Control Framework

Breakfast Groupagenda

9:00 Arrival, Breakfast & networking

9:20 Welcome and The “gold star awards” - Ali Dove

9:25 Hardy – control framework in a “business as usual” environment – post implementation – Kirsten Charlton

9:45 Phase II roadmap – Jaana Rouvari

9:55 Survey responses – Jaana rouvari

10:05 HCC – A managing agents approach to phase II – Caroline Stanley

10:20 Q & A

10:30 Close

Control Framework

Lloyd’s market gold star awards…

ALTERRA

MARKEL

ASCOT

Control Framework

LIBERTY

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SERVICE COMPANY CONTROL FRAMEWORKKirsten Charlton, April 2013

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The Challenge

Goal: Implement and provide evidence for Service Company Control Framework compliance for Board sign-off by 30 Jun 2013

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Delegated UnderwritingDelegated Underwriting

How We Tackled It

1. Eliminate premium backlog

2. Redefine premium process

3. Jointly train Underwriting, Finance, and Delegated Underwriting

4. Eliminate claim backlog

5. Redefine claims process

6. Jointly train Claim, Finance, and Delegated Underwriting

Cross-functional Steering Group: Claims, Compliance, Delegated Underwriting, Finance, Internal Audit,

International Operations, IT, Operations, Risk Management,

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Aspirational Evidence Diagram

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Evidence Diagram – Underwriting

• Focus on Risk Entry

• Developed risk entry indicators on scorecard

• Review of scorecard built into process

• Connections with Compliance, Risk Management, and Internal Audit

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Evidence Diagram – Claims

• Very similar to Underwriting controls, but in development

• Focus on process• Developing claims

quality indicators• Same connections

with Compliance, Risk Management, and Internal Audit

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Evidence Diagram – Finance

• Focus on separation of duties and enhanced reports

• Better understanding of Underwriting and Claims processes

• Connections with Compliance, Risk Management, and Internal Audit

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Critical Success Factors

• Hardy management recognised importance of this project and dedicated resource to it

• Early decision to capture all data requirements into Subscribe

– All data in one spot

– Importance of getting the data right from the start at the source

– Long-term view: pre-requisite for Direct Reporting

• Risk entry refresher training

– Small, defined, internal group of underwriters, underwriting assistants, and finance

– New measurements of risk entry quality

– Provided context for why the changes were being made

– Made a case for benefits of the new process and details

11 V6 Oct 12

LONDON GUERNSEY BERMUDA SINGAPORE

1st Floor Fitzwilliam House 10 St Mary Axe London, EC3A 8BF T: +44 (0)20 7626 0382F: +44 (0)20 7283 4677

PO Box 155 Mill Court, La Charroterie St Peter Port Guernsey GY1 4ET T: +44 (0)1481 719 292

4th Floor, Park Place55 Par-la-Ville RoadHamilton, HM11 BermudaT: +1 441 295 0382F: +1 441 295 7926

8 Marina View#15-01 Asia Square Tower 1Singapore 018960T: +65 6303 6700F: +65 6535 8274

www.hardygroup.co.uk www.hardygroup.co.uk www.hardygroup.bm www.hardygroup.com.sg

Control Framework

Phase II

March

Challenge & provide

alternative solution

Managing agent working Group

Feedback&

Volunteers

April

DUM

DUC

Breakfast Group

BIG changes

Lloyd’s

Control Framework

Managing agent working groupManaging agent Representative

ACE Sue Burn

Argenta Stuart Taylor

Barbican Steven Green

Brit Leena EkmanAlex Smith

Catlin Charles Rowley

Chaucer Chris Rees

HCC Caroline Stanley

Hiscox Steve BurnsJames Chaplin

Kiln Charlotte Boardman

Markel Martyn Lucas

Talbot Richard FaulknerAndrew Howse

XL Vicky Draper

Control Framework

Phase II Roadmap 2013

Pre-project consultation Develop Lloyd's project tool kit

Understand Phase II requirements and apply risk matrix to coverholder data

Design and plan implementation

Q2 Q3 Q4

Lloyd’s and managing agents joint broker engagement

Carry out audits and review findings

Phase II kick off

Control Framework

Phase II Roadmap 2014

Review and monitor

Sign off

Assess risk, identify controls & gaps

Develop / Implement controls

Develop / Implement/ test controls

Q1 Q2 Q3 Q4

Lloyd’s and managing agents joint broker engagement

Carry out audits and review findings

It was suggested that a conference be held by Lloyd’s and managing agents for brokers. Do you support this suggestion?

•83% - Yes •17% - No

•Lloyd’s are investigating feasibility of a Launch event in July.

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Control Framework

Survey Feedback

How can Lloyd’s assist with your broker engagement dialogue?

•Lloyd’s to drive all Phase 2 communication•Centralised/standardised messages•Provide materials to managing agents to reinforce message •Ali Dove, Andrew Gurney and Mark Edwards to speak at a forum for brokers•Representation at various market broker meetings•Managing agents to liaise with the brokers, with guidance and steer from Lloyd’s

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Control Framework

Survey Feedback

What are the foreseeable issues from brokers relative to managing agents achieving sign-off for Phase 2?

•Too many managing agents providing a different message to each broker

•Brokers avoiding doing business with managing agents who are out in front with regards to compliance – more work, additional costs

•As agents of coverholders, no incentive to engage with managing agents to achieve sign-off

•Lack of understanding of the requirements

•Smaller brokers will not maintain adequate data records

Control Framework

Survey Feedback

Would you support Lloyds coordinating the audit activity?

•81% - Yes •19% - No

Comments:•Yes: Avoid duplication of effort and cost

•No: Managing agents should retain control over selection of auditors and timing of audits

•Should be on an optional basis

•Delegated Authorities team at Lloyd’s running a pilot with 6 managing agents

Control Framework

Survey Feedback

What are the obstacles for delivering Phase 2?

•Distortion of “the message” from individual managing agents.

•Broker engagement. The key is to identify several key people from each broking firm.

•Resistance to change from coverholders without a clear Lloyd’s mandate.

•Managing the audit process – responsibilities of lead vs. follow.

•Coverholders having inadequate systems.

•Time.

Control Framework

Survey Feedback

Suggested future topics:

•Managing agent presentations on both process for Phase 1 and approaches to Phase 2

•How to create the right message for Phase 2

•How to manage/control the audit process

•Re-development of ATLAS – what can we expect?

•General view on market progress/readiness

•Overview of Crystal

Control Framework

Survey Feedback

Control Framework

A managing agents approach to phase II

Caroline Stanley

Control Framework

HCC - A managing agent’s approach to Phase II

• Clarification on the number of Coverholders

• Confirmation of data elements

• Collaborative approach with other Managing Agents who have same Coverholders

• Communication strategy• Internally

• Externally with brokers and coverholders

– Mixed messages

– Duplication

– Loss of reputation

– Loss of business

Control Framework

• Gap analysis – How can we avoid duplication work within Managing Agents– Where should the information be stored to enable Managing Agents to access

• Risk Assessment Approach– Is it a one size fits all approach or do we split them into the ‘Good, The Bad and

the Ugly’ – Can scope of existing audits be expanded to provide the additional information

required?

• What are the consequences if the 2014 deadline is not met?

HCC - A managing agent’s approach to Phase II

Control Framework

Q & A session

& Close