Embed Size (px)
Citation preview
1
BINDING AUTHORITIES: LMP SLIPS, MODEL BINDING AUTHORITIES: LMP SLIPS, MODEL WORDINGS & CONTRACT CERTAINTYWORDINGS & CONTRACT CERTAINTY
CURRENT ISSUES AND THE WAY CURRENT ISSUES AND THE WAY FORWARD FORWARD
11 & 14 March 200511 & 14 March 2005
Matthew Chandler
Head of Admissions
Risk Management, Lloyd’s
2
1. Context
2. The key issue
3. Resolving the key issue
4. Feedback on LMP Slip audits
5. Feedback on Top 5 reasons for rejection by Xchanging
Overview of presentationOverview of presentation
3
n Key drivers for changes:o Contract certainty between underwriters and coverholders (under D.U.B)o Business process improvements
- LMP slip for binding authorities- Model wordings for binding authorities
n Massive changeo Impacts significantly all people involved in the binding authority process
- Front / back-office of Lloyd’s brokers- Underwriters- Coverholders- Xchanging
o All significant changes take time to settle down- Changes are complex- Involve changes to long established business processes- Implemented at peak renewal season (i.e. January 2005)
ContextContext
4
ContextContext
nn LMPLMP
o No application for binding authorities
o No common slip format
nn Model wordingsModel wordings
o 2860 and 2640 up to date but usage variable
o 2580 out of date
o 228 out of date
nn Contract certaintyContract certainty
o Over 1000 binding authorities signed Stage 1 only – No contract of delegation ever produced
o Most other delegated underwriting arrangements did not have contract certainty before inception
nn Wording quality (Xchanging)Wording quality (Xchanging)
o rejection rate = 50%
o Multiple re-submissions prevail
What was the picture 12 months ago?What was the picture 12 months ago?
5
ContextContext
nn LMPLMP
o 94% compliance in first month of measurement
o Slightly better than open market
o Excellent start – keep it up!
nn Model wordingsModel wordings
o Universally adopted
o Minimum use of bespoke wordings
nn Contract certaintyContract certainty
o All binding authorities have a contract agreed between coverholder and underwriters
o Majority of binding authorities had contract certainty between coverholder and underwriters by 1.1.05
nn Wording quality (Lloyd’s standards)Wording quality (Lloyd’s standards)
o Not meeting Lloyd’s required standards for binding authority submissions
o Post change rejection rate = 90%
What is the current picture?What is the current picture?
6
The key issueThe key issue
n Rejection rate of 90%
We We ALL ALL have an interest in reducing have an interest in reducing this in the short termthis in the short term
Our collective ultimate objective must be right Our collective ultimate objective must be right first time and 100% signing qualityfirst time and 100% signing quality
-- Rejection is a process failureRejection is a process failure
-- Rejections cost time and money to resolve Rejections cost time and money to resolve
7
The key issue:The key issue:Why are rejections running at 90%?Why are rejections running at 90%?
n Bedding in period for significant changes (practical issues of making new rules work at the “coal face”)
n Submissions are of variable quality and contain avoidable mistakes
o Strongly encourage 2nd pair of eye before submissions
o See also Completion and submission errors below
n Lead underwriters not checking to make sure outstanding issues are resolved at the time they are witnessing the schedule
n Ignorance about certain aspects of the new rules
o e.g. submitting unsigned Schedules, witnessing before the coverholder has signed it
8
n Lloyd’s gave Xchanging new checking instructions in November 2004
o Still bedding in / lots of questions
o Still under review between Lloyd’s / Xchanging (see below)
n Rejection process not working effectively
o Need for better communication
o Consistency of rejections
o Non-critical queries raised, alongside important ones
n Lloyd’s required standards under review
o Checks performed not documented until Q4 2004
o Now going through a process of eliminating / modifying processes / checks
o LMBC / broker feedback being received
The key issue:The key issue:Why are rejections running at 90%?Why are rejections running at 90%?
