Key parties in the London market, including the London Market
Association (LMA), and the G6 have welcomed Lloyd’s CEO Richard Ward’s contract
documentation initiative, which was announced on 22 May.
The following day the LMA revealed
it too had been working on a future model for checking, producing and issuing
contract documentation at inception.
In a letter to Ward, the LMA’s chairman Andrew Kendrick said the association had
gauged market views of “staff from the franchisor and have included a range of
opinion including underwriters, CEOs, operations
managers and wordings practitioners from a variety of managing agencies”.
It continued: “Our conclusion
matches the model you describe in your letter and we support the line you are
taking.”
Kendrick added that the LMA favoured
several of the key points in Ward’s initiative including the development of “a
single set of contract checks, agreed with the franchisor, covering material
requirements of contract certainty, risk management and regulatory compliance,
carried out in advance of a line going down”.
It was also pleased with the
proposed “flexibility for managing agents to carry these out themselves, or
outsource” and the “quality auditing of these checks by the franchisor with
reports to the market to enable managing agents on a slip to judge the
appropriate level of re-checking”.
Finally, the LMA welcomed the
“flexibility for underwriters and brokers to determine (and specify on the slip) the nature of and responsibility for issuing a single
contract document”.
The LMA also announced that it was
supporting its contract documentation position by developing a new
underwriter-owned market wordings repository.
The repository would provide a
trusted source of tried and tested wordings and clauses in common use in the
market at the box for both brokers and underwriters.
The LMA said the model had been
recommended by its working group and approved by its board, leaving it subject
to legal checks and a proposed pilot in US Property. It also acknowledged its
“debt to G6 for detailed work on the straw man they presented to the working
group, and for laying the foundation for the new wordings database”.
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Masojada throws down gauntlet
Although the pace of business
process reform has picked up in London, with initiatives from Lloyd’s, the
London Market Association and the G6 moving forward, Bronek
Masojada, chief executive of UK insurer Hiscox, challenged the market, as he participated in our
sister publication IQ's London market roundtable.
“I throw down the gauntlet to
everybody. What are you going to do to change tomorrow,” asked Masojada, as a group of leading market figures debated the
topic: Is the
And Masojada,
who is also deputy chairman of Lloyd's, was bullish about his own company’s
progress and plans for electronic trading.
He said: “We’ve already launched G6
– at least we’re doing something. By the end of June we’ll be messaging backwards
and forwards. The next step for Hiscox is that by the
second half of the year, we’ll be taking people out of Lloyd’s and putting them
in our building. The next step after that is going to be to come back to the
brokers and say 'if we’re doing reinsurance, we’re not going to pay you 15
percent, we’re going to pay you 10, but we’ll do the whole back office' – just
like they do in Bermuda.”
There was support for the G6 from
other Lloyd’s players too, with the CEO of Chaucer, Ewen
Gilmour, responding: “I think all us non-G6 underwriters are actually extremely
appreciative of what you are doing, and I think that what will actually drive
it forward is fear that we’ll be left behind [if we don't].
"Seeing G6, Aon, Benfield,
Marsh and Willis all moving ahead, the rest of the community will say 'hang on,
we’re not going to be part of this, we must catch up'. I think that is the way
forward and it will produce change much faster as a consequence.”
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G6 'delighted' at progress
In an exclusive interview with our
sister publication IQ, Sue Langley, chair of the G6 and chief
operating officer of UK insurer Hiscox, confirmed the
group would pilot a new approach to contract checking, to which the new Lloyd’s
CEO Richard Ward has already announced his full support.
The new process aims to cut
administrative checks by around 70 percent, reducing working times and
supporting the drive towards contract certainty.
“I’m delighted that we have been
able to take this step forward so quickly, working with both Lloyd’s and the
Lloyd’s Market Association (LMA),” said
The G6, which consists of the
Lloyd’s heavyweights Amlin, Beazley, Catlin, Hiscox, Kiln and
According to the G6, the current
contract checking procedure, part of the process known as ‘stage 2’ at Lloyd’s
and administered by Xchanging Ins-Sure Services
(XIS), involves an average of 170 checks per slip.
“It will cut out a huge amount of
work, particularly for the brokers. At the moment every query goes from XIS
back to the broker, back to the agent, then back to the broker,”
Since its emergence at the beginning
of the year the G6 has been notable mainly for its “Skinny Placement Message”
that is pushing electronic trading forward in London, although it is involved
in several other projects.
The first phase of the project has
involved the development of standards to facilitate peer-to-peer trading
between insurers and brokers using the internationally recognised ACORD
standards.
"I think the key thing that
perhaps we haven't explained enough is that there's no technology involved
here; it's a standard message. We can support a range of systems and gateways
because of the use of ACORD standards," said
“It could be that
To read the Sue Langley interview in
full see the summer edition of IQ, a copy of which can be
obtained by contacting Laura Dempsey on +44 (020) 7397 0619, or laura@theinsider.co.uk