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					Topic                                    Date                                                                                Question                                                                                                                                                        Answer

Governance, Risk Management & Use
Actuarial Function                                The plan shows the review of the Actuarial Function late in the process - does Lloyd's consider this appropriate?                                                      The Actuarial Function is a good example of an area that whilst sitting in the Governance, Risk Management and Use workstream, will
                                                                                                                                                                                                                         also be considered as part of other workstreams (e.g.. Technical Provisions). As such the specifics of certain elements of this review
                                         Mar-11                                                                                                                                                                          will be considered across a number of workshops and documentation requests and all review work will not be left until Q3 2011.

Actuarial Function                                If a managing agent has its Actuarial Function completely outsourced, can it still be Solvency II compliant?                                                           Yes, however, there needs to be clear evidence of compliance and the requirements for the Actuarial Function could make this
                                                                                                                                                                                                                         onerous. For example: The Actuarial Function must “contribute to the effective implementation of the risk-management system referred to in
                                                                                                                                                                                                                         Article 44, in particular with respect to the risk modelling underlying the calculation of the capital requirements”. This extends the requirement
                                                                                                                                                                                                                         beyond calculating the technical provisions and the requirement will need to see links to active contribution to the risk management
                                                                                                                                                                                                                         system of a syndicate and the capital modelling. There is more emphasis on the Actuarial function to assess the suitability and quality
                                                                                                                                                                                                                         of data. This will extend beyond receiving a Data Accuracy Statement and syndicate will need to evidence how an external party will be
                                                                                                                                                                                                                         satisfying the requirements surrounding data management. The requirements surrounding outsourcing introduced as part of Solvency
                                                                                                                                                                                                                         II will also need to be satisfied.

Contingency Plans                                 What is Lloyd's contingency plan in the event that the Internal Model is not approved?                                                                                 Lloyd's is currently undertaking discussions at steering group level on the outcomes and actions required should the model not be
                                                                                                                                                                                                                         approved - this includes both syndicate models and the LIM. These discussions are ongoing internally and will also be discussed with
                                                                                                                                                                                                                         the FSA. Agents should have contingency plans in place to deal with the situation where a syndicate model is not approved.

Evidence Templates                                Are agents required to complete the greyed out use test tab on the evidence template?                                                                                  In the use test template we require agents to complete only the cells in the lines which are not greyed out - i.e. the 9 principles of the
                                                                                                                                                                                                                         Use Test (rows 6,10,13,18,21,25,29,32 & 36). Under each of these principles we have greyed out the underlying rows of detail points
                                         Mar-11                                                                                                                                                                          below which provide more detail around the principle but where we would not necessarily expect separate evidence.

                                                                                                                                                                                                                         Agents should, however, bear these principles in mind when completing the evidence templates. Whilst they are not expected to be
                                                                                                                                                                                                                         evidenced separately, Lloyd's will look for application of the principles when assessing the quality of evidence in other areas.
Information Systems                               Could Lloyd’s provide more guidance around the requirement regarding “Adequacy of Information Systems”. What should the content of documentation in relation to this   The evidence templates purposely only set out the CEIOPS requirements as we want to understand how agents think they meet each
                                                                                           information systems that produce sufficient, reliable, consistent, timely and relevant
                                                  be? CEIOPS guidance is very vague: "Establish                                                                                                                          of the requirements. As part of the dry run review in 2010, the sort of evidence we thought may be available was: IT systems review
                                                  information concerning all business activities, the commitments assumed and the risks to which the undertaking is exposed."                                            documentation i.e. gap analysis of their systems against the needs of Solvency II, Information and data security policy statement, Data
                                                                                                                                                                                                                         security review documentation, Data accuracy reporting, Management information produced on the back of the above etc. This is also
                                                                                                                                                                                                                         linked to the Adequacy of records and security information requirement. Taken together, agents need to be considering the questions:
                                                                                                                                                                                                                         Is the data we are using correct? Are we using the correct data in terms of MI etc?
Model Change Policy                               How is Lloyd's planning to define the model change policy?                                                                                                             Specification of major and minor changes will include consideration of various types of model change (e.g. changes in governance or
                                                                                                                                                                                                                         external models), as well as the criteria for classifying changes as major or minor. A number of criteria are being considered, including
                                                                                                                                                                                                                         quantitative aspects such as the effect of any change on the SCR as well as consideration of other factors such as methodology
Model Change Policy                               Internal model change policy - how will this work after 'live' with 2 regulators - will we get conflicting messages?                                                   We would expect that Lloyd's will have primary responsibility for assessing material changes with the FSA monitoring our review work
                                                                                                                                                                                                                         and the impact on the overall LIM change policy.

