Accounting and Settlement: Claim Process Flows

Accounting and Settlement: Claim Process Flows Version 1.0 Page 1 of 36

Contents Market Reform 1. INTRODUCTION 3 1.1 PURPOSE 3 1.2 BACKGROUND 3 1.3 END VISION 4 1.4 BENEFITS 5 1.5 TRANSITION 6 1.6 NEXT STEPS 6 1.7 HOW TO USE THIS DOCUMENT 6 2. STRATEGIC END VISION CLAIMS PROCESS FLOWS 7 2.1 DESCRIPTION OF CLAIMS PROCESS FLOWS 7 2.2 INDIVIDUAL CARRIERS MANAGING THEIR OWN CLAIMS 7 2.3 CLAIMS IN AN OUTSOURCED CLAIMS MANAGEMENT ENVIRONMENT 11 2.4 CLAIMS AGREEMENT FOR FOLLOWERS ENVIRONMENT 11 2.5 CLAIMS PROCESS FLOWS IN A HUB ENVIRONMENT 14 3. IMPLEMENTATION CONSIDERATIONS 17 3.1 LEGACY 18 3.2 TRANSITION 18 3.3 IMPLEMENTATION 19 4. ACORD MESSAGE REQUIREMENTS WITHIN CLAIMS PROCESS FLOWS 21 5. VARIATIONS TO BE CONSIDERED 24 5.1 TABLE OF VARIATIONS 24 5.2 LETTERS OF CREDIT 26 6. DESCRIPTION OF ACORD CLAIMS MESSAGE FLOWS 27 6.1 PURPOSE OF THE ACORD CLAIMS MESSAGES 27 6.2 CLAIM LIFECYCLE EXAMPLE 28 6.3 SUBMIT CLAIM DOCUMENTATION 29 6.4 SUBMIT CLAIMMOVEMENT 30 6.5 SUBMIT TECHNICAL ACCOUNT MESSAGES (TECHACCOUNTS) 32 6.6 SUBMIT SETTLEMENT 34 7. ACKNOWLEDGEMENTS, QUERIES, REJECTIONS/RE-SUBMISSIONS & CORRECTIONS 36 8. REFERENCING, GROUP REFERENCES WITHIN ACORD MESSAGES, PARTY IDS, 36 Page 2 of 36

1. Introduction 1.1 Purpose This document is one of four prepared by the Accounting & Settlement group (The A&S Group) and published by the Market Reform Group. Full membership of the A&S group can be found in the overview document. Together the documents set out at a high level a vision of how the London Market s accounting and settlement processes could operate using a technology infrastructure based on international standards for data and message. The objective of introducing this technology is to make it as easy as possible to automate access to the London Market and to allow brokers and carriers to implement standard ways of accessing all markets and providers, i.e. to reduce barriers to dealing with the London Market. Although the scope of accounting and settlement could be constrained to the processing of payments it is difficult to separate that component of the claims processes from the rest. For this reason this document explores the way in which the whole claims process could be supported by Accounting & Settlement (A&S). The purpose of this specific claims document is to set out at a high level the way in which claims processes in the London Market could operate using that common standard technology whilst preserving the different component processes where appropriate e.g. Lloyd s Claims Scheme. It provides business practitioners detail relating to the processing requirements for claims and reinstatement premium transactions within the strategic design for A&S as described at a high level in the Accounting and Settlement Processing Strategy Overview document. This document only covers claim related transactions: separate documents show details for premium processing and other transaction types and the detailed processing guidance regarding the London Market (LM) implementation of the ACORD Reinsurance and Large Commercial accounting standards. This document sets out an end vision based on the implementation of ACORD international standards and is designed to be an aid to those lead implementers who wish to move towards international standards. ACORD is the generally recognised international authority on insurance data standards. It is a not-for-profit body based in New York and London and operating over 3 domains: Life & Surety; Property & Casualty; and Reinsurance and Large Commercial (RLC). It is this latter domain that provides the new messaging technology that is the focus of the A&S Strategy. The RLC domain has taken over and developed modern messaging technology from the old bespoke messaging and data standards which were evolving through London, other European and US standards bodies including LIMNet, RINet, WISe, and BRMA/RAA. 1.2 Background The A&S process change was initiated to develop a strategic approach for the future processing of accounting and settlement transactions in the London Market. This strategic approach is designed to enable processing directly between trading partners (primarily between brokers and carriers) and to enable carriers to outsource their processing, to system or service providers, as required. Page 3 of 36

