Contract Certainty Subscription Market Progress Update for FSA

Transcription

1 Programme Office Contract Certainty Subscription Market Progress Update for FSA 19th September 2006 Dane Douetil, Chair Market Reform Group

2 The Market is making progress in line with expectations 100% Broker Contract Certainty Returns Contract Certainty 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Open Market Contracts Certificates Overall Average Target 86% - Contract Certainty in June 06 June performance UP 1% from May 06 85% - Open Market Contracts in June 06 June performance UP 4% from May 06 88% - Certificates in June 06 June performance DOWN 3% from May 06 Page 1 Evidence of Cover 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Evidenced to Client in 30 days Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Open Market Contracts Certificates Overall Average Target 84% - Evidenced to client in 30 days in June 06 June performance UP 6% from May 06 77% - Open Market Contracts in June 06 June performance UP 3% from May 06 92% - Certificates in June 06 June performance UP 8% from May 06

3 Data from Managing Agents and Companies continues to support Broker data 100% Managing Agent Contract Certainty Returns 90% 80% Managing Agent Contract Certainty 70% 60% 50% 40% 30% 20% 10% 0% Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 88% - Total Contract Certainty in July 06 July performance UP 3% from June 06 88% - Open Market in July 06 July performance UP 3% from June 06 89% - Binding Authority in July 06 July performance UP 3% from June 06 Open Market CC% Binding Authority CC% Overall Average Target 100% IUA Company Contract Certainty Statistics 90% 80% 70% 93% - Total Contract Certainty in July 06 July performance UP 2% from June 06 Company Contract Certainty 60% 50% 40% 30% 20% 10% 93% - Open Market in July 06 July performance UP 2% from June 06 91% - Binding Authority in July 06 July performance UP 15% from June 06 Page 2 0% Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Open Market CC% Binding Authority CC% Overall Average Target

4 We have focused on the three areas highlighted by the FSA as requiring further work and have either addressed the issues or have plans in place to do so during the remainder of 2006 and into More challenge and assurance over data Analysis of organisations measurement systems (including visits to outlier firms) concluded that variations in reported performance exist because organisations are dealing with contract certainty within the context of their particular operational risk frameworks. Further action is currently under way to; Support the market in the interpretation and use of existing guidance specifically around measurement Consolidating, simplifying and incorporating lessons learnt into the guidance. Supporting the market in the elimination of contract certainty exceptions. Survey of extent of market adoption of contract certainty concluded that 75% of market participants regard their systems & controls for achieving Contract Certainty to be either embedded or very well established in their business-as-usual operation. Analysis of the contract certainty of binders concluded that performance is as we would have expected. Page 3

5 We have focused on the three areas highlighted by the FSA as requiring further work and have either addressed the issues or have plans in place to do so during the remainder of 2006 and into Focus on the key drivers which are likely to inhibit cultural change. (Value) Market set out to test whether there was a strong correlation between value of contract and lack of contract certainty. Analysis based on data from managing agents supported by individual brokers performance and output from the survey. Analysis concluded: Broker data Managing agent data Survey Correlation varies from firm to firm but there does not appear to be a strong correlation. If the average value of premium for all risks was 100, the average value of contract certainty passes would be 85, the average value of failures would be 122. This implies that 81% of contracts by value are contract certain. 29% of organisations analyse the contract value/certainty relationship. Of this set, over 90% of organisations concluded that the average value of their exceptions was either approximately the same or less than the value of their certain contracts. Page 4

6 We have focused on the three areas highlighted by the FSA as requiring further work and have either addressed the issues or have plans in place to do so during the remainder of 2006 and into Focus on the key drivers which are likely to inhibit cultural change. (continued) An analysis of late orders shows that they are contributing between 5 and 10% of the contract certainty passes (broker data). Further work around late orders is planned as part of the work during the remainder of 2006 and into Plans developed and agreed with MRG and CCPB for further CC activity throughout the remainder of 2006 and 2007 to further embed contract certainty into the market. Page 5

7 We have focused on the areas highlighted by the FSA as requiring further work and have either addressed the issues or have plans in place to do so during the remainder of 2006 and into Greater clarity over the extent of the legacy issue Progress made on providing purging facilities for the Unsigned Policy Report. Recognition of the need to do more in respect to the legacy issue with plans in place to devise and implement a coherent monitoring regime to demonstrate progress and eradication to the FSA. The survey found that 50% of organisations consider themselves to have made some or significant progress in reducing their Legacy backlog. Market presentation held on the 14/09/2006 Early indications are that most of the mobilisation necessary to address the legacy issue is now complete. Page 6

8 In summary, we believe that the market is making good progress towards meeting the contract certainty challenge. The market s performance remains ahead of published market targets. Variations in reported performance exist because organisations are dealing with contract certainty within the context of their particular operational risk frameworks. The guidance that the market has issued is substantially embedded in firms business-as-usual processes. The analysis of value is sufficient to demonstrate that there is not a strong bias towards high value contracts and lack of contract certainty. As part of the continuing process towards achieving even higher levels of contract certainty the schedule of things to do includes: Continuing to support the market in the interpretation and use of existing guidance specifically around measurement. Consolidating, simplifying and incorporating lessons learnt into the guidance. Supporting the market in the elimination of contract certainty exceptions. Addressing the issue of Legacy and being able to demonstrate tangible progress. Page 7

9 Ongoing support required from the FSA Provide support to the market by: Continuing to feedback findings from market analysis and visits. Continuing to address oversees regulators and markets. Maintaining a principle rather than rule-based approach. Page 8