate as a client-facing docu-
The key features of the new code are: ment.
• The definition of Contract Certainty has been modi- • A new Broker Remuneration and Deductions sec-
fied to put the emphasis on the point at which the con- tion.
tract is formed, not inception. This caters for late place- • Contract documentation changes (effective 1 July);
ments within a single definition. However, it is worth not-
Insurer Contract Documentation (replacing Docu-
ing that FSA have been clear that firms must keep
ment Production) now appears in Risk Details.
monitoring late placement and put measures in place to
try and reduce its’ occurrence. • Clarification of the usage of the Subscription Agree-
ment and Fiscal And Regulatory Sections.
• The aim has been to make the principles “timeless”.
This means that any targets or timescales are included in • A new (re)insurer’s liability clause has been devel-
the guidance to make it easier to amend these without oped that addresses the needs of companies and
having to change the fundamental principles. the Lloyd’s markets.
• The scope of Contract Certainty has been properly A copy of the MRC implementation guide and companion
defined. documents can be downloaded from our website –
• The principles have a consistent structure. www.marketreform.co.uk. In addition a number of presen-
tations, including panel sessions featuring representatives
A copy of the Code of Practice and companion documents can from Lloyd’s, the market associations and MRPO - are
be downloaded from our website - www.marketreform.co.uk. being organised. Again, see our website for details.
Hard copies are available from Jessica Miller (by emailing
June 2007 issue 27
MRG = Market Reform Gong?
Company claims - as easy
Dane Douetil, chair of the Market Reform Group, has
as ECF been named a Commander of the British Empire in the
Queen’s Birthday Honours list for services to business.
Last month we heard from Barnabas Hurst-Bannister on This reflects, in part, the prominence with which the
the plans for the new London Market Repository Board. reform programme is viewed in the wider business
world. Dane said: “This is a huge surprise, wholly
Here John Hobbs, Director of Market Services at the
unexpected and I am truly delighted. I would like to
IUA, gives an update on a crucial aspect of the work the thank and acknowledge the substantial contribution
new board is overseeing - use of ECF in the Company made by everyone in the market engaged in the re-
market. form agenda in making my task easier and enabling us
to achieve significant progress in the modernisation of
We should start by recognising that electronic claims proc-
the insurance industry “
essing is not new in the Company market. Company
CLASS (Claims Loss Advice and Settlement System) was
implemented in the late 1980s and has since processed in
excess of one million claims, with current annual volumes tives to achieve this goal.
of around 100,000. This system is the basis for the new
• Agreement of the Service Contract. The IUA model
Lloyd’s CLASS development, which, of course, has the
has been used to develop a version in conjunction
benefit of utilising the latest technology.
with the LMA and LMBC that is now the basis for
The use of the repository based Electronic Claims File negotiations with XIS that are targeted to conclude
(ECF) is therefore more of an evolutionary change than a by mid July.
new concept for the Company market, and commenced in • Quantification of the operational costs. The basis
June 2006, when eight IUA member companies started to of apportionment of the repository costs between
engage in a pilot with five broking firms, on the basis of the Accounting and Settlement (A&S) and ECF, and
service contract devised for Lloyd’s managing agents. between the development / infrastructure and op-
Whilst initially very slow, the period to the end of last year erational costs has been finalised. This will enable
saw the flow of new claims advices steadily increase to an a ‘pure’ ECF operational cost for an individual Com-
overall total of 500. Additionally, good progress was made pany to be calculated and will be advised to mem-
with developing a model service contract for a ‘live’ envi- bers following the June meeting of the IUA’s Ser-
ronment; producing a systems and procedures manual; vice Review Panel.
considering the implications of ECF on established claims • System changes. These arise from the original
agreement processes; and determining the costs that design of the repository that was built for the
would apply to live operations. Lloyd’s business model, and requires a number of
changes to allow the necessary interfaces with the
With regard to claims agreement processes, it was impor- Company versions of CLASS. These have been
tant to verify the operation of the repository for the Com- specified, documented, estimated, funded, and are
pany business model. This is particularly true for reinsur- now in development. Delivery of some of these
ance, where typically companies will agree claims for their changes may be dependent on other XIS releases,
own proportions, rather than the model used commonly for and consequently may not be until early 2008.
Lloyd’s where the lead and XCS (by delegation for the • Workarounds for system shortfalls. To mitigate the
following Lloyd’s markets) agree the claim. potential impact of the delivery time for some of the
In January of this year, four additional companies joined system changes above, workarounds have been or
the pilot and by March there were 52 partnerships operat- are being developed and implemented.
ing by class of business across the 12 Companies and 7 We have strong indications that the availability of an ap-
brokers then involved. The level of new advices had risen propriate service contract and acceptable costs, together
to over 850 and a formal evaluation of the pilot had been with the workarounds, will result in a good proportion of
completed, together with the IUA model service contract pilot firms completing the transition to fully live operation.
