Transcript Delinking PowerPoint Presentation April 2007

LONDON
MARKET REFORM
DELINKING
AGENDA
• Background
• Contract Certainty
• What is Delinking?
• Market Closing Performance
• The Myths
• Current usage
• Summary
BACKGROUND
• Part of the International Process Compliance (IPC)
Reforms (1998)
– Align the London market with international processes
– Improve flow of information to underwriters
• Incorporated into the LMP Programme
– Faster premium payment
– Enables earlier documentation to client
• Contract Certainty
– Early delivery of Signed lines
• Premium Payment Working Party
– Faster premium payment
Current MRG Initiative
• Project started at 1st January 2007 aimed at doubling usage of
delinking
• Identified what barriers exist to using Delinking and how these
can be fixed
• MRG have agreed to provide each Broker with a monthly report
showing what has been Delinked.
• MRG have set targets for usage:
– Q2: 50%
– Q3: 60%
– Q4: 80% - Mandatory as at 01/01/2008
• Market Rollout Plan provided to MRG for consideration
LONDON MARKET CLOSING
THE PROBLEM
• London Market closings are submitted on an LPAN
• Submission of the LPAN to XIS provides:
– advice of Closing details
– notification of signed lines
– authority for XIS to pay underwriters
• Broker submits the LPAN once client pays
– NOT when the information is available
Pre DELINKING
Over 80% of
risks submitted
‘on time’
Risk
inception
date
-15
(Re)insurer
writes risk
Latest date for
PAN submission
to XIS
London Broker:
- signs down
- produces evidence
of cover
- produces debit note
0
TOT
date
Client pays
Producing broker
receives:
- evidence of cover
(including signed lines)
- debit note
Client receives:
- evidence of
cover
- debit note
Only 20% of
premium is
received by SDD
Non-XIS (re)insurers
advised of:
- Closing note
- signed lines
60
XIS check
and resolve
queries
Funds
transfer
68+
XIS advise
(re)insurers of
signed lines
and payment
WHAT IS DELINKING?
• Post Placement separation of the Closing submission (technical
account) to XIS (& underwriters) from the instruction to settle
• A two stage process
– Advice of closing details and signed lines (LPAN)
• Timing to meet the Contract Certainty/FSA targets
– Trigger settlement once the client pays
• At the same time as the old LPAN submission
DELINKED CLOSING
Broker
signs
down
the risk
-15
(Re)insurer
writes risk
Risk
inception
date
Funds
transfer
London Broker:
- produces evidence
of cover
- produces debit note
0
Producing
broker receives:
- evidence of
cover
- debit note
Client receives:
- evidence of
cover
- debit note
Trigger date +
3 days
Client pays
Non-XIS
(re)insurers
advised of:
- Closing note
- signed lines
LPAN
submitted to
XIS
Broker
triggers
payment
XIS check and
resolve queries
XIS advise
(re)insurers of
signed lines
Pending
file
XIS advises
Underwriters
of payment
BROKER RELEASE OF FUNDS
• On Line Trigger
– Common facility for Lloyd’s/IUA business
– Available via the XIS screens
– Release items held on the pending file
• Electronic RESETT message
– Automatic trigger from Broker system
– Standard international ACORD message
Money released into Settlement that evening
PAYMENT PERFORMANCE
Monitoring Against Terms of Trade - Settlement Due Date to Payment
Excluding Binders, Lineslips and Covers
2005 Signings
27%
53%
20%
27%
Total
Delinked
Non-Delinked
8+ Early
92,027
305,654
1-7 Early
72,165
165,183
On Time
89,117
53,741
1-3 Late
256,160
191,968
4-7 Late
154,199
633,378
8-15 Late
75,681
789,756
16-30 Late
75,727
197,065
Figures include cash and first installments only
Based on total in-scope premium signed for 2005 up to August. Data supplied by Xchanging
31-90 Late
116,131
224,595
91+ Late
24,709
121,139
955,915
2,682,480
QUERIES/REJECTION RATES
• Closing Queries
– Items where the Closing submission is queried by XIS
• 22%
• Closing Rejections
– Items rejected back to the Broker for correction and resubmission
• 4%
SCOPE OF DELINKING
• Includes
– Original premiums
– Additional premiums
– Return premiums
• Excludes
– Proportional Treaties
– Reinstatement premiums
– Premium reserves
• May not be suitable for
– Short Terms of Trade periods
– Planned/Flexible Settlement schemes
• Direct
• Facultative
• XOL
Broker Signing Messages
- BSM
– EVERYTHING SETTLED THAT DAY. Includes payment of
previously Delinked items and cash (Non-Delinked) signings.
