Loss Fund Management
There has historically been no common way of managing agents managing loss funds, which can lead to:
- varied approaches which frustrate TPAs, brokers and coverholders
- potential surplus funds, affecting solvency levels
- potential inadequate funds, resulting in delayed settlements and possible customer detriment
- inefficient processes.
The Lloyd’s Thematic Review of Delegated Underwriting Claims Management in 2017 also identified the under-funding of loss funds as an issue that the market needs to address.
The Binding Authority Strategic Claims Group (BASCG) instigated a focus group in 2017 to review current practices, and develop a framework of guidance and best practice that can be shared with the market. That best practice document has now been published and distributed to the claims community in September 2018. The guide focuses on:
- the loss fund (establishing the fund, funding level, CAT funds etc)
- cash calls
- bordereau submission and consideration (including the creation of a reconciliation form)
- replenishment of loss funds
- payments from the fund
- oversight/reporting
- contracting
- recovery of the fund
Technology to Support
Following a successful market pilot in 2017 with Vitesse, a section of activity that is required within a loss fund model has been added to the best practice document to identify any changes affecting a carrier that is utilising a technological solution. At the time of writing, approximately 70% of the market are either contracted with Vitesse or at an advanced stage of negotiation. A common technological solution and service being provided also supports the need for a consistent and common approach to loss fund management.
It should be noted that other vendors are able to provide a loss fund management solution or service, some of which may be utilised by managing agents currently. Much of the guidance within this document would also apply to other services.
The Guidance is available to download here