The international standards vehicle chosen by the market to achieve this was ACORD. The relevant ACORD standards are: ACORD Messaging Service (AMS) standards (for the communication of messages), ACORD Document Repository Interface (DRI) standards (for the communication of documents) and Reinsurance and Large Commercial (RLC) XML standards (the standards for the message data). In parallel with this strategic approach, the London Market has developed and is adopting repository technology to receive, transmit and store documents electronically in support of the claims process (Electronic Claim Files, ECF) and the premium closing and policy checking services (A&S Repository). The ECF project is a stepping stone towards this end vision. ECF delivers an Insurers Market Repository which allows all carriers on the same risk to share claims documents and access them concurrently. ECF has already implemented the ACORD Document Repository Interface (DRI) standards (for the communication of documents). ECF also brings the CLASS system to the Lloyd s market in support of the Lloyd s Claims Scheme meaning that all brokers and carriers in the London market can use data records to support their claims processes. These claims processes vary within the London market between the IUA and Lloyd s. CLASS is driven by bespoke London Market specific technology messages developed and introduced in some twenty tears ago. ECF is now in place with the focus on driving up implementation by firms and usage. ECF capability is required as the base entry level for all players so that all claims can be supported electronically. The next strategic step for ECF is to replace the London specific messages with international standard messages. This would provide a standard technology interface for brokers and carriers irrespective of the markets within which they operate and enable easier access by non-london players, including loss adjusters, cover holders and lawyers. This also provides the ability for claims to initiated and serviced for the London Market from anywhere. That is, it is capable of being location agnostic with claims initiated at source from wherever they occur globally, serviced in the most appropriate location for a carrier but managed and reported in London. 1.3 End vision The strategic end vision is described in the body of this report. It does not alter claims management and handling but provides an improved electronic infrastructure to support the communication and distribution of documents, instructions, decisions and payments. The environment is flexible enough to accommodate all models including, collective agreement mechanisms, delegation or outsourcing of claims handling to third parties and Lloyd s Claims Agreement for Followers process (CAF) and is responsive to change. The significant change from today s processes is that the broker will send ACORD messages conveying data and documents to each carrier on the risk separately. Brokers will no longer be able to send a single message with an explicit or implicit (by virtue of the use of premium signing references) list of carriers as they currently can using the London market bespoke message used to drive CLASS (i.e. the EDI message LIMCLM). This change ensures that brokers can treat all carriers in exactly the same way Page 4 of 36

from a technology messaging and communication perspective for claims handling irrespective of geographical location. Brokers and carriers will need to establish their trading partner relationships by providing each other with their internet protocol (IP) addresses. These may be different for different message types or classes of business and may refer to shared services such as the Insurers Market Repository in which case the broker need only send one copy of a document with the appropriate Access Control List (ACL). The Access Control List is the list of users that are able to access a document on the system. However, for business messages where there may be different trading partner IP addresses for different classes/ types, if carriers share the same service, the broker is still required to send messages for each carrier. It should also be noted that the ACORD Claim Movement message is used to advise the position of the claim at the 100% level whilst the ACORD Technical Account and Settlement (Settlement) messages are used to advise claim payments at the carrier level i.e. their individual share of the claim payment. This means that recipients will need to apply their percentage written of the risk to the values contained within the Claim Movement to calculate their share of any amounts whereas the Technical Account and Settlement messages will not require that calculation. Whilst the processes described show operations directly between broker and carrier, where the carrier decides to use an external service supplier the carrier must pass the messages received from the broker onto their service supplier i.e. from the broker s perspective he is still dealing directly with the carrier. However, where agreed at time of placing between the broker and the carrier, brokers will send messages for a carrier directly to that carrier s service supplier Implementations of these processes will be through the establishment of trading partnerships, where both a broker and a carrier agree to process using ACORD message standards. The end vision requires all carriers and all brokers in the London Market to be operating in these modes. The management of claims against risks which are placed on a subscription model where some carriers agree to process using ACORD message standards and some do not, is covered in Transition and Legacy (Section 3). 1.4 Benefits The overall benefits being sought from the end vision include improved service provision, reduction in barriers to trade and improved accuracy and reconciliation. Improved service provision to the market s clients will be derived from concurrent message flow to all parties on the risk so that documents and data will be communicated to all and the overall time to make decisions will be quicker. The reduction in the need for mail and paper transport services will increase speed of delivery of information. Reduction in barriers to trade will be achieved by providing standard interfaces for the communication of data and documents irrespective of the market in which the risk is written with the aim of reducing Londonisms. Use of electronic messages and electronic communication of documents will allow business from anywhere to be processed directly into London or with global markets. Data delivered electronically will reduce the need to re-enter/ re-key data thus increasing accuracy and reducing re-work. Use of automated validation routines (the message and data rules), following defined Page 5 of 36