- IPC BSM
– An EDI or CSV message in the same format as BSM showing
EVERYTHING DELINKED THAT DAY applies to all transactions
- DL5089 “CSV File”
– For A&S Repository submissions only shows EVERYTHING
SIGNED THAT DAY – Delinked and Non-Delinked
DELINKING MYTHS
•
Delinked risks are paid later than non Delinked
– Analysis of Delinked submissions disproves this commonly stated issue
•
Underwriters cannot tell if a delinked risk has been paid
– Separate messages are sent to Underwriters by XIS to advise when a
delinked risk has been submitted and of the subsequent payment
•
Brokers just want to delink risks to keep them off the late payers list
– The XIS Signing Performance Report for delinked items is based on the
payment trigger date - not the LPAN submission
DELINKING MYTHS – Cont’d
• Just another Market Reform requiring costly systems changes
– Brokers submit the existing LPAN with a ‘Delinked’ stamp on it
• Payments can be released using the XIS on-line trigger facility
– Underwriters will need to change their systems if they want to take advantage
of the earlier Delinked message.
• Most Underwriter Software packages already support delinked
messages
Convertible Currency Processing
•
For convertible currency transactions a notional rate of exchange must be
provided at the Delinking stage.
•
When the premium is released for settlement, the rate of exchange may be
updated with the actual rate which will apply
•
Rate of exchange may be updated via RESETT or Delinking Trigger
•
If settlement rate of exchange varies more / less than 10% of original rate of
exchange then release is prevented. Contact XIS to release on your behalf
Miscellaneous
• Settlement Due Date (SDD)
– Delinked risks may be released for settlement, before, on or after the
SDD. If they are released after the SDD, you will be late signed.
• Premium Payment Warranty (PPW)
– Delinked risks may be released for settlement up to and including the
PPW Date.
• Underwriter Proof
– Once date has been passed underwriter proof is required, they will
accept the premium
– Evidence of underwriter proof should be sent to Xchanging who will
release on your behalf
BENEFITS - Brokers
•
A standard process for dealing with XIS and non-XIS insurers
•
Queries resolved earlier
•
Control of payment is retained
•
Enables Contract Certainty requirement for Signed Lines to be achieved
•
Consistent with A&S processes
BENEFITS - Underwriters
• Earlier advice of signed lines:
– Provide confirmation of exposure
– Assist credit control
– Eliminate effort in chasing broker for details
– Xchanging messages
• Closing queries and corrections should not delay settlement
• Consistent with A&S processes
BENEFITS - XIS
•
The checking of Closings and resolution of queries is no longer time
critical to premium payment
•
Reduces processing peaks and enables better workflow management
•
Should a processing backlog occur it should not impact premium
payment
•
Earlier policy preparation is possible
Getting Started
•
Who will release funds?
•
Will you use the RESETT or Delinking Trigger?
•
Get Delinking trigger ID’s set up or your RESETT software configured
•
Get “IPC Delinked” stamp made
•
Consider whether you will require the IPCBSM
•
Consider processing some test transactions
M a rk e t R e p o rts - D e lin k e d V a lu e s a n d P e rc e n ta g e s (2 0 0 5 -2 0 0 7 S ig n in g s )
L lo yd 's M a rk e t
70%
60%
50%
40%
30%
20%
10%
0%
Jan
Feb
M ar
Apr
2 0 0 5 D e lin k e d %
£m
Jan
2 0 0 7 D e lin k e d
T o ta l
2 0 0 6 D e lin k e d
T o ta l
2 0 0 5 D e lin k e d
T o ta l
Feb
M ay
2 0 0 6 D e lin k e d %
M ar
Apr
Jun
Jul
2 0 0 7 D e lin k e d %
M ay
Jun
Aug
2 0 0 5 M k t A vg
Jul
Sep
O ct
2 0 0 6 M k t A vg
Aug
N ov
D ec
2 0 0 7 M k t A vg
Sep
O ct
Nov
Dec
309
197
148
500
483
359
212
151
96
146
165
166
223
177
102
123
145
138
427
528
366
330
482
467
496
523
355
286
328
268
183
144
64
116
104
96
132
104
76
61
94
83
439
536
326
352
389
406
407
446
378
257
323
275
SUMMARY
•
The Delinking process is beneficial to your organisation
•
It supports the Contract Certainty and FSA requirements
•
Closing queries and rejections are no longer on the critical path for premium
payment
•
This results in improved premium payment performance
•
Premium performance and Delinking usage will be monitored over the next
six months
•
Eliminates “Londonisms”
LONDON
MARKET REFORM
DELINKING