‘Finish What We’ve Started’ Market Briefing by Mark Chapman Group CIO, Global Aerospace 27 th October 2009 Associations’ Administration Committee.

‘Finish What We’ve Started’

Market Briefing

by Mark ChapmanGroup CIO, Global Aerospace

27th October 2009

Associations’ Administration Committee

This Presentation

What is it we started and need to finish? What benefits will these the changes bring? How much will the programme cost, when will it be

delivered and how will it be funded? How was the procurement done and does the programme

deliver fair value for money? Have we got the right governance in place to successfully

deliver the programme? How does this position the London Market for the future?

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What do We Need to Finish?

All accounting submissions within the scope of IMR As close to full usage of ECF for all claims as is

practicable A significantly better user experience for ECF/CLASS Support the move to use of structured ACORD standard

data for accounting

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Why finish?

Reap the full benefit from the investment thus far: ECF quicker than paper but not all claims in scope A&S via the repository is quicker than paper but

structured data will be quicker still Structured data will help reduce queries and rejections for

accounting submissions Transfer of accounting splits work from broker to insurer

brings London into line with international markets

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Stakes in the Ground

Why continue to invest in “old” London Bureaux systems? Current systems landscape will be with us for at least

four years It is unrealistic to expect to have moved off legacy bureau

systems to a new strategic solution until after 2012 Finishing What We’ve Started can not be achieved

without systems investment To protect our investment, wherever possible change is

focused on newer systems, such as IMR and ECF, and uses ACORD standards for data exchange

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IMR Security Model

What needs to be added to the IMR? Mid-term Broker and Market Changes 3rd Party Access Conflict of Interest Confidential terms

What does it deliver? All accounting submissions within the scope of IMR Increases in-scope claims for ECF by circa 7% Brings in scope Vertical Placements (e.g. Aviation)

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What needs to be changed in ECF?

ECF delivered a basic, functioning system Two years live experience has unearthed significant

usability improvements that would aid processing and encourage further take-up: Convince some players that are yet to be convinced Address weaknesses in ECF’s usability identified by cross-

market user group Simplify current system where some still have to use up to

three versions of CLASS Hide CLASS, including Company Market CLASS – a 20 year-

old green-screen museum piece

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What does ECF2 deliver? Fast on-line viewing of IMR documents

An electronic claim file containing all documents for a claim Ability to text search within this file

Removal of CLASS from the carriers’ business processes Allow claims handlers to respond to all claims via browser screen

without the need to use CLASS One common approach/system for Lloyd’s & Companies

Claims Workflow Management Provides transparency about the status of each claim Puts claims handlers in control of their work Allows managers to balance workload within their teams

Data Warehouse to provide service performance information, data exploration capability and audit trail

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What needs to be changed with A&S?

A&S via the IMR was always viewed as a stepping stone Removed “van time” but still involved the exchange of

scanned documents eAccounts moves to use of ACORD standard structured

data in line with other markets (e.g. continental reinsurers)

Transfer of calculation on non-fundamental accounting splits from broker to insurer brings London into line with other markets

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Benefits of eAccounts Elimination of re-keying, fewer errors and less rework by both

the broker and XIS in the premium process, leading to the potential to improve cash flow to carriers

Delays in current process cost insurers circa £3.5m pa in lost investment income (based on 2% interest rate) [source JMD]

An accounting interface (eBOT) that is in line with international markets (e.g. Europe)

Easier electronic access to the London Market for Brokers in remote locations

Leverages market’s existing investment in IMR and DRI No systems disruption for Carriers

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Cost to Finish What We Started

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Build Estimate  

IMR Security Model £1.3 m

ECF2 £4.4 m

e-Accounts £3.1 m   

Total Build Estimate £8.8 m

Operating costs (2010-12)

IMR Security Model No additional cost

ECF2 £4.9 m

e-Accounts No additional cost

Total Operating Costs £4.9 m

Total £13.7m

These figures exclude a 20%

contingency budget held by AAC and LMG

Contract and Funding

Contract will between XIS, LMA and the IUA Funding:

The costs will be split 62.5% to LMA and 37.5% to IUA, consistent with previous build projects

LMA Board has formally requested that the Corporation of Lloyd’s provides the money to fund its share of the build costs

IUA Board has confirmed that it will meet its commitment without further recourse to its members

Operating costs to be met by transactions charges to be agreed by the respective Associations

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Procurement Process

Using Xchanging, as the incumbent supplier, to make changes to their systems reduces the risk of failure

Challenge was how to reduce the risk of uncompetitive pricing for the work

Two stage process: Engaged third party (DMW Group) to audit XIS’s costs, work

estimates and technology proposal to assure appropriate technical price

Deployed a market-led commercial negotiation team (Shirine Khoury-Haq, Catlin; Chris Smith, LMA and John Hobbs, IUA – supported by Lewis Love III, Aon)

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Negotiation

Unprecedented access given to DMW Group and the commercial team

Costs reflects a substantial discount on XIS’s “card rate” Cost estimates believed to be accurate to +/- 20% While XIS is delivering this programme close to “cost”,

the Xchanging group will be making a modest profit

Overall we have established this is a fair price

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Delivery Timescale

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Programme Implementation date

IMR Security Model November 2009

eAccounts - Release 1 November 2009

Support for ACORD messaging

ECF 2 June 2010

eAccounts - Release 2 July 2010

Support for non-fundamental splits

Programme Governance

London Market Group Overall responsibility for programme Strategy and budget setting

Associations Admin Committee Budget holder for each project Oversight of programme delivery Market communications

Programme Manager Management of programme delivery Resolution of conflicts between projects Primary point of contact for Xchanging

senior management

Client-side Project Managers Management of project delivery Monitoring cost, scope, quality and

timescale Key contact for XIS project managers Management of market input to projects

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LMG

AAC

IMR security model Project

Manager

ECF2 Project

Manager

eAccounts Project

Manager

Programme manager

What is not currently in scope

Solution for claims for binders – proposal to be made to LMG in early 2010

Replacement of current EDI messages to insurers with ACORD messages

Changes to support Lloyd’s claims transformation project pilot

Future improvements to IMR, ECF and eAccounts

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The Future

FWWS programme moves the market forward, delivering real and important benefits in the short term

Gives the market 3-year breathing space to plan and implement future systems, allowing freedom to exercise choice in its selection of technology and service providers

Use of ACORD standards reduces our reliance on Xchanging and protects the carrier and broker communities in their technology investment

So while FWWS isn’t the future, it reduces the barriers to moving to a new generation of market systems and infrastructure

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Questions and Answers

‘Finish What We’ve Started’Market Briefing