market standards, applied on the creation of business messages output by the sender, and re-checked by the receiver to the same standards will trap errors early. Documents and data will be captured once and transmitted electronically between all relevant parties at the same time. This will eliminate the service drag caused by today s serial processing and enable the re-use of data and documents where appropriate throughout the service chain. This re-use will improve automatic reconciliation, reduce re-keying and transcription errors, reduce error rates and re-work and, enable corrections to be communicated rapidly. 1.5 Transition Although the document identifies a number of implementation steps, it does not attempt to set out an implementation path or timetable: that is a matter for those market leaders who decide to implement this end vision. 1.6 Next steps This document is designed to be an aid to those lead implementers who wish to move towards international standards. Although not a consultation paper, comments and questions should be sent by e-mail to AccAndSet@LMPOFFICE.com. This mailbox is managed by the Market Reform Programme Office (MRPO). 1.7 How to use this document This document is an extension of the details in the ACORD RLC Implementation Guide - V 2005.2 and provides a specific London market focus to those ACORD standards. It should be read in conjunction with the following documents and implementation aids which can be found on the market reform website (www.marketreform.co.uk) or the ACORD website (www.acord.org): 1. Accounting and Settlement Processing Strategy: Overview 2. ACORD RLC Implementation Guide - V 2005.2 3. ACORD Document Repository Interface (DRI) Implementation/Reference Guide V 1.2 4. ACORD Messaging Service SOAP Implementation Guide V 1.4 5. ACORD RLC Data Dictionary (Interactive Database) V 2005.2 6. Technical Information for London market implementation of ACORD DRI messages v 1 7. Accounting and Settlement Premium Process Flows; 8. Accounting and Settlement Technical Information Page 6 of 36

2. Strategic End Vision Claims Process Flows 2.1 Description of Claims Process Flows Throughout the document reference will be made to the broker sending messages or information to carriers using the ACORD RLC Claim Movement, Technical Account, Settlement, Acknowledgement and DRI (document Repository Interoperability) messages. Although this terminology is used as it represents the normal process flow, the processes allow for the sender and receiver to be other parties, where appropriate, such as a third party loss adjuster, a cover holder, a managing general agent, an attorney or a client.. The overall objective is to ensure that irrespective of the way in which individual firms operate and irrespective of any outsourcing, collective agreement schemes, or hub usage; each firm operates a standard gateway interface so that it is not affected by other firms operating models. In that context peer to peer means the technology interconnection that enables a firm to interoperate with a trading partner directly. Those trading partners operate in a principal to principal mode but in the London market this is more likely to be a principal s agent (broker) to principal (carrier) or the carriers nominated external service provider. Where trading partners operate in a hub environment (c.f. CLASS) the hub must provide technology interfaces so that the hub acts as though it were a peer in a peer to peer environment. This is in addition to any interactive or web services interfaces that the hub offers its customers. The end vision supports the Lloyd s Claim Scheme(s) and Claims Agreement for Followers service within the Lloyd s market as currently operated by Xchanging Claims Services (XCS). On receipt of claim movement messages, the Lloyd s followers will automatically forward them to the Lloyd s CAF operator for processing on their behalf. The Lloyd s leader will forward its responses to the Lloyd s CAF operator. For further details refer to Section 2.4). Within the London Market, claims are allocated a unique claim reference (UCR) which is assigned by the broker and may or may not be the broker s internal reference. This UCR would be recorded in ACORD messages as the broker claim reference. Each UCR must cross reference the placing section against which the claim is made. (Refer to Accounting and Settlement: Premium Process Flows Version 1.0 ) 2.2 Individual Carriers Managing Their Own Claims All parties use A&S ACORD Framework and manage their own funds transfer, although this may be outsourced to a nominated external service provider, including central settlement services. On notification of a claim, the broker will send a Claim Movement as notification of the claim (and, where appropriate, a Technical Account message) to each carrier on the risk. Documents relating to the claim will also be made available to each carrier. Page 7 of 36

On receipt, the carrier will provide an initial receipt (system or business acknowledgement) of the messages back to the broker. Each carrier will process and record the Claim Movement (and Technical Account where appropriate) and create cross references to the original risk. The carrier is managing claims on its own behalf and will review the messages and the documents and review/negotiate the claim. The carrier will indicate its decision to the broker by issuing an Acknowledgement to the Claim Movement which completes the transaction processing of that Claim Movement. The contents of the acknowledgement and any associated documents created by the carrier will indicate the carrier s position with respect to the claim transaction. This will not be the normal mode of operation for Lloyd s claims under the Lloyd s Claims Scheme as this scheme as endorsed by the Franchisor Board, does not support this approach for claims agreement in a subscription market i.e. where there is more than one Lloyd s syndicate on a risk. This also is not expected to be the normal mode of operation for London market companies who wish to continue to use a hub e.g. CLASS. This mode of operation could be used for singleton Lloyd s claims (i.e. written 100% by one syndicate who do not use XCS for claims processing) and by London market companies who do not use a hub, but outsource funds transfer to a central settlement service. The following diagrams illustrate the brokers and carriers use of their own document management systems and/or the use of shared market repositories. The Figures below represent the options available to Brokers and Carriers for the use of document management systems. These options are available in models 2.1 to 2.5. Figure 1: Broker and carrier using own document management systems Page 8 of 36

