The Market Reform Contract Endorsement

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• The Market Reform Contract Endorsement
• and where are we going to take it and us?

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Lets start with a brief history lesson
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Market Reform Contract Endorsement (MRCE)

• Why Guidance?
• No prior definitive guide to Endorsements
• Formal launch of new style documentation
• Aids training and implementation
• Benefits
• Assists in meeting code of practice, Contract
  changes need to be certain and documented
  properly
• Reduces the time and effort handling Contract
  Changes

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Key Elements

• Eliminates use of the honeycomb endorsement
  condensing the long established two document (and
  sometimes three) process into one
• Allows for the MRCE to be used as an Insurer
  Authorised Document or as a Broker Insurance
  Document (BID)
• Follows MRC approach and section layout
• Provides an unambiguous Settlement Due Date
  default position
• The MRCE may be used immediately formally
  adopted as the Market Standard after 31 March 2008

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Old Honeycomb style
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Cover Note Addendum
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MRCE Standard Structure
STRUCTURE
MRCE Structure
RISK and ENDORSEMENT IDENTIFICATION DETAILS
Page header

CONTRACT CHANGE(S)
Primary sections
INFORMATION (where required)
CONTRACT ADMINISTRATION AND ADVISORY (mandatory,
where applicable)
Secondary sections order of sections is
reversible
AGREEMENT
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New style layout
Risk Identification and Endorsement Details
section - Additional details may be included
Contract Change(s) Section using MRC format and
headings
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New style layout
Contract Administration and Advisory Section
(mandatory where applicable) Settlement Due
Date default position (always include on APs)
Agreement Section GUA Example Agreement
Boxes ensure date of agreement is captured
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Evidencing Contract Changes

• The MRCE may be used irrespective of the form of
  the original contract documentation
• MRCE approach to evidencing Contract Changes
• A copy of the MRCE
• A copy of the MRCE with the Contract
  Administration and Advisory and Agreements
  sections in the contract documentation being
  omitted
• Brokers may also evidence agreements of change(s)
  to contract(s) by means of a Broker Insurance
  Document
• A formal policy endorsement document which is
  produced and authorised in accordance with the
  Insurer Contract Documentation heading of the MRC

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• e-MRCE

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e-MRCE

• Project Approach
• Primary target audience - the vast number of easy
  (non-complex) endorsements
• As many as possible as quickly as possible
• Attaching an MRCE to an e-mail or message for
  agreement and return to the broker
• Formal adoption criteria to join initiative
• Measurement
• E-mail being used as an interim stage (minimum
  entry requirement)

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Benefits Accumulation
Benefits Accumulation
E-mail agreement
E-mail delivery
Technology phase
MRCE
Face to Face
Implementation phase
Benefit increments not to scale
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Benefits

• Clients
• Align the relative low value that clients place
  on brokers and insurers handling easy
  (non-complex) Contract Endorsements with the
  actual expense to the Market
• This means embedding a more cost effective and
  efficient process for all
• Clients should benefit from quicker turnaround of
  agreement process and therefore receive Contract
  documentation earlier supports achieving
  Contract Certainty
• Regulator
• Code of practice states Contract Changes need to
  be certain and documented promptly

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Benefits

• Insurers
• Allows insurers to apply triage to incoming
  endorsements
• Free up box time for more important ,
  significant, productive and valuable business
• Free up line underwriters time by matching
  materiality and value with appropriate level of
  insurer personnel and personnel location
• Following markets see full audit trail and
  could be much more easily notified when not an
  Agreement Party
• Much easier to get agreed endorsements into
  insurers systems
• Use the consistency of presentation and data to
  integrate into insurers systems

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Benefits

• Brokers
• Reduce time spent on delivering endorsements to
  insurers
• Provides more control and clearer accountability
• Reduces hand-off between Account Handlers and
  Market Brokers
• Simplifies onward confirmation of agreement to
  the Contract Change(s) to the client
• Allows for parallel insurer agreement process
  which will speed up endorsement agreement
• Affords the technology opportunity from the use
  of consistent presentation/data to integrate into
  brokers systems
• Encourages confidence in electronic trading in
  the London Market and its growth and development

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Adoption

• Assign a Project Champion
• Actively promote the change in culture and
  behaviour
• Determine which technology (if in doubt start
  with e-mail)
• Start in an easy place
• Single agreement endorsements
• Contracts with regular endorsements
• Know the process e.g., dealing with Urgents
  and slow responses
• Workflow considerations
• Changing roles and responsibilities in the
  organisation
• Simple measurement collated by MRO

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Remote Agreements Technology overview

• E-mail use with authentication software
• Document Repositories such as Lloyds Wordings
  Repository and ECF Repository are also available
  for automatic download of documents.
• Electronic Forms. This is the simplest option,
  involving the use of electronic forms for
  capturing or presenting information and using
  ACORD messages to transport the information
  between trading parties.
• Direct Messaging refers to the ability to
  received and send (ACORD standard) messages
  through your own gateway and integrate the
  documents and data directly onto your own core
  systems.
• Messaging Hub. This is a web-based application
  offering users the ability to route electronic
  messages between trading partners. It is used
  primarily to outsource the connectivity
  configuration where there are multiple
  destinations for sending/ receiving messages and
  keeping/maintaining live connections . Note some
  technology vendors sell messaging hubs that have
  electronic forms integrated with them.
• Trading Platform. This is a web-based application
  offering users secure access to a trading
  environment which provides placement workflow and
  data management functionality via the internet.
  Risks may be bound on-line within the trading
  platform.

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What are the risks and issues?
Key Risks and issues
Resolution/mitigation

• Requires commitment from each organisation to
  adopt and adhere to new practices and procedures
• being mitigated by Implementation Pack guidance
  and the work of the Electronic Placing Steering
  Group
• Standards and common processes from usage
  scenarios. ACORD working on standards. Service
  Providers are already building Endorsement
  solutions
• Simple measurement approach for now count what
  is sent remotely and what is agreed remotely.
  Brokers and Insurers submit high-level data

• Have to change the Culture and Behaviour
• Varying views from Brokers/Insurers on method of
  deploying electronic endorsements can act as
  barrier to take-up
• No common infrastructure or (placing) systems
  platform that facilitates endorsement agreements
• Endorsement numbers are not currently officially
  monitored. For proper and accurate measurement of
  the penetration and success of the initiative,
  Market-wide endorsement statistics will be
  required and centrally monitored

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Next Steps

• December 2007, January and February 2008
• Finalise starter pack
• Definitive e-mail guidance
• Overview of remote agreement processes
• Adoption and implementation considerations
• Measurement
• Market guidance and presentations early 2008
• Insurer Briefings
• Broker Briefings
• Build-up market endorsement framework via
  cross-market representation for
• Usage scenarios Practitioners
• Messaging standards Associations/ACORD