Accounting & Settlement A&S An outline of the Accounting & Settlement Project 14 th December 2004

Accounting &Settlement

A&S

An outline of the Accounting & Settlement

Project

14th December 2004


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What are the A&S reforms?

Modernising the transaction processing infrastructure within the London market by implementing the use of international standards for the communication, and processing of accounting & settlement data

(the ACORD RLC XML standards)

To move away from bespoke, to “international” To implement common processes To provide a firm base of infrastructure for the

future with flexibility for future business process change


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Rationale for change

Reduces errors and reconciliation issues Enables back office rationalisation Provides data faster/earlier Enables more accurate data – pre

validation Aligns with international approaches Provides flexibility Reduces costs


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What changes are involved?

Provision of data electronically using ACORD message standards & repositories from;

London brokers, Broker’s overseas parents/sister brokers, other intermediaries, including via electronic placing environments.

Underwriters receiving and processing ACORD standard messages,

for bureau business in place of current bespoke messages

for any non-bureau business direct from sender

These processes are fully “delinked” i.e. technical accounting can be separated from settlement and processed much earlier than today for bureau business.


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ACORD – RLC XML message suite

Business Name XML Name Usage for A&S

Placement Message Placement Issuance of a post placement record to establish contract structure in receiver systems to facilitate subsequent transactions

Technical Account Message

TechAccount Establishment of transactional debt for both premiums and claims

Financial Account Message

Settlement Release of debt for settlement, agreement to settle.AND as settlement statement

Claim Movement Message

ClaimMovement Establishment of claims records and reserve movements

Acknowledgement Message

Acknowledgement

Acknowledging receipt and advising status and responses to messages received. Sent in relation to every individual ACORD message received.

De-linked


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Premium accounting process flows now

UWRS

XCHANGING(bureau)

Paper LPANs

Paper Slips

Paper Supp Docs

DSIGN

Paper Closings (non-bureau)

USM

ILUCSM

Paper Slips SNAD

BSM

BROKERS

Paper TTYs

Statements (non-bureau)


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Premium accounting process flows future

UWRS

XCHANGING(bureau)

ACORD msgs

Electronic Slips

Electr Supp Docs

ACORD messages (non-bureau)

ACORD msgs

ACORD Acknmnts

ACORD Acknmnts

BROKERS

ACORD Acknowledgements (non-bureau)


8

Claim accounting process flows now

BROKERS UWRS

XCHANGING(bureau)

Paper LCCFs

Paper Claim Files

Paper Supp Docs

USM

Paper Claim Closings (non-bureau)

SCM

DSIGN

ILUCSM

LIMCLMsLIMCLMs

SNAD

BSM

CLASS on-line

Statements (non-bureau)


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Claim accounting process flows future

UWRS

XCHANGING(bureau)

ACORD msgs

Electr Claim Files

Electr Supp Docs

ACORD messages (non-bureau)

ACORD msgs

ACORD Acknmnt

ACORD Acknmnt

BROKERS

ACORD acknowledgements (non-bureau)


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Scope

The process covers: Direct Reinsurance Facultative, proportional and non-proportional Lloyd’s and London companies Bureau and non-bureau London broker, other broker, client Premiums and claims Inward and outward transactions

Out of scope are: Placing processes (However does use Placement

Message as start of A&S process) Claim agreement processes

(although use of ACORD messages to support claim agreement are part of the Xchanging development)


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Governance (above A&S Board)

Market Reform Group (MRG)STRATEGY

•approving strategy•commitment•setting priorities

chairmen andreform champions

LMA, LMBC,IUA,Lloyd’s

MRG Executive

•proposing strategy•market-wide buy-in•managing resources•defining projects•feasibility

LMA CEO, Lloyd’s COO/s, IUA CEO, LMBC CEO, franchisor

MR Implementation Board

Major brokers, major managing agents, major companies, Xchanging

IMPLEMENTATION

•market wide implementation•scope creep•conflict resolution

‘DESIGN’

A & S PROJECT BOARD

LMA Board

LMBC Board

IUA Board

Franchise Board / Council

Influences Reports to

PROJECT


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Board Membership A&S Project Board

Design & development Delivery of functionality Proposals to MRIB on

implementation

Members Andy Brookes –(Chair) Lloyd’s BPR Roy Alexander - Chaucer Stephen Anderson – Catlin John Bacon – Guy Carpenter Mark Barwick - LMBC Mick Dempsey – Global Aero Geoff Kennard – Xchanging Dave Matcham – IUA Rob Myers – Xchanging Mike Reidie - Marsh Phil Romano – Kiln Ian Summers – Aon Pat Talbot – Alea David Williams – QBE John Wingrove – Project Manager

MRIB Implementation approach Delivery of own firm and

hence market

Members Iain Saville (Chair) Lloyd’s Tom Bartleet – Willis Andy Brookes – Lloyd’s Clive Buesnel – Xchanging David Harris – Amlin Hugh Maltby – BRIT Andy McDonald – Benfield Patrick Mina – Marsh Edward Moss – Catlin Paul Moss – QBE Bill Oram – Aon Chris Rawson – Lloyd’s & ACORD Chris Smith – Limit Alan Tasker – Global Aerospace Tim Riley - Alea


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Next Steps

Implementation plan from MRIB, with Project Board input

Development of Technical Information to support Business Design (over next few months – planning underway)

2005: first phases of the build – premium related transactions likely to be first

2006: Further build phases and grow volumes of use to critical mass


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Summary

The detailed business design is now complete, quick sign-off by Associations expected

Cost split of £8m between IUA and LMA sorted; broker contribution Governance in place

Progress

Individual firm contributions for funding nearing completion Sign off of any cost changes to be completed

Issues

Implementation plan from MRIB, with Project Board input Development of Technical Information to support Business Design (next

few months) 2005: first phases of the build – premium related transactions likely to be

first, 2006: grow volumes of use to critical mass

Further work

© £7-8m for XIS © £70m – £80m guestimate for the London

market

Improved processing efficiency Common processes Substantial London Market cost savings

(£50m pa) Firm base for future change

Implementing the use of international standards for the communication, and processing of accounting & settlement data (the ACORD RLC XML standards)

Purpose

Benefit Implementation Cost


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So what should you do now?

Establish who in your organisation should be your driver for these reforms

Ensure that you have a good understanding of the new processes and the implications to your business

Discuss and agree within your organisation What you need to do to your processes to support the

changes How these will interact with your systems What other opportunities that the new process enables

do you wish to take advantage of and how/when you will develop these opportunities

Discuss the changes with your software supplier (in-house or external) and establish their ability to support the changes and their potential delivery schedule

Agree within your organisation the delivery path and timetable that you wish to follow


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Questions?

Documents

Accounting & Settlement A&S An outline of the Accounting & Settlement Project 14 th December 2004