Figure 2: Broker using own document management system and carrier using Insurers market Repository Figure 3: Broker using own document management system and carrier using Insurers Market Repository and own document management system Page 9 of 36

Figure 4: Broker using Shared Market Repository (this could be a Broker shared repository and is not necessarily the Insurer s Market Repository) and carrier using own document management system Figure 5: Broker and carrier using Insurers Market Repository Page 10 of 36

2.3 Claims in an Outsourced Claims Management Environment Market Reform (That is using a third party claims manager but not Lloyd s Claims Agreement for Followers) Where the carrier has delegated (outsourced) claim agreement to a nominated external service provider of their choice, the carrier will provide an initial receipt Acknowledgement back to the broker and will pass a copy of the messages to the nominated external service provider for review and agreement. Once agreed, the nominated external service provider will acknowledge agreement of the claim to the carrier who will, in turn, acknowledge agreement of the claim to the broker. The overriding principle is that the carrier decides delegation and manages it so that the broker deals with the carrier irrespective of outsourcing arrangements. The delegated services may vary between Companies and Lloyd s and may vary between individual carriers. Provision is made for the nominated external service provider IP address to be given as part of the trading partner profile so that it is used as though it were the carrier. This is useful for services that are established at the time of placement and remain fixed over the life of the risk, but is not flexible enough for claims where outsourcing will be more dynamic over the life of the risk and its exposure to claims activities. 2.4 Claims Agreement for Followers (CAF) Environment The London subscription market operates streamlined claims management processes. Lloyd s claims are subject to the Lloyd s Claims Scheme. Lloyd s syndicates delegate their role in claims handling to a single outsourced service supplier that operates as a Claims Agreement party for Followers. The operator of this service (currently Xchanging Claims Services) manages claims in accordance with a claims services agreement and handles Lloyd s claims by working with the Lloyd s leader. The London Company Market has historically expected the company leader to validate electronic claims data before following underwriters become involved in the claim management process. In the London Company market each underwriter decides for themselves (but may of course outsource). The variation to this is in the London Company Aviation and Marine markets, where the company agreement parties, usually the first two underwriters, can authorise a payment on behalf of all company underwriters. However each following underwriter has the ability to rescind that decision on their behalf and reclaim the money Page 11 of 36

paid: the objection process. The following two sections show how each of these markets is expected to operate under the end vision of the A&S strategy. 2.4.1 Lloyd s Claims The diagram below illustrates the A&S Strategy end vision for managing claims transactions within the Lloyd s Claims Agreement for Followers environment which requires following underwriters to delegate their claims agreement and handling to an outsourced service provider (currently XCS). The scenario depicted has all parties using A&S ACORD Framework. The repository is the Insurers Market Repository (IMR). The broker provides Claim Movement messages to all carriers, and each carrier provides an initial system receipt acknowledgement. The broker also provides the electronic claim file to all carriers either directly or via the Insurers Market Repository, or their own repository. Once the leader has completed the claim transaction, the leader acknowledges completion to the broker and provides relevant details to the Lloyd s CAF operator and the electronic claim file on the Insurers Market Repository, for access by other parties. All other carriers automatically forward the advice to the Lloyd s CAF operator and once activity has been completed the Lloyd s CAF operator advises all carriers, who then automatically forward the completion response to the broker without intervention. The Lloyd s CAF operator will need to be able to receive ACORD messages from the Lloyd s leader and followers and respond to leaders and followers for their onward response to brokers. Settlement is automatically triggered by each carrier on receipt of a positive response from the CAF operator and the Lloyd s central settlement operator (Settlement and Trust Funds Operations) ensures that each carrier s share is paid simultaneously so that the whole Lloyd s share is paid as one. Page 12 of 36