Non-Executive Directors                           What is Lloyd's doing to ensure that Non-executive directors have a better understanding and spend appropriate time considering                                        Lloyd's will hold board level briefings on Solvency II for both executive directors and NEDs in May, August and November. Those will
                                                  Solvency II?                                                                                                                                                           highlight areas where the board should be challenging their Solvency II programme as well as producing updates on general market
                                         Mar-11                                                                                                                                                                          progress and issues. However, agents should take responsibility for ensuring that their own NEDs are fully briefed and informed on
                                                                                                                                                                                                                         Solvency II issues and that they spend sufficient time on a formal process for this [link to FSA slides].

ORSA                                              Can agents submit a Group ORSA or must it be by syndicate?                                                                                                             Lloyd's will require an ORSA to contain syndicate specific information and as such will require the agent to submit an ORSA for each
                                         Feb-11                                                                                                                                                                          managed syndicate.

ORSA                                              Will more guidance be available from Lloyd's on the ORSA process, and in particular, how do syndicate ORSAs interact with the                                          Lloyd's will issue further guidance on the ORSA process later in 2011. Following feedback from the draft plan document, the ORSA
                                                  Lloyd's ORSA?                                                                                                                                                          workshop has been brought forward to earlier in the year to allow greater preparation time prior to submission. At present, Lloyd's does
                                         Mar-11                                                                                                                                                                          not expect there to be a formal direct link from syndicate ORSAs to society ORSA and Lloyd's will continue to set economic (and
                                                                                                                                                                                                                         member level) capital using an agreed basis.
ORSA Reports                                    There is no mention of ORSA in the Evidence and Timing document. As agents will be developing their ORSA reports throughout the The ORSA submission date is 16 December. Lloyd's will aim to provide as much guidance ahead of this date as possible and will be
                                         Mar-11 year, will there be an opportunity of any review from Lloyd's of iterations before the December deadline?                       happy to discuss specific elements with managing agents at any time throughout 2011. However, there will be no formal review
                                                                                                                                                                                process ahead of the December submission.
Outsourcing                                       Is there an update on the implications of treating delegated underwriting arrangements as outsourcing?                                                                 Lloyd's expectation is that EIOPA will resolve that delegated underwriting will constitute outsourcing. Lloyd's have been conducting a
                                         May-11                                                                                                                                                                          review of how this will impact current binding authority and coverholder arrangements and associated documentation. Additional
                                                                                                                                                                                                                         guidance on the practical implications of this will be issued to the market later in 2011.
Outsourcing/Delegated Underwriting                Will delegated underwriting be classed as outsourcing and when will more information on this be available?                                                             In the latest Level 3 pre-consultation guidance it is clear that delegated underwriting will be classed as an outsourced activity. Lloyd's
                                         Mar-11                                                                                                                                                                          and the LMA are undertaking work in this area to fully understand the potential impact. Lloyd’s will be able to provide more information
                                                                                                                                                                                                                         on the impact in Q2 2011.
Outsourcing/Third Party Administrators          The deadline for outsourcing self-assessment review programme is due on March 21st when further clarity on TPAs is not due until                                         The review activity will only be undertaken against the existing guidance. Should further guidance be issued later in the year which has
                                         Mar-11 the end of March - is this appropriate?.                                                                                                                                 a material impact on the approach, the specific activity to update this review will be published at that time.