9
A team effort is requiredA team effort is required
BROKERS
XCHANGING LLOYD’S
UNDERWRITERS
10
Resolving the key issueResolving the key issue
n Allowing premiums and claims to be processed for binding authorities with open queries (March 2005)
o Short term solution
o Revised instructions to Xchanging to sign and allocate an FDO number and date to any binding authority incepting in January, February or March 2005 even if it has outstanding queries
n Transparency of Lloyd’s required standards: Binding authority quality assurance tool (January 2005)
o Documents all current Xchanging checks (can be found at www.lloyds.com/QAtool)
- STRONGLY recommend you use it as part of your checking process before making submissions
- Need your help to make sure all technical teams responsible for binding authority preparation are aware of and have access to this tool
- Will be updated following LMBC feedback / Lloyd’s review of validity of checks
11
n Reviewing the validity of Lloyd’s required standards for bindingauthorities (March – April 2005)
o LMBC binding authority group has been asked for feedback on the QA tool
o Lloyd’s reviewing in detail the queries raised to consider relevance
n Classification of rejection queries (March – April 2005)
o Contract critical
o Future submission / renewal
n Feedback (ongoing)
o Guidance on most common reasons for rejection published (2 March 2005)
o Additional guidance will be published during 2005 for rejection “hotspots”
o Key issues from guidance are reviewed later
Resolving the key issueResolving the key issue
12
n Removing unnecessary processes / checks (March 2005)
o Removed requirement for Worldwide affidavit with immediate effect
o Removed Xchanging check that Lloyd’s brokers had relevant territorial permissions where the Lloyd’s broker acts as a coverholder
o Removed Xchanging requirements for paper copy to show binding authority is fully registered
o Others will follow (see above)
n Developing training (April – May 2005)
o Create a tailored training course for:
- Lloyd’s brokers
- Lead underwriters of binding authorities
- Xchanging
Resolving the key issueResolving the key issue
13
n Top 15 binding authority Lloyd’s broker visits
o Top 15 Lloyd’s brokers account for 60% of binding authority submissions
o Aim of visits:
- Review and discuss reasons for current rejections
- Provide interim training / resolve key rejection issues / avoid recurrence
- Understand what the problems are at the “coal face”
- Feedback on validity of rejections and ideas for improvement
- Feedback on submission process and ideas for improvement
Resolving the key issueResolving the key issue
14
n Working with Xchanging to change and improve their role in the submission process (March – April 2005)
o Brainstorm session with Management and senior checkers
o Develop a Blueprint for a new way of working
o Key issues for discussion:- Improved communication during the submission process
- Consistency of response to submissions
- Improving resolution of queries
- Account manager concept for large volume brokers
- Timing of the provision of service
- Performance measures
- Updating service levels
- Format of rejection reports
- Moving towards solutions
- Treatment of non-critical queries
- Eliminating re-submissions
How are we going to deal with the 90% How are we going to deal with the 90% rejections?rejections?
15
n Reviewing current model wordings (April 2005)
o Conduct survey of users asking for feedback on current model wordings and identifying areas for change / improvement
o Working groups to produce model wording for Lloyd’s brokers acting as coverholder outside of UK
n Creating One Big Team (Q2 2005)
o Clear understanding of different roles
o Improved working relationships
o Mutual respect
o “Right first time”. If not, solutions not just rejections
n Developing performance measures (Q2 2005)
o Relevant management information
o Feedback to brokers / managing agents
How are we going to deal with the 90% How are we going to deal with the 90% rejections?rejections?
16
What might the future look like? What might the future look like?
n Transparent Lloyd’s required standards for binding authorities: clear and owned and understood by all
n High quality submissions meeting Lloyd’s required standards
n Low / zero rejections by Xchanging
n Xchanging providing solutions to assist to achieve successful binding authority signings
n Contract certainty before inception of all binding authorities
n Well trained people throughout the contract formation, placementand agreement process
n No more than 1 re-submission after a rejection
n Xchanging providing services before contact inception
n Agreed service levels throughout the process
17
FEEDBACK ON LMP SLIP FEEDBACK ON LMP SLIP AUDITS OF BINDING AUDITS OF BINDING
AUTHORITY SUBMISSIONSAUTHORITY SUBMISSIONS
18
LMP Slip audits of binding authority LMP Slip audits of binding authority submissions submissions
n Quality of LMP slips for binding authorities reviewed to date has been good
n 3 areas to focus in:
o Claims
- “Basis of Claims Agreement” (34% incorrect) / “Claims Agreement Parties” (26% incorrect)
– Basis of Claims Agreement = Lloyd’s 1999 Claims Scheme (but this will be revised in April 2005)