2.4.2 London Company Market Claims Market Reform The London company market currently operates a process whereby the leader validates message data against a claim file and then releases the message to all other companies for each company to agree for their own part. In effect each company is managing claims individually but using the leader to validate data and to share their comments. In the end vision the data validation should be performed by all carriers through automated gateways. The sharing of leader s comments can be achieved through the use of document management systems using ACORD DRI messages or by the forwarding of leader s comments to all other companies through messaging or a service supplier. The broker is not required to receive and re-route company leader s comments to company insurers. The exception to the current process is that for company market marine and aviation claims the leader (or leader and second) can initiate the payment of claims on behalf of all companies on the claim. Although this results in the payment of money to brokers each company follower has the right to object to the payment within a defined time period and the broker must repay that money. As part of this end vision there is a strong call for the practice of allowing the leader to trigger payment on behalf of all companies to cease, and the general process of each company triggering the settlement of their own share, to be followed instead. This would standardise the settlement process within the Company market, which will make the processing of settlements more efficient. The IUA representatives on the group are now pursuing this recommendation with the IUA. 2.4.3 Claims against risks subscribed by both Lloyd s and London Companies There is no London market claims agreement process that covers both Lloyd s and companies. The end vision described in this document supersedes the need for a single London market claims agreement process by adopting an international standard messaging service on which specific collective agreement mechanisms could be superimposed. The LMP Claims Protocol was published in February 2001 setting out a proposed single method of managing claims negotiation and agreement in the London Market. This was reviewed against the principles of the end vision using ACORD messaging and it was concluded that it is not worth pursuing The LMP Claims Protocol. In the end vision of ACORD messaging each carrier must be treated as an individual entity in its own right subject to whatever market sector claim agreement processes are put in place. It is the responsibility of the leader for each sector (Lloyd s or Companies) to ensure that their comments are shared with other carriers within their own sector, and it is each carrier s responsibility to determine whether or not they require the comments from other sectors (including those outside Lloyd s and Companies) in order to manage the claim. Where the comments of the leader in another sector are required, the carrier will request this additional information from the broker. The broker will respond to this request by following the usual query resolution process. Page 13 of 36

2.5 Claims Process Flows in a Hub environment Market Reform The end vision for claims process flows under the A&S strategy does not include a hub in the traditional sense of a piece of technology that sits between brokers and carriers and manages the routing of transactions between brokers and carriers and central settlement. The end vision is based on peer to peer technology, with market participants gateway systems automatically performing the appropriate validation, verification and routing of claims transactions, based on agreed business rules. Where trading partners operate in a hub environment (e.g. CLASS) the hub must provide technology interfaces so that the hub acts as though it were a peer in a peer to peer environment. The following diagrams illustrate a sequence of possible implementation steps from today s CLASS infrastructure towards the end vision showing the necessary ACORD message conversion services. In order to simplify these diagrams, the movement of claims documents and the Insurer s Market Repository have not been added. Current London Market Claim Messaging Infrastructure Broker 1 Manage LIMCLMs (Variations for the three London market agreement processes) Interactive Carrier 1 Interactive (Lloyd's) Interactive Carrier 2 Broker 2 Interactive (IUA Aviation & Marine) Interactive (IUA Non Marine) CLASS (supporting the three London market agreement processes) Interactive Carrier 3 Interactive Broker 3 Manage LIMCLMs (Variations for the three London market agreement processes) XCS The first implementation step will be dependant upon whether a broker or carrier moves to ACORD first. If the broker(s) move(s) to ACORD first the following diagram shows the first implementation step: Page 14 of 36

If the carrier(s) move(s) to ACORD first the following diagram shows the first implementation step: The following diagram shows the position where some brokers and some carriers have moved to ACORD, including Peer to Peer messaging. Page 15 of 36

Implementation Step 2: ACORD Broker & ACORD Carrier Market Reform Broker 1 Manage ACORD claim messages ACORD messages sent to interactive carriers Interactive carrier response to broker Peer to Peer (ACORD broker / ACORD carrier) Carrier response provided to non ACORD brokers & carriers Manage ACORD claim messages Interactive claim message sent to ACORD carrier Carrier 1 ACORD/LIMCLM message conversion service ACORD message Interactive screen conversion service Broker 2 Interactive (Lloyd's) Interactive (IUA Aviation & Marine) Interactive (IUA Non Marine) CLASS (supporting the three London market agreement processes) Interactive Interactive Carrier 2 Carrier 3 Broker 3 Manage LIMCLMs (Variations for the three London market agreement processes) Interactive XCS This final diagram, below, shows the likely end vision scenario where some brokers and some carriers are expected to require shared services. A shared service being where, a group of firms collectively fund a service that each one requires. The diagram shows examples of each communication path but does not show every path in order to avoid over complicating the diagram. Page 16 of 36

