Transcript Slide 1

Market Reform
Programme Office
Legacy Market Session
September 2006
Market: James Andlaw (Zurich), Richard Borgonon (JLT),
Peter Goddard (BRIT), John Muir (Willis)
Xchanging: Rob Myers
MRPO: John Harvie, Steve Hulm
Market Reform
Agenda
Page 2
• Introduction
John Harvie
• Legacy Code of Practice & Guidance
Steve Hulm
• Broker Approach
Richard Borgonon/
John Muir
• Summary
John Harvie
• Frequently Asked Questions
Panel
• Open Questions
Panel
Legacy Status
• Legacy Statistics
Market Reform
– Unsigned Policy Reports (UPR) provide a basis
– You may well have your own data
• FSA Interest
– They have a close interest in the subject
– They are likely to focus on the UPR numbers & on your progress
• Market Guidance
– Legacy Code of Practice & Guidance published
• Tools Available (from Xchanging)
– Legacy Unsigned Policy Reports
– Legacy “Purging” Facility
• Change Requests being progressed
– Removal of items with alternative evidence of cover from UPR
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• Now is the time for action!
Market Reform
Programme Office
Legacy Code of Practice
Legacy Policies
Market Reform
Background
• Initially not seen as the main priority by some in the market
• MRG with encouragement from the FSA, wanted to see if there
was any value in some central activity
• Instigated a study to find out more
– Questionnaire
– Consultation with a small number of Brokers and Underwriters
– Categorisation of Legacy into priority
• Formation of Legacy Policy Group
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Legacy Policies
Market Reform
• Legacy Policy Group
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– Confirmed and refined the priorities for categorising legacy issue
– Refined into Code of Practice
• Code of Practice
– Agreed by MRG and associations
– Agreed by non-London practitioners group, including ABI, BIBA
and IIB
– Published on 17 February 2006 with full UK Insurance Market
branding
Market Reform
Legacy Policies
•
Code of Practice
•
Priority 1 - Definition
– Business incepting on or after 01/01/05 and any unexpired
policies as at 01/01/2005 (current work in progress)
•
Priority 2 - Definition
– 2004 expired short tail and long tail which expired prior to
2005 (priority legacy policies)
•
Priority 3 - Definition
– Expired 2003 and previous short tail (other legacy items)
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Legacy Policies
Market Reform
• Guidance - General
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– G1 - Priority should always be given to meeting a client request for
evidence of cover – This is key
– G2 - It is for each insurer and broker to determine its own legacy
statistics, drawing on a variety of data sources including the bureau
records where relevant – “Sizing the problem”
– G3 - The broker should determine the requirements of its client for
any legacy that is no longer planned for preparation and issuance
of appropriate evidence of cover – “Ask the client”
– G4 -In absence of any instructions to the contrary brokers should
commit to issuing any insurer-approved evidence of cover to its
clients – “It doesn’t sit in a drawer!”
Legacy Policies
•
Priority 1 - Definition
Market Reform
– Business incepting on or after 01/01/05 and any unexpired policies as at
01/01/2005 (current work in progress);
– The highest priority is to stop adding to the legacy backlog – Comply with
the C/C Code of Practice
•
Priority 2 - Definition
– 2004 expired short tail and long tail which expired prior to 2005 (priority
legacy policies);
– A decision not to produce an appropriate evidence of cover is the
responsibility of the insurer rather than the broker – So the insurer makes
the decision. The broker or insurer may initiate the process.
– Insurers should assess, among other things, both the intrinsic risk of the
contract and the quantum of cover in agreeing priorities for resolution – and
makes the risk decision
– Particular attention should be paid to any unresolved claims or disputes,
and the options for addressing those situations – Reflecting these facts
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… continued overleaf
Legacy Policies
Market Reform
•
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•
Priority 2 – (Continued)
–
Having made these assessments, insurers should agree guidelines with
each broker in respect of the characteristics of legacy policies which are
not to be issued – Need not be on a case by case basis
–
Accordingly following insurers are encouraged in this respect to review
and seek to accept the guidelines adopted by the leader – The leader
should normally make the decision
–
Legacy policies should be issued where required, even where the
underlying slip is of high quality – Client wishes are paramount
Priority 3 - Definition
–
Expired 2003 and previous short tail (other legacy items).
–
All the above principles remain relevant.
–
As a general principle priority three policies need not be produced.
The Broker Approach
• Approach developed by Willis and JLT independently of
Market Reform
each other
• Discussed with representatives of the Market:– Aon, Marsh, Benfield
– MRG Chairman
– LMBC
– LMA
– Lloyds CEO
– Wide range of Lead Insurers (Lloyds and Companies)
– At CEO level
– FSA – Senior and CC interview team members
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The Broker Approach –Endorsing the Code of Practice…..
• Accept the Code Mechanisms to address Market Legacy:
– I.
Insurance Policy (Bureaux or Company)
Market Reform
– II. Copy of Complete Slip (Insurer approved Document)
– III. Certificate of Insurance
– IV. Broker Insurance Document (Broker Prepared Document)
• Accept and Agree FSA/ MRG Prioritisation:
– Priority 1 - Definition
– Business incepting on or after 01/01/05 and any unexpired policies as
at 01/01/2005 (current work in progress)
– Priority 2 - Definition
– 2004 expired short tail and long tail which expired prior to 2005 (priority
legacy policies)
– Priority 3 - Definition
– Expired 2003 and previous short tail (other legacy items)
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Market Reform
The Brokers approach – A Staged Approach…..
• Detailed analysis of Data to establish:
– Robustness of Market and Broker Core system data
– Volumes within each Priority
– Lead Insurer/ References
• Recommend appropriate EoC per Contract:
– Per Leading Insurer
– Capture Client or Leader instruction at time of placement
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The Brokers approach – A Staged Approach…..
Market Reform
• Write to Lead Insurers/ Reinsurers at CEO level
– Outline Review process undertaken
– Consideration given to lead or Client instruction
– Attach bordereau containing
– Lead Insurer Reference and Signed line
– Recommended EoC per contract
– Request approval from CEO to action recommended EoC
– Time frame stated for response (4 working weeks)
• Upon agreement of the above, request Underwriters to
purge bureaux data base.
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Market Reform
Programme Office
Summary, Questions
and Close
Summary
Market Reform
• Now is the time for action!
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• You need to:
– Adopt the Code of Practice
– Set up a legacy project
– Determine your legacy position (UPR reports + internal data)
– Liaise with your counter-parties (primarily: brokers – leaders)
– Agree & implement an action plan
– Reduce your UPR numbers (FSA will be looking at this)
Frequently Asked Questions
Market Reform
•Why do I need to devote resource to this
issue?
•What does the panel think the FSA’s
approach to this issue will be?
•Who should initiate action on legacy? The
broker or the leader?
•Are the Unsigned Policy Reports accurate?
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•What does a follower need to do?
Market Reform
Open Questions
Page 18
Market Reform
Programme Office
Legacy Market Session
September 2006
Market: James Andlaw (Zurich), Richard Borgonon (JLT),
Peter Goddard (BRIT), John Muir (Willis)
Xchanging: Rob Myers
MRPO: John Harvie, Steve Hulm