– Claims Agreement Parties = how claims in excess of coverholder claims authority will be handled
New arrangements here w.e.f. 1 April 2005 (Market Bulletin Y3505)– “leader only” claims must have a delegated authority between leader and following
underwriters; or– Leading underwriter and Xchanging Claims Services (on behalf of following
underwriters) only
19
LMP Slip audits of binding authority LMP Slip audits of binding authority submissions submissions
o Period (time zones)
- Incorrect use of time zones (22% incorrect)
o Taxes
- Taxes payable by insured (32% incorrect)
- Taxes payable by underwriters (46% incorrect)
Must be clear about this at the time of placing
20
FEEDBACK ON TOP 5 FEEDBACK ON TOP 5 REASONS FOR REJECTIONS REASONS FOR REJECTIONS
BY XCHANGINGBY XCHANGING
21
Choice of model wording Choice of model wording
n Key issues:
o Modifications to model wording where Lloyd’s broker acts as coverholder binding business worldwide
- Bespoke, is preferred
- If model, must be fit for purpose
- LMA (with LMBC input) will develop a model wording for this (Q2 2005)
o Do not need a worldwide affidavit
Non-marine, aviation or motor binding authorities , accepting Canadian business LMA3006
Marine binding authorities LMA3005
Non-marine , aviation or motor binding authorities accepting International business, but not from UK, US or Canada
LMA3004
Non-marine, aviation or motor binding authorities accepting UK business LMA3003
Non-marine, aviation or motor binding authorities accepting US business LMA3002
USE FORUSE FORMODEL MODEL AGREEMENTAGREEMENT
22
Schedule Schedule
n Key issues:
o Eliminate the following practices:a) some submissions have not been signed by either one or both relevant parties (i.e. the coverholder
and the lead underwriterb) some lead underwriters have signed before the coverholder has agreed the schedule.c) some coverholders have signed the schedule before the broker has commenced placing the binding
authority.d) some schedules include a signing page that clearly does not form part of the schedule. For
example, the signing page is a fax and needs identification to tie it to the original.e) on one submission the broker had attempted to cut and paste the signatures from another document
for use on the schedule
o Repeat visits to lead underwriters- Not necessary unless followers have changed contract during placement
- Visit with signed clean schedule for lead underwriter to witness
o Submission to Xchanging- Placing Schedule
- Full clean signed Schedule and witnessed
- No check between placing and clean schedules (that is the lead underwriters responsibility)
23
Signing schedule Signing schedule
n Key issue:
o Brokers are now responsible for providing this
o Incorrect signing schedule information provided. Must have
- a list of syndicates participating on the contract showing signed lines, pseudonym and number
- details of each syndicate supporting a consortium participating on the contract
showing signed lines, pseudonym and number
24
Licensing compliance Licensing compliance
n Key issues:
o US general cover conditions
- Binding authority does not mention them at all
o Worldwide affidavit
- Requirement removed with immediate effect
o Coverholder territorial approval
- Binding authority territories not consistent with BAR listed approved territories
- All brokers acting as coverholders will have worldwide approval on BAR
- Must consider carefully what territories the coverholder needs approval for
o Copies of documentation for Lloyd’s overseas offices- Illinois (1 copy) - Kentucky (2 copies) - Canada (1 copy)
- Malta (2 copies) - Greece (1 copy) - Italy (1 copy)
- Spain (1 copy) - Switzerland (1 copy) - France (1 copy)
- Germany (1 copy) - Republic of Ireland (1 copy)
25
Completion and submission errors Completion and submission errors
n Key issues:
o Panel 1 not completed
o Subjectivities not resolved
o Binding authority not fully registered
o Wording for embossment / slip schedule and changes
o Page numbering is inconsistent
o Master coverholder arrangements using model
- Use model wording for off slips
o Inconsistent inception / expiry dates
o Use of “leading Underwriter” in the schedule
o Incorrect joint certificate wording used (see Underwriting Requirements, paragraph 16, chapter 2)
26
(A)(A) DELEGATED UNDERWRITING BYELAWDELEGATED UNDERWRITING BYELAWMatthew ChandlerMatthew ChandlerTel: 020 7327 6177 Email: Tel: 020 7327 6177 Email: [email protected]@lloyds.com
(B) LMP SLIP FOR BINDING AUTHORITIES (B) LMP SLIP FOR BINDING AUTHORITIES James James WillisonWillisonTel: 020 7327 5231 Email: Tel: 020 7327 5231 Email: [email protected]@lmpoffice.com
(C) QA TOOL FOR BINDING AUTHORITIES(C) QA TOOL FOR BINDING AUTHORITIESSusan BlackmanSusan BlackmanTel: 020 7327 6267 Tel: 020 7327 6267 Email:Email:[email protected]@lloyds.com
D) XCHANGING QUERIESD) XCHANGING QUERIESCharlie Potter Charlie Potter Tel: 01634 392245 Email: Tel: 01634 392245 Email: Charlie.PotterCharlie.Potter@ @ xchanging.comxchanging.com
Nick Parker Nick Parker Tel: 01634 392534 Email: Tel: 01634 392534 Email: Nick.ParkerNick.Parker@ @ xchanging.comxchanging.com
Jackie Jackie IngeIngeTel: 01634 392226 Email: Tel: 01634 392226 Email: Jackie.IngeJackie.Inge@ @ xchanging.comxchanging.com
Key contactsKey contacts
27
QUESTIONS QUESTIONS &&
ANSWERSANSWERS