Implementation Step 3: ACORD and Shared Broker & Carrier Services Manage ACORD claim Peer to Peer (ACORD broker / ACORD carrier) Manage ACORD claim Broker 1 messages messages Carrier 1 Peer to Peer (ACORD broker to non ACORD carrier) Non ACORD broker to ACORD carrier ACORD carrier to non ACORD carrier ACORD carrier to ACORD carrier Broker 2 Brokers Shared Interactive Claims Service (Single screen for all markets) ACORD message Interactive screen conversion service Non ACORD broker to non ACORD carrier ACORD message Interactive screen conversion service Carriers Shared Interactive Claims Service Carrier 2 XCS ACORD broker to non ACORD carrier Manage ACORD claim messages Peer to Peer (ACORD broker / ACORD carrier) Manage ACORD claim messages Broker 3 Carrier 3 3. Implementation Considerations Features of the new model that need to be considered when planning implementation include the following: 1. The model is designed to operate for claims against risks where the first accounting transaction for that risk has been processed under the new A&S strategy model. 2. The model is designed to operate only where both the broker and the carrier and any outsourced claims service provider can send and receive ACORD messages, and then only where a risk has not started its processing life under the old model. So, for example, where a new claim arises on a risk whose original premium was processed under the old model, the new claim will need to be processed under the old model. This is known as legacy. 3. Some new claims will inevitably be transacted where the broker and some carriers operate on the new model for the first accounting transaction but other carriers operate on the old model. In addition, some carriers that were operating on the old model at time of the first accounting transaction could have acquired the capability to operate on the new model at the time of the claim. These situations are known as transition. 4. Given the above and the current market investments in electronic claim files it is extremely likely that individual firms will want to ensure that there is a single way of dealing with all claims within their own firms. Although it is possible for firms to segment the handling of claims under the new model in order to handle legacy and transition issues, it is more likely that for operational efficiency reasons each firm will want to handle all claims in the same way. This could be achieved by firms investing in their own internal integration programmes, which will enable the management of claims Page 17 of 36

information received via the different way of working, and translate this, such that the claim can be handled internally by a single business process. Alternatively, firms may choose to invest in the existing hub infrastructures of ECF, CLASS and the IMR, in order to enable these systems to manage ACORD claim messages, in addition to their current functionality. 5. Implementation of the end vision will require significant investment in gateway systems and 3.1 Legacy message translation services by each firm in the market trading partnerships. For a sequence of possible implementation steps to the end vision, refer to section 2.5. In this context Legacy transactions refer to any transactions that started their processing life on the old model i.e. where the original premium has been processed on the old model. As at today and for some time to come the old A&S model will include: paper only electronic data (i.e. through CLASS) and paper electronic data and documents (i.e. ECF) electronic data and documents and paper documents (i.e. ECF legacy claims) The A&S Strategy design requires any such items to continue on the old model. However, it is expected that there will be an overwhelming demand to deal with all claims electronically in the same way irrespective of their legacy status. This is likely to require more detailed design work to identify and support the processing of these legacy claims on the new model. 3.2 Transition In this context transition refers to new claims against risks whose first accounting transactions were processed where the broker and some carriers operated on the new model but others operated on the old model. It also includes new claims where one or more carriers that were operating on the old method for the first accounting transaction can now operate on the new model. Transition to the whole London market working fully on the end vision model is a complex journey with a number of interim steps and different routes for each firm. Brokers and underwriters will migrate to the claims end vision at different rates and even in the end vision there will be parties that operate peer to peer, and others who will want a shared service. The shared service will allow them to work interactively (e.g. on shared web enabled claims processing system) that will receive and generate ACORD messages, thus enabling them to operate on the new model. See section 2.5 Implementation step 2. Each broker is expected to know at placing which carriers want to operate on the new model in respect of that risk. Where there is a mix of carriers operating on the new and old models the broker will set up appropriate records to deal with carriers on the new model and the current bureau operation for those carriers which need to process under the old model. This mixed way of working is unlikely to be acceptable to brokers in the long run, because of the increased costs of operating multiple processes. Specifically brokers will want to service each claim in its entirety at the claim level, not at different accounting split levels subject to the status of different carriers. Under Lloyd s Claims Strategy the Page 18 of 36

