Market Processes newsletter September and October 2011

You told us…

In seeking your feedback on communications, you told us that you would like an informal and regular way to keep abreast of market operations matters and modernisation developments. We hope this bi-monthly newsletter will help. Please feel free to forward it to colleagues and encourage them to sign up. We are also keen to hear what you think to the format and style, as well as the sorts of topics you would like to see covered in the future. Further information on the work of the Market Processes team is available here.

Rob Gillies, Head of Market Processes

Speeding up premium cash flow to underwriters

Xchanging’s ability to receive ACORD electronic premium technical and financial account messages from brokers went live in June with Miller using E-Accounts Release 1. Miller has been followed by UIB, Price Forbes, AON, AON/Benfield, and Guy Carpenter. There are two further convoys of brokers planning testing during 2011, the first of these is scheduled to complete in 3Q11 and comprises Towers Watson, Lockton, Cooper Gay, and Ropner; LIIBA are scheduling further convoys of brokers to test and implement E-Accounts R1 throughout 2011 and 2012. All brokers will be able to implement and connect to the service once they or their software house are ACORD message accredited and testing has been completed with Xchanging. LIIBA are actively working with brokers in order for them to join future convoys.

This is the first step to bringing the creation of ‘non-fundamental accounting splits’ into Xchanging which will be possible with Release 2. That release provides brokers with an interface with the bureau which is more consistent with that which they experience with any other insurer, provides further flexibility and, in turn, offers opportunities for expediting premium settlement to syndicates. Further information is available on the E-Accounts webpage.

Settlement Due Dates (SDD) and Premium Payment Warranties (PPW)

The implementation of E-Accounts release 1 has given rise to an issue concerning the way in which Xchanging Ins-sure Services (XIS) ensures that premium is not settled in breach of a PPW date. This was impeding the adoption of electronic accounting and realisation of the benefits which that brings.

Effective from 22 August 2011, LMA’s Xchanging Review Board (XRB) has instructed XIS to implement a solution which will result in XIS aligning the SDD with the PPW date where there is a mismatch between these dates (most often because the PPW date has been changed but not the SDD). Under no circumstances would XIS have any authority to amend a PPW date. This realignment of SDD will not result in any additional charges to Syndicates.

In the few circumstances where the SDD is realigned, the original SDD (an arrangement between broker and insurer to measure broker premium payment) would not be maintained. XIS data indicates that 0.4% of all Lloyd’s market transactions may be affected and feedback from managing agents indicates that priority should be given to ensuring premium is signed promptly. For these few occasions when it would be necessary to realign an SDD, other mechanisms exist for underwriters to be aware of late premium payment and to take remedial action if they so choose.

In view of this feedback, and to remove a cause for confusion, this new arrangement will apply to all transactions whether processed through ‘electronic accounting’ or otherwise. Where a slip clause dictates that the original SDD should be maintained then XIS will respect this and not realign the SDD. However, in those circumstances, the problems described above may arise and in agreeing such clauses underwriters should consider the potential impact on premium settlement.

See the LMA letter and further details of this change on the LMA website.

Continued rollout of E-Endorsements

Following the market going live with electronic endorsements for marine, property, PI and specie, activity is developing in other classes bilaterally between some trading partners: Bloodstock, Livestock and Terrorism. This all leads up to the market being live for all classes by the end of Q1 2012. An ‘Engagement Matrix’ will be published shortly showing insurers and brokers developing plans for engagement with the initiative and their plans for participation in specific classes. Data on using the electronic process for endorsements – as well as other endorsements transacted - has been requested from both insurers and brokers and we are developing the reporting available from the Exchange to provide a more comprehensive picture of progress with adoption. Process improvements for eleven of the issues identified in the endorsement pilot is well under way and remains on track for go live on 17 October. Improvements for ‘subjectivities’ and ‘multi-section risks’ is proving slower to resolve than anticipated with the introduction of changes possibly early to mid 2012. MAT testing was on track to commence on 5 September. An October event is planned to cover ‘Integration’; the ACORD Club on 27 October will be looking at the developing use of remote technologies to support placing; and the LMG Forum on 30 November will present the status report on the endorsements project.

Counting the pennies

Increasing demands from regulatory and tax reporting authorities, a need for greater transparency and accuracy regarding accounting data, the anticipated effect of the market’s electronic accounts project, and expectations arising from the market’s work on future processes have led LMA’s Xchanging Review Board (XRB) to conclude that the Small Pool Scheme no longer offers a net benefit to managing agents. The decision was taken that it should be closed for new premium submissions from 4 July. While the Scheme is now closed for new premiums, additional transactions relating to items previously processed via the Pool will continue to pass into the Scheme. Further information is available from the LMA bulletin.

Treaty statements

Claim elements on treaty statements need to be agreed and ‘signed’ by the underwriter(s) so that monies can be released. Historically this was a manual process which involved duplication of effort across parties and could result in Xchanging Ins-sure Services (XIS) raising queries if the underwriter’s ‘scratch’ was not easily recognisable and which could cause delays in the processing and release of funds. Earlier this year the Process Advisory Group (PAG) agreed a streamlined email agreement process which reduces the need for broker visits to syndicates, removes duplication of printing / scanning documentation, and eliminates XIS queries when trying to identify the ‘scratch’. While this is not a “mandatory” process, its adoption is a step closer to the efficiencies to be gained through fully electronic agreement. See the LMA website for further details on the revised process.

