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LMG Secretariat

Future Processing in the London Market

Tim Carroll, CanopiusLMG Forum, 29th January 2010

With

London Market Group

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Agenda

• Where are we now?

• Why do we want further change?

• Progress to date

• What has been proposed?

• Expected benefits

• Next Steps

• Questions

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Where are we now?

• Close to finishing latest round of reform

• Xchanging provides:

–Economies of scale

–Single point of audit for regulators

–Consistent process, standards & SLAs

–Pool of resource; reduced insurer overheads

–Common infrastructure for the market

• Still have legacy issues

• Still have too many Londonisms

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Why do we want further change?

• Information is rekeyed numerous times throughout the process – leading to significant query and error rates

• A growing number of Lloyd’s market organisations want the same choice as Companies and either outsource some processes to a different supplier, or perform them in-house

• There is a perception that overseas brokers are placing certain types of business elsewhere as result of London’s complex operating environment

• Initiatives such as Finish What We Started are improving processing, but still based on legacy systems and inherent Londonisms

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Progress to date

• Current processes for central services mapped to a detailed level

• Future models proposed

• Future mandatory and optional central services proposed

• Workshops held with Heads of Associations and Lloyd’s

• Future Process Working Group established…

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Progress to date (cont.)

• The Future Process Working Group has:

– Agreed a set of principles that should underpin any future model eg– Insurers have the choice to perform certain functions themselves or to outsource to a third

party.

– The Future Process Model will support both face-to-face and entirely electronic trading and negotiation.

– The Future Process Model should benefit all practitioner firms in the London Market.

– The Future Process Model should retain the benefits of the subscription market

– There will be a core central service that monitors the overall status of transactions and which aggregates carrier responses in support of subscription business processing.

– Recommended to the LMG, which agreed, that the proposed future process is workable and warrants much more detailed design

• An LMG-sponsored project has been initiated to deliver:

– A robust London Market process model, expressed in sufficient detail that it can be adopted and implemented by the market.

– A recommended transition/implementation plan; likely to identify a two stage approach, with a new model for 100% written business as the first implementation, followed by subscription business

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What has been proposed?

• Move to electronic “straight through processing” and re-use of information throughout the value chain (i.e. without any need for re-keying)

• Adoption of ACORD standard messages throughout the risk lifecycle

• Provide insurers with central core services and the option to select from a suite of supporting services, or to undertake processes themselves

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The expected benefits

• Throughout 2010 the project will seek to validate the below benefits and ensure that they are built into any future model design

• Insurer benefits:

– Choice - perform services in-house or outsource to another party

– Cost reduction - processing costs will be reduced by reusing data and decreasing transactional query costs

– Reduced operational risk

– Access to risk data earlier in the process, allowing for improved exposure management

– Opportunities to automate various processes

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The expected benefits

• Broker benefits:

– Consistent processes - working in accordance with global (ACORD) processing standards; leading to a consistent process across many markets using the same process and data

– Direct interface to insurers - ability to interface directly with insurers using standard data; vastly reducing re-keying and query rates throughout the risk lifecycle

– Opportunities to automate various processes

– Easier to access London market – allows small/medium overseas brokers to access direct and more efficient process for global brokers => more choice for clients (and potentially lower cost)

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Proposed next steps

• Make sure we have the right governance in place – proposal

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Proposed next steps

• 2010

– Stage 1: Q1– Market communication– High level cost / benefit analysis– Risks/issues/benefit analysis of each service model

– Stage 2: Q2/Q3– Develop process models to lower level– Address risks/issues– Identify transition/implementation options– Re-assess/update Working Group’s Principles & Assumptions

– Stage 3: Q4 2010 / Q1 2011– Market consultation– Finalise proposals/documentation

• First implementations of programme in 2011, likely to commence with 100% written business followed by subscription business

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Questions?