Claims Agreement for Followers operator will have to operate under both models for as long as all brokers and carriers are not on the new way of working. A claim will need to be processed in different ways, depending on whether the carriers on the risk have moved to the new model or not. Claims will be against risks which may have been processed: entirely under the current operation model and therefore the claim is processed consistently for all carriers under the old model; entirely under the new A&S Strategy model (i.e. all carriers) and therefore the claim is processed consistently for all carriers under the new model; under the A&S Strategy transition where some carriers operate on the new model and some on the old The latter condition raises the issue that a claim could be processed differently by different carriers. It also raises the issue that a carrier that was operating under the old model at time of placing may be operating under the new model at the time of the claim. 3.3 Implementation Although the A&S Strategy end vision states that the new model would apply only to new transactions that had not started their lifecycle on the old processes, an implementation plan showing how all claims could be consolidated in to one process, will need to be developed by early implementers of the end vision. This document articulates the options to be considered in implementation: further work would be required once a number of firms had committed to implementation. Each trading partnership would need to ensure that any collective claims agreement process is supported including interactions with the operator of Lloyd s Claims Agreement for Followers, applicable to claims at Lloyd s. Some carriers and brokers will for some time wish to operate outside the peer to peer model. A number of carriers will continue to operate in a non-acord hub environment (e.g. today s CLASS). For diagrams refer to section 2.5 Implementation Step 1 Broker ACORD Option and Implementation Step 1 Carrier ACORD option. In order to enable these brokers and carriers to continue to use a hub, the following issues will need to be addressed: Registering the hub address as the carrier s address with trading partners Ensure the correct sequencing of and the releasing of messages and transactions Automatically recognising that all messages for all hub customers on the same claim have been received Offering web services interactions to carriers as well as on-line interactions Interacting with market carriers who opt out of using a hub. This is illustrated through the ACORD/LIMCLM and ACORD/Interactive conversion services in section 2.5 Implementation step 2 ACORD Broker and ACORD carrier. The end vision is predicated on the implementation of the A&S Strategy premium process and requires: Page 19 of 36

Detailed definition of processes and procedures to support regulatory reporting, options for payment outside central settlement and support of collective claims agreement. Carriers and brokers acquiring technology that enables them to send and receive messages and documents directly (i.e. not via CLASS) and provide automated rules to support collective claims agreement. Or as a step towards this end goal, a hub could be made to act as though it were a peer in a peer to peer environment. Creation of the ability of the Claims Agreement for Followers operator to send and receive peer to peer messaging. This requires engagement with Xchanging as the current operator within the Lloyd s Claims Scheme. Evolution of ECF to the end vision would require engagement with Xchanging as both current technology provider and as Claims Agreement for Follower operator under Lloyd s Claims Scheme. Evolutionary steps will need to be agreed, specified and funded and could include: Enable brokers to use ACORD messages (see section 2.5 Implementation Step 1 Broker ACORD); Ensure that carriers and third parties are able to create claim transactions using ACORD messaging (could be done through the use of ACORD conversion services); Enable carriers to receive ACORD messages as output, replacing SCM, LIMCLM, CLASS Download (see section 2.5 Implementation Step 1 Carrier ACORD); Upgrade (with ACORD conversion services) or replace CLASS to support a web services interaction with carriers; Provide third party and customer enquiry access Page 20 of 36

4. ACORD Message Requirements within Claims Process Flows The diagrams in section 2 identify where ACORD Messages would be used in the agreement, accounting and settlement of claims. The Below table identifies specific business processes that may take place during the lifecycle of a claim and the specific ACORD message requirements. For a definition of the different types of ACORD claim messages refer to section 6 With the exception of proportional treaty balance statements (treaty scheme) a Technical Account is only used when there is a payment request i.e. only when in current London market practice an LCCF (London Claim Collection Form) would have been raised. The Technical Account will not be used just for reserve changes. The current ACORD implementation guide always requires Claim Movement and Technical Account messages to be supplied together. We believe this is a misinterpretation of the original requirement and we are seeking to change this coupling. Process Process Number Name 1 First Advice 2 First Advice With payment Request Subprocess Sub Process Name Number 1 Basic Notification with no financials and no documents 2 Basic Notification with documents but no financials 3 Basic Notification with financials but no documents 4 Initial Loss Advice (with documents and financials) 1 First Advice with Payment request and incurred position but no documents ACORD Message(s) Comments Claim Technical Settlement DRI Movement Account Yes No No No May be used to establish data records after notification of claim via other means e.g. telephone Yes No No Yes Yes No No No Yes No No Yes Yes Yes Yes No Carrier likely to respond with request for more information before processing the transaction. Page 21 of 36

Process Process Number Name 3 Subsequent Advice without payment request Sub- Sub Process Name ACORD Message(s) Comments process Number 2 First Advice with Payment request and documents but no incurred position 3 First Advice With Closing Settlement, incurred position but no documents 4 First Advice with Closing Settlement, incurred position and documents 1 Information Update with no change to incurred and no documents 2 Additional Documents and no change to incurred 3 Closing Information Update with final incurred position and no documents 4 Closing Additional Documents with final incurred position 5 Reopen claim with no documents and no change to incurred position 6 Reopen claim with documents and no change to incurred position 7 Reopen claim with change in incurred position and no documents 8 Reopen claim with documents and change in incurred position Claim Movement Technical Account Settlement DRI Yes Yes Yes No Likely to be used for payment of fees to third party e.g. loss adjuster Yes Yes Yes No Yes Yes Yes Yes Yes No No No Yes No No Yes Yes No No No Yes No No Yes Yes No No No Yes No No Yes Yes No No No Yes No No Yes 9 Reserve change with no documents Yes No No No 10 Reserve change with documents Yes No No Yes Page 22 of 36