(for discussion with XIS), and the systems and procedures In addition, 3 more companies have expressed interest in
manual. starting to use ECF, and a further 2 are already ‘live’ via
The scope of the evaluation included system performance, direct arrangements with XIS. Levels of new advices and
XIS service and support, system functionality, and busi- class of business partnerships with brokers continue to
ness efficiency impact. The conclusions confirmed both rise, and some now also include ‘legacy’ claims.
the successful experiences of the participating companies, Companies will continue to have varying criteria and cir-
and the issues to be resolved to facilitate their transition to cumstances for the pace at which they adopt ECF, and
full live operation and the wider take up by the Company IUA will continue to encourage take up and ensure that
market as a whole. The current focus is on four impera- they have the necessary support and information on which
to develop and advance their plans. 3
market reform newsletter June 2007 issue 27
Dates for your diary
Taking the direct approach—how to
The Market Reform Forum sessions
get up and running on A&S
are designed to provide an update
Willis have been among the pioneers of electronic processing for accounting
on the progress of the reform and settlement. In this article, John Muir, Chief Operating Officer: Fine
programme and give more detailed Art, Jewellery & Specie at Willis, takes us through their experiences in
information on particular projects or getting up and running with the Direct Load method of submitting premi-
aspects of the process. ums…
Upcoming dates are provided below. Willis has been piloting Direct Load and the Market Repository for Stage 1
Full details on the topics, locations and Stage 2 signings since August last year, with a wholesale rollout across
and time for each one will be pub- all divisions since October. The mechanism allows brokers to upload
LPANS, slips, endorsements and drafted policies directly into the Market
lished prior to the session.
Repository so they can be accessed and allocated instantly by XIS. This
Thursday 28th June - 9.15am has resulted in an average reduction of over 8 days in end to end signing
times and facilitated significant increases in the numbers of policies achiev-
Tower Room, LUC
ing the FSA Holy Grail of issuance in 30 days. Direct Load is now used for
Thursday 26th July over 80% of all Willis’ current submissions.
Thursday 30th August
As Direct Load is simply a delivery mechanism, presentation content of
Stage 1 and Stage 2 does not change. For brokers with legacy systems not
Places can be booked by emailing
capable of ACORD-messaging, it provides a low-cost alternative that dra-
email@example.com. Places matically reduces the frictional issues of posting premium and policy entries.
are reserved on a first come first It also facilitates a full audit trail that allows the progress of items to be
served basis. tracked throughout their lifecycle. Where a policy is required, submissions
can be made S&A (Stage 1 and 2 together) allowing XIS to work on both
New beginners forums
items in parallel, speeding up the end to end signing times. Signing num-
We also run a series of seminars and bers and dates are posted electronically and hard copy signed policies are
mailed back by ‘snail mail’ (in fact, via the Willis delivery van!).
presentations for those who need to
get up to speed with the reform Whilst electronic processing is the way forward, the implementation of Direct
agenda. If you are interested in at- Load has not been completely problem free. Initially, query rates rose as
tending one of these – or would like a users on both sides got to grips with the new system, but over time and with
MRPO representative to make a perseverance, these teething problems have been overcome. With increas-
“market reform – from the top” pres- ing time pressures in policy signing, we rely more and more on status infor-
entation to your firm, please email mation within the Xchanging Tracker system which has highlighted the im-
firstname.lastname@example.org portance of data integrity and our own understanding of the system. We
have worked closely with XIS to address these issues. Most significantly,
IT Club dates: there is still some work to be done in respect of automatic uploading of sign-
ing numbers and dates into the repository, to ease what is currently quite a
Thursday 28th June - 11.00am cumbersome, manual process.
Balls Brothers, Minster Court
The implementation of Direct Load provided instant benefits:
Thursday 26th July
Thursday 30th August • As XIS use the data supplied in the Direct Load Work Order to auto-
matically generate the Tracker record, there are no gaps in track-
Suppliers Forum dates: ing throughout the signing process.
• There is less risk of data errors (particularly on the UMR) caused by
Thursday 2nd August - 10.00am rekeying.
ACORD Conference Centre, LUC • The new process does away with physical signing slips so we are
Thursday 4th October already reaping the benefits of the reduced storage requirements and
Thursday 13th December instant access to signing information at any location.
To book a place on either of the From a policy perspective, the weakest link in the Direct Load process has
above please contact Mel Harding, been the hard copy return of policy documents. Two things should help here
ACORD, by emailing - the changes to contract checking and documentation should mean there is
less need for a policy document separate from the new Market Reform Con-
tract; and, where a policy is still required, XIS have developed an electronic
solution. Willis will be piloting this from July.
Additionally, Willis is implementing new systems to move us much nearer to
full electronic processing but in the meantime, Direct Load has given us a
valuable mechanism to achieve our FSA policy issuance and control man-
We would commend its wider take up.