Market Reform Contract guidance refers to two types of lineslip: bulking lineslips and non-bulking lineslips.

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1 To: All Broker Contacts All Company Contacts Lloyd s Managing Agents Software Providers Date: 17 May 2016 Reference: 2016/053 Enquiries to: Xchanging Service Desk Tel: or +44 (0) service.desk@xchanging.com market communication RE: PROCESSING LINESLIPS VIA XCHANGING With the current interest in facilities, Xchanging feels that it is a good time to remind brokers and (re)insurers of how lineslips are processed at Xchanging. Market Reform Contract guidance refers to two types of lineslip: bulking lineslips and non-bulking lineslips. For Lloyd s business, Xchanging refers to non-bulking lineslips as year of account schemes to reflect the functionality within Xchanging s systems that ensures that the declarations thereto, which are signed under their own UMRs, receive the correct Lloyd s year of account. As a consequence Lloyd s non-bulking lineslips are processed differently to company non-bulking lineslips. It is important that brokers and (re)insurers consider the way that each type of lineslip is processed as part of the pre-placement process of deciding which type of lineslip best suits the business expected to attach thereunder. The attached flow diagrams illustrate how bulking and non-bulking lineslips typically operate. Ins-Sure Services Limited Registered Office The Walbrook Building, 25 Walbrook London EC4N 8AQ UK Registered in England and Wales No

2 Bulking Lineslips Page 2 Characteristics Normally used by a single broker. Xchanging messaging does not contain any declaration level information. Subsequent amendments and claims are not linked to individual declarations. Does not lend itself well to variable markets. Does not lend itself well to individual referencing of declarations by underwriters. Xchanging processing for Lloyd s and company business All declarations and claims submitted on IMR under lineslip UMR. Original Signing Number(s) and Date(s) (OSNAD) allocated to lineslip For Declaration Only (FDO) signings. All declaration premiums signed as Additional Premiums (APs) against lineslip OSNAD. Claims and subsequent APs and Return Premiums (RPs) are signed against lineslip OSNAD. Signed lines are fixed, and references are normally fixed, on each OSNAD no variations on APs or Claims attaching to each OSNAD. Closings are usually bulked, with monthly or quarterly bordereau submissions, although individual declarations may be presented (the lineslip should provide for the basis of submissions, and calculation of SDD etc.). Policies can be requested for individual declarations if the slip provides for this format of insurer contract documentation. Where these extract policies are required, brokers must submit sufficient information to enable Xchanging to identify the OSNAD(s) applicable. Non-bulking lineslips Characteristics Individual declarations are processed in the same ways as open market premiums Can be restricted by broker or used as a market facility and accept declarations from multiple brokers. Xchanging messaging provides declaration level information. Subsequent amendments and claims associated with individual declarations. For Lloyd s business only, underwriters references (but not lines) can be amended on AP and RPs but this method of processing relies on manual intervention and is extremely prone to errors. It is best avoided. As an alternative, separate associated FDOs can be set up for each declaration (i.e. first submission is FDO LPANs, each declaration is FDO LPANs plus AP LPANs, all under lineslip UMR on the IMR).

3 Page 3 Is able to accommodate variable markets. Is able to accommodate individual referencing of declarations by underwriters. Sometimes used as a processing method for complex consortia, typically where variable markets are required. Xchanging processing Lloyd s business: Lineslip only is presented under the lineslip UMR on the IMR with FDO LPANs. Xchanging allocate year of account scheme (YOA) FDO OSNAD(s). Each declaration is presented on the IMR under its own declaration UMR. First submission of premium should be under LPANs marked as PM. Each declaration submission refers to the relevant YOA FDO OSNAD(s). Except for Treaty Scheme Reinsurances, lines (syndicates can be excluded or modified but not added) and references can differ on each declaration. Subsequent claims, APs and RPs are submitted under the declaration UMR and attach to the OSNAD allocated to the declaration PM(s). APs/RPs/Claims signings cannot be processed against the YOA FDO OSNAD. If an AP/RP (for example a profit commission) applies to the lineslip as a whole, the broker should have insurers agree either to (a) take down the AP/RP against one declaration or (b) to set up dummy lineslip FDO OSNAD off of the YOA FDO OSNAD to which the AP/RP can be processed. Policies can be requested for individual declarations if the slip provides for this format of insurer contract documentation. Company business: A lineslip does not normally need to be presented to Xchanging under its own UMR. Each declaration is presented on the IMR under its own declaration UMR. First submission of premium should be under LPANs marked as PM. A copy of the lineslip needs to be included to enable Xchanging to check and key the signed lines. Where a profit commission or similar needs to be collected, then at that point the lineslip may be presented to Xchanging under the lineslip UMR with FDO LPANs, in order that Xchanging can allocate a FDO OSNAD(s) for the purposes of collecting the profit commission. Subsequent claims, APs and RPs are submitted under the declaration UMR and attach to the OSNAD allocated to the declaration PM(s). Policies can be requested for individual declarations, if the slip provides for this format of insurer contract documentation.