Outsourcing/Xchanging                             With regards to the role of Xchanging in outsourcing, has there been any progress in taking this forward centrally? Is there a central                                 The main oversight of Xchanging currently sits with the LMA, however Lloyd’s are looking to provide more central oversight and will be
                                                  oversight for the policy?                                                                                                                                              working with the LMA on the overall approach to this.

Reliance on Lloyd's Process                       Do the processes carried out centrally by Lloyd's on business planning and controls need to be repeated by the syndicates?                                             It will be necessary to evidence how the syndicate meets the Solvency II requirements whether through their own processes or reliance
                                         Mar-11                                                                                                                                                                          on a Lloyd's central process. Where a Lloyd's process is relied upon, we do not envisage that the agent would need to replicate this
                                                                                                                                                                                                                         process within their own documentation, a reference to the Lloyd's process should suffice.
Risk Aggregation                                With reference to the risk appetite examples provided at the workshop, how could these be linked into an aggregated risk appetite                                        The examples provided are intended as an illustration of one way in which risk appetite could be expressed and monitored. Lloyd's
                                         May-11 statement?                                                                                                                                                               would not expect to see a mathematical aggregation of these illustrative measures to derive an overall risk appetite statement, but
                                                                                                                                                                                                                         would expect some consideration of higher level appetite statement(s) within the overall framework and the consideration of key metrics
                                                                                                                                                                                                                         at an appropriate level within the organisation.
Topic           Date                                                                  Question                                                                                                                   Answer
Risk Appetite            Does Lloyd's have an overarching risk appetite statement?                                                               No, there are 14 high level statements which are broken down into various metrics and monitored by the Franchise Board. Agents will
                                                                                                                                                 need a framework for risk appetite that fits their own circumstances and a top level statement of risk appetite may be an important
                                                                                                                                                 feature of this. Whatever framework is adopted, it will be important to ensure that board members can articulate how the board montors
                                                                                                                                                 risk appetite, including any top level statement(s) and more detailed metrics which support this.
Risk Appetite            What has Lloyd’s approach been to Risk Appetite and how have they balanced the “top-down” and “bottom-up” approaches?   Lloyd’s now has a set of risk appetite statements which have been approved by the Franchise Board. This consists of 14 measures
                                                                                                                                                 which the Franchise Board regard as fundamental. These are split into 2 categories; 6 for the Corporation and 8 for the Market. They
                Mar-11                                                                                                                           are all quite high level e.g.. Cat Risk, Reserve Risk, Central Fund Reserve Risk, consisting of a simple statement and one or two
                                                                                                                                                 metrics. Lloyd’s task now is to implement the reporting and MI around these items. The items will change over time so they need to be
                                                                                                                                                 under continual review.
Use Test                 Do agents need to look at a comprehensive list of uses?                                                                 Ultimately agents will need to be able to provide evidence of their identified business uses operating in practice. It is likely that any
                                                                                                                                                 process to agree uses will initially identify a more extensive set of possible uses which will be narrowed down. This was the case for
                                                                                                                                                 Lloyd's, where the process described in the workshop slides initially identified a more extensive set of uses, which has been prioritised
                                                                                                                                                 to focus on a more manageable number. Any list of uses should not be considered as static, ideally there should be a regular (possibly
                                                                                                                                                 annual) review of the list to identify any new uses arising as the business model changes. It may be that the use test approach will be
                                                                                                                                                 developed to include some of the lower priority uses over time.
Use Test                 What is the process for the demonstrating the Use Test and how might this apply specifically to run-off syndicates?     A logical process would be to agree the key uses and then document the uses that are fundamental to decision making. This approach
                Mar-11                                                                                                                           would be applicable to all syndicates even though the key uses will vary.

Use Test                 What is Lloyd's expecting to see as evidence for the Use Test?                                                          The evidence provided will vary from agent to agent and will depend on what has been determined by each agent to be a key use.
                                                                                                                                                 From the review activity being undertaken, Lloyd's will get appropriate information on the level of embeddedness within the business
                Mar-11                                                                                                                           and expect agents to be able to demonstrate this. Should specific evidence be required this will be flagged to the market as soon as it
                                                                                                                                                 has been determined.

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