Introducing the Xchanging Review Board (XRB)

The Xchanging Review Board (XRB) is a sub-committee of LMA’s Market Processes Committee (MPC). XRB is responsible for monitoring and managing the quality and delivery of services provided by Xchanging Ins-sure Services (XIS) to managing agents under the terms of the LPSO Agreement. In addition, XRB works with XIS to agree service pricing and changes to the services. The XRB is chaired by Jonathan Ibbott of XL, with representation from Beazley (Ian Fantozzi), BRIT (Sean Norris), Hiscox (Tracy Tinney), Kiln (Phil Romano), Mitsui (Colin Smith), and Novae (Mark Hudson). XRB meets monthly, both as a group of managing agents and with XIS.

In order to focus on developing and managing the XIS relationship, XRB is supported by the Process Advisory Group (PAG) that works with XIS on practical operational matters. The work of PAG will be featured in a future newsletter.

The key XRB focus for 2011 is refreshing the LPSO Agreement (see separate article), ensuring the Agreement meets Lloyd’s Solvency II guidelines (to be featured in a future newsletter), and 2012 pricing negotiations.

LPSO Agreement – fit for purpose

XIS core services to managing agents are delivered under the ‘LPSO Agreement’. As mentioned in the feature introducing the Xchanging Review Board (XRB), at the start of the year Xchanging Ins-sure Services (XIS) and XRB agreed that it would be prudent to review the Agreement to ensure that it is fit for purpose. Much has changed since 2004 when the current version of the Agreement was constructed. Amongst other developments, contract certainty, Solvency II, changing managing agent needs, and the introduction of Accounting & Settlement using the Insurers Market repository have all placed demands on the services XIS provides to the market. XRB, with support from various LMA groups and the LMA itself, continues to work with XIS to bring the Agreement up to current outsourcing agreement standards and ensure it is fully compliant with Solvency II requirements. It is expected that a revised agreement will be available to the market towards the end of the year.

Xchanging Ins-sure Services (XIS) performance reports

XRB responsibilities include monitoring and managing the quality and delivery of services provided to managing agents. While managing agents have the peace of mind that XRB are monitoring XIS performance on their behalf, increasingly managing agents are requesting their own copy of the performance report for their own governance. With this in mind, since the start of the year the monthly report, which takes the form of a spreadsheet, has been available to all managing agents via the LMA website.

In addition to the monthly performance report, managing agents can also view a copy of the XIS (LPSO) Agreement, details of the 2011 charges, and an overview of the Xchanging "core" contracts. These documents are within the members’ area of the site and a log-in is required.

The Bluffers Guide to London Market Modernisation Activity

The latest version of the guide is now available for download from the LMA website.

The Insurance Day and ACORD Insurance Technology Congress, 11 and 12 October

The Insurance Technology Congress reflects the increasing emphasis on using technology and improving process efficiencies within Lloyd's and the London market. The congress seeks to assist attendees to map out their technology-purchasing decisions and strategy for the next 12 months and beyond; transform their business and gain the edge over competitors by examining and reviewing the latest technological product developments which are transforming the insurance industry; find out where the market's priorities really lie when it comes to modernisation processes and how they are being funded; provide the opportunity to pose questions to key industry and technology leaders on the successes and challenges they have faced and learn from other industries' change programme experiences. LMA members will be offered a 10% discount by quoting “LMA” when registering. Register here.

Xchanging London Market Conference, 9 November

The Xchanging London Market Conference has long been a fixture in the industry but last year - in conjunction with The Insurance Insider - it found a new home in the Square Mile. This year's event takes place in the Merchant Taylor's Hall, 30 Threadneedle Street. More than three-hundred leading industry professionals, advisers and investors will debate, network and discuss the major issues affecting the London and international (re)insurance markets as it looks ahead to 2012 and beyond. Once again, there will be a combination of overarching strategy sessions, together with more focused, streaming sessions on key themes, such as distribution, Solvency II, capital, technology/processes and claims. Further details are available here.

Available skills

Organisational changes at a leading Managing Agent has resulted in the availability of the following skills:

DataWarehouse ETL Developer: more than ten years experience in IT of which eight have been in data warehousing across multiple domains such as telecoms, investment banking, insurance and finance. Experience using various ETL and BI tools such as Business Objects, IBM DataStage, SQL Server Integration Services, Analysis Services and Reporting Services. Exposure to database volume issues, performance tuning and best practices having worked on two of the top five datawarehouses worldwide.
Business Objects Analyst/Developer: four years experience, followed on from four years of end user experience. Specialised in Report and Universe development in BO XI Release 2 and 3, with recent experience on UK insurance data. Good SQL knowledge. Excellent communication skill with both business users and technical staff.
Business Objects Analyst/Developer: six years experience in the London Insurance Market and four years in the gas and power sector. BSc(Hons) (Computing information systems design), LLMIT certification. Report and Universe development up to Business Objects XI Release 3 with recent experience on the UK London-market insurance data. Extensive experience with project and adhoc reporting development & support work with a sound appreciation of data warehouse processes and modelling techniques undertaken prior to the reporting stage. Experience of both Oracle and SQL Server databases.
Operations management: over twenty years experience of London market and non-bureau premium and claims processing. Setting up and running a Lloyd’s service company, including bureau processing and reconciliation. Implementation of an integrated workflow system to manage bureau signings.

Anyone interested in further details should contact Rob Gillies at Robert.gillies@lmalloyds.com.