4 Bureau Arrangements and Allocation of Premium to Years of Account Page 4 It is recommended that the Bureau Arrangements slip heading is used to clarify the way that the lineslip declarations and/or profit commissions etc will be processed, particularly if there is expected to be any variation from normal market practice. Where lineslips can accept declarations in excess of 18 months (multi-year policies), the lineslip should include a provision, under the Allocation of Premium to Years of Account slip heading, setting out how the second and subsequent period of the declaration will be accounted for. Typically, the second and subsequent years are cancelled from the first year s lineslip and resigned to the second and subsequent lineslips, or the full premium is retained by the original lineslip (for Lloyd s business it would then be retained in the year of account in which the lineslip incepted). Lloyd s only - supplying Xchanging with the Lloyd s non-bulking lineslip (year of account scheme) Signing Number(s) and Date(s) on declarations attaching thereto It is important that brokers provide Xchanging with the correct non-bulking lineslip (year of account scheme) FDO signing number(s) and date(s) when submitting declarations attaching thereto. Traditionally this information was agreed by (re)insurers as part of the Security Details section of the slip. However, it is appreciated that this information is not always known at the time of placing and that brokers may not wish to include it in documentation that will be sent to their clients. As an alternative, Xchanging would suggest that when submitting declaration LPANs for Lloyd s business brokers may wish to consider showing the non-bulking lineslip (year of account scheme) FDO signing number(s) and date(s) under the For Bureau Use Only part of the LPAN. The non-bulking lineslip (year of account scheme) FDO signing number(s) and date(s) should not be shown in Box 8 Bureau Original Ref of the LPAN. For eaccounts submissions these numbers and dates should be quoted in accordance with normal eaccounts practice. Where multiple non-bulking lineslip (year of account scheme) FDO signing number(s) and date(s) apply (for example for different risk codes or (re)insurers), care must be taken to provide Xchanging with the correct details. Failure to do so may result in the signing of the declaration being delayed.

5 Page 5 Lloyd s claims FDOs on risks involving non-bulking lineslip and open market security, or a combination of non-bulking lineslips Because of the different slip type codes recorded by Xchanging, it is not normally possible to sign a single entry covering multiple placement methods (open market, binding authority, and lineslip). Each has to be signed separately. However, claims FDOs are sometimes signed to allow a claim to be processed via ECF this creates a single market for all placement methods. Advice from Lloyd s via the LMA is that claims should be processed against the same UMR as the premium to which they relate. Because non-bulking lineslip declarations are signed under their own UMRs, it is therefore possible for a claims FDO to be signed to create a single market which combines, (a) security from multiple non-bulking lineslips or, (b) both open market and non-bulking lineslip security, if the declaration slip on which they appear shares a common UMR, provided that all Lloyd s (re)insurers thereon attract the same Lloyd s year of account and other coding characteristics. It is not possible to sign a claims FDO that combines, for example, open market security in one year of account with non-bulking lineslip security from another year of account. The year of account of non-bulking lineslip security is normally determined by the inception of the lineslip. Bulking lineslip security cannot be combined with other bulking lineslip security, nonbulking lineslip security and/or open market security to create a single claims FDO, because the expectation is that claims will be closed under the same bulking lineslip UMR to which the premium was signed. Lloyd s bordereaux Brokers and (re)insurers are reminded that bordereaux on Lloyd s bulking lineslips should be consistent with Lloyd s Coverholder Reporting Standards, with the omission of coverholder specific fields. Failure to include the necessary level of information may result in the signing of the declarations being delayed. ANTHONY CROYDON HEAD OF SERVICE XCHANGING INSURANCE SECTOR Enc