Third Party Adminstrators (TPA) Questions and Answers

QUESTION: Is there any progress with a more consolidated approach around annual auditing amongst underwriters, both in terms of scope, sample sizes and perhaps utilising the same auditor to do multiple audits on site to reduce the volume of audits?
[Added:  April 2017 ]

Recent developments to the CTIS LME database include the introduction of shared audit functionality. This allows each MA to identify those TPAs they wish to audit, with CTIS then co-ordinating a shared audit on behalf of those MAs. As of April 2017, this has already resulted in 204 audits shared audits, which is reducing the impact of multiple audits to TPAs and allowing the MAs to benefit from cost savings. In addition, as part of the LMTOM programme the AiMS system is being developed to assist with coordinating of TPA audits. This should be released in June and there should be much greater consolidation of TPA audits as a result. A new coverholder audit scope is currently under development. The Coverholder audit scope is changing format significantly, moving from a prescriptive Q&A based document to a risk / control / opinion approach. Work will commence in June 2017 on the TPA audit scope, which will largely be bsaed on the operational aspects of the coverholder scope. Changes can therefore be expected from Q3 2017.

QUESTION: In addition to the annual audits, usually done by an external auditor some underwriters are now carrying out quarterly audits either remotely or on site. Is there a plan to have a more consistent approach around interim auditing / review?
[Added:  April 2017 ]

There is currently no plan to align interim auditing and review of TPAs, which will be driven by each MAs risk appetite around the control of their TPAs. Much of the work undertaken through these reviews is likely to be on specific claims file review, which will be bespoke to each binding authority. Therefore we see less of a case for a need to coordinate in these instances, although will encourage managing agents to limit interim reviews to these aspects of the audit and review more general aspects as part where there is greater crossover through a coordinated annual audit.

QUESTION: Sometimes we do not receive any feedback from audits – good or bad this would clearly help us deliver a better service if we could learn more from the process outcomes
[Added:  April 2017 ]

The work being undertaken on audit scope does deal with feedback to the CH/TPA, so there should be some improvement in this regard going in to 2018. In addition the AiMS system should provide further structure around handling of any recommendations and feedback to stakeholders.

QUESTION: File selection doesn’t seem to make sense i.e. files are selected that pre date previous audits and improvement recommendations. Surely the idea should be to look at new files since the last audit to see if recommendations have been taken on board and implemented
[Added:  April 2017 ]

This is down to each MA to select their own sample. There is no intention to issue a best practice approach for file selection, but this is something that will be considered as part of the TPA audit scope review.

QUESTION: There appears to be some gaps in the due diligence data on the LME Database and what is requested by some underwriters. Could we not get collective agreement over what is required and this is what is used on the database?
[Added:  April 2017 ]

If you are receiving repeated requests for the same sort of due diligence requests, then please flag examples of the data requests to the LMA. The LME database does have functionality to allow individual MAs to ask additional questions, but we are happy to recommend changes to ensure the needs of the market are covered in the standard question set.

QUESTION: MI – requested submissions are becoming more and more onerous and granular, yet we very rarely get any feedback to acknowledge or comment regarding our performance or benchmarking. This is frustrating and it would be good to have feedback and some idea as to how our performance compares assuming we are being benchmarked
[Added:  April 2017 ]

Work is underway to create a core set of SLA measures. This work is being done in conjunction with the BASCG representing the binder markets in Lloyd's, and with input from the Corporation of Lloyd's. Whilst these core SLA measures will not be mandatory, they will be a useful standard each MA may wish to adopt to benchmark the performance against their own service level expectations, and should reduce the variety of requests TPAs receive from the Lloyd's market. This will start the move towards TPA approval and benchmarking, which is likely to come into place after 2017.

QUESTION: Why do some underwriters still insist on TPA's completing lengthly questionnaires around compliance when we have provided the same information via the CTIS database?
[Added:  April 2017 ]

This may be a historical issue where each MA has had to manually request any additional due diligence they feel appropriate that is not captured under the core request of the LME database. The functionality now exists for each MA to add those additional requests in to the LME database, so this should reduce any additional compliance checks. This may also be where the MA requests the due diligence on behalf of the auditor, who has not had access to the content on the LME database. Functionality has been delivered that will allow auditors to access the database and obtain directly from the database the due diligence for TPAs that they are auditing.

QUESTION: The V5 bordereau does not have a column for recording excess recoveries. As we collect the excess up front and hold within the loss fund, the top up request to the broker will be wrong, as will not reflect the excesses recovered. What should we do?
[Added:  July 2017 ]

The V5 bordereau was not designed to cater for all various ways someone may report financials, but is instead a minimum standard reporting framework. In this situation, the TPA will have to add additional columns to the V5 bordereau to reflect the excesses recovered throughout the month, so make it clear when requesting any fund top up.

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