Market Reform Office with ACORD Market Reform Contract (MRC) for Binding Authorities and Lineslips Andy Brookes & Steve Hulm (MRO), Paul Brady (Lloyd’s),

Market Reform Office

with ACORDwith ACORD

Market Reform Contract (MRC)for Binding Authorities and Lineslips

Andy Brookes & Steve Hulm (MRO),

Paul Brady (Lloyd’s),

Mark Knight (LMBC), David Banks (Travelers)

3 April 2008

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Summary

Very little has changed!

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Contents

• Background

• MRC (Binding Authorities)

– Lloyd’s Bulletin (Y4133)

• MRC (Lineslips)

• Implementation Timescale & Actions

• Market Reform Contract Endorsement (MRCE)

• Future Plans & Actions for You

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Background

• Why change at all?

• MRC (Open Market)

• MRCE

• Combined Certificates & Several Liability

– Lloyd’s Bulletin Y4133

• Overall, close call but worth new version

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Lloyd’s Bulletin – Y4133

• Combined certificates – where proportion of security provided by non-Lloyd’s insurers (“mixed markets”)

• Prohibited until now in US (by Lloyd’s)

• Now reviewed (at request of market)

• Primary concern – to ensure Lloyd’s syndicates not liable for non-Lloyd’s participations

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Lloyd’s Bulletin – Y4133

• Bulletin (11 March 2008) sets out new procedures for combined certificates and new several liability clause (LMA5096)

• The use of US combined certificates is now possible (but not mandatory)

• Underwriters can choose if/where to adopt

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Lloyd’s Bulletin –Feedback/Queries

• Positive reaction – new business opportunities

• 100% Lloyd’s “joint certificates”

– Can use existing procedures (including LSW1001)

• Risk placed with binder and open market participations

– Coverholder is not authorised to issue a joint/combined certificate encompassing the open-market lines

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MRC (Binding Authorities) - What has NOT changed

• The Model wordings (LMA3018 etc.) have not changed

• In any way

• The Schedules (& hence Schedule templates on website) have not changed

• In any way (despite example)

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MRC (Binding Authorities) – Changes

• Where relevant, order of headings and sections amended in line with MRC (Open Market).

• Non-Schedule agreements section:

– Headings removed: Order Hereon, Brokerage, Other Deductions from Premium, Signing Provisions

– Heading renamed to: TAX PAYABLE BY THE INSURED AND ADMINISTERED BY INSURERS

• Information section:

– Unchanged

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MRC (Binding Authorities) – Changes

• Security Details section:

– Now includes: Order Hereon, Basis of Written Lines, Basis of Signed Lines, Signing Provisions

– Several Liability clause/heading not required within this section of MRC (BA)

• Subscription Agreement section:

– Heading removed: Basis of Written lines

– New conditional heading: Bureau Leader

– Headings re-ordered

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MRC (Binding Authorities) - Changes

• Fiscal and Regulatory section:

– Headings renamed: TAX PAYABLE BY INSURERS, ALLOCATION OF PREMIUM TO CODING

• New Broker Remuneration and Deductions section:

– Total Brokerage, Other Deductions from Premium

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MRC (Binding Authorities) – Several Liability• Y4133 has prompted a review of Several

Liability requirements, & it is now agreed that:

– MRC (Binder) does not require further Several Liability language, beyond that within the model wording and that to be used on each certificate (specified within the Schedule)

– The clause for each certificate may be LMA5096 (for Combined Certificates) or as current (such as LSW1001)

– Do not use LMA3333 on MRC (BA) or on certificates

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MRC (Lineslips) – Changes

• Where relevant, order of headings and sections amended in line with MRC (Open Market).

• Contract Details:

– Headings removed: Order Hereon, Several Liability of the Lineslip, Brokerage, Other Deductions from Premium, Signing Provisions

– Headings renamed to: TAX PAYABLE BY THE INSURED AND ADMINISTERED BY INSURERS FOR EACH INSURANCE BOUND, INSURER CONTRACT DOCUMENTATION FOR EACH INSURANCE BOUND

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MRC (Lineslips) – Changes

• Information section:

– Unchanged

• Security Details section:

– Now includes: Order Hereon, Basis of Written Lines, Basis of Signed Lines, Signing Provisions.

– Several Liability clause/heading not required within MRC (LS)

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MRC (Lineslips) - Changes

• Subscription Agreement section:

– Heading removed: Basis of Written lines

– New conditional heading: Bureau Leader

– Headings re-ordered

• Fiscal and Regulatory section:

– Headings renamed: TAX PAYABLE BY INSURERS, ALLOCATION OF PREMIUM TO CODING

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MRC (Lineslips) - Changes

• New Broker Remuneration and Deductions section:

– Total Brokerage, Other Deductions from Premium

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Implementation Timescale & Actions

• MRC (BA) and MRC (LS) published in March 2008

• They can be used immediately

• They are the London Market standard from 1 July 2008

• Placing of Binder and Lineslip Declarations & Off-slips unaffected

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MRCE for Binders and Lineslips

• The format to be used for endorsements to the Binder or Lineslip itself

• Replaces the honeycomb

• Comparable to MRCE (Open Market)

– With minor changes in terminology

• Published April 2008

• London Market Standard from 1 August/September 2008

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Future Plans

• Minor changes to MRC (Open Market) – Summer 2008

– Which may affect Lineslip Declarations

– Clarification only, no changes to headings

• No further changes currently planned for MRC (BA) or (LS)

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Actions for You

• Understand the changes

– Today’s session

– Documentation on website (MRC & MRCE)

– Lloyd’s Bulletin (Y4133)

• Disseminate the information

– To others within your organisation

• Make it happen!

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Links

• Lloyd’s Bulletin Y4133

http://www.bulletins.lloydsoflondon.com/bulletins/mktcirc.nsf/mktBulletins/Y4133/$file/Y4133.pdf

• MRC for Binders:

http://www.marketreform.co.uk/RD_P_S_Binders_guidance_pg1.htm

• MRC for Lineslips:

http://www.marketreform.co.uk/RD_P_S_Lineslip_guidance.htm

• Endorsements (MRCE) for Binders & Lineslips:

– Watch this space

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Contacts

LMBC: [email protected] 0207 397 0252

LMA: [email protected]

[email protected]

0207 327 3333

Lloyd’s: [email protected] 0207 327 6064

[email protected] 0207 327 5750

IUA: [email protected] 0207 617 4445

MRO: [email protected] 0207 327 5220

Market Reform Office

with ACORDwith ACORD

Questions for Panel?

Mark Knight (LMBC), David Banks (Travelers),

Paul Brady (Lloyd’s), Steve Hulm (MRO)

3 April 2008