Process Process Sub- Sub Process Name ACORD Message(s) Comments Number Name process Claim Technical Settlement DRI Number Movement Account 11 Carriers Instructions Yes No No Yes 4 Payment 1 Interim Payment Request with no Yes Yes Yes No Request documents 2 Interim Payment Request with documents Yes Yes Yes Yes 3 Closing Payment Request with no Yes Yes Yes No documents 4 Closing Payment Request with documents Yes Yes Yes Yes 5 Rate of Exchange Adjustment with no Yes Yes Yes No documents 6 Rate of Exchange Adjustment with Yes Yes Yes Yes documents 7 Payment Request with Simultaneous Yes Yes Yes No Reinstatement Premium with no documents 8 Payment Request with Simultaneous Yes Yes Yes Yes Reinstatement Premium with documents Page 23 of 36

5. Variations to be considered During the introduction of electronic services for claims a number of variations to the standard process have been identified. These are listed below and categorised. 5.1 Table of Variations Item Variation Comment Variations that are not expected to impact the end vision i.e. they are a claim management concern not a technology infrastructure concern and the technology is expected to enable the effective distribution and communication of relevant information to support claims adjusters 1 Aggregates Expected to use cross referenced spreadsheets, bordereau and other claims, i.e. not handled by the claim movement message but through claim file documents conveying data to support claims financials. There will be new ways of working allowing automated processes with electronic bordereau as spreadsheets or XML objects with a workflow event. 2 Aviation verticals Claims against placing sections and delegation of claims management should resolve this. 3 Binding Authorities and Cover collections 4 Consultation between Agreement Parties Expected to use standardised spreadsheets or bordereau messages, and other claims, delegation, placing sections. To be handled outside the technology or through shared documents using shared repositories or ACORD DRI between repositories or automated rules within messaging gateways. 5 Partial Markets A feature of peer to peer. 6 Recoveries Recovery agents expected to act as third parties or continue to operate through brokers. 7 Split Signings (Ghost Leads) Variations currently arise against risks placed for example across open market, line slips and offslips and there is cross signing delegation. This should be resolved with claims against placing sections. 8 Third party access Third parties (including but not limited to) loss adjusters, attorneys, recovery agents should be able to use the same standard messages and processes to initiate transactions on claims. 9 Delegation Achieved through the use of automated rules by carriers. This enables brokers to operate a consistent process and interface to carriers and gives carriers the flexibility to change their delegation arrangements in line with a carrier s commercial and strategic decisions whilst minimising the impact on trading partners. 10 Commutations The analysis, negotiation and agreement of commutation opportunities are outside the scope of this end vision. Once a commutation arrangement has been established the Claim Movement message and documents could still be sent to a commuted carrier and if necessary a Technical Account with the commuted carrier s share set to zero could be issued. 11 Letters of Credit, loss funds, outstanding claim advances and other documentary collections Letters of credit are set up and managed differently across the London Market. There is no plan to radically alter these processes which are described in section 1.7.1. It should be noted that the Technical Account message should clearly indicate the method of funds transfer for each claim payment, including payment by letter of credit drawing. Page 24 of 36

Item Variation Comment 12 Simultaneous reinstatement premium The broker should group the claim payment and reinstatement premium within a single Settlement by ensuring that the Settlement refers to the Technical Account messages for the claim payment and the reinstatement premium. In this way both amounts will be settled simultaneously as a net single amount. The carrier should ensure that their internal systems (and gateways) enable the registering of the need for simultaneous reinstatement premium as part of the claim transaction approval process and ensure that claim payment is not made until the premium has been submitted. Although options exist to include both premium and claims in a single Technical Account it is believed that the London market processes and procedures are not ready to adopt such an option. 13 Proportional treaty Proportional treaty is usually handled through treaty balance statements supplied using a technical Account at the agreed accounting intervals. Where a collective claims review and handling process is in place such as in the Lloyd s market, the carriers must detect the fact that the Technical Account is in respect of a Proportional treaty Balance Statement and route it as though it were a Claim Movement to the appropriate claim agreement parties. Individual claims within the Treaty balance must be uniquely referenced and identified so that claim files can be associated with individual losses. A Cash Loss or significant loss notification under a Proportional Treaty will be handled as though it were any other claim and requires a Claim Movement message. Carriers and brokers will need to ensure effective reconciliation with treaty balance statements. 14 Conflicts of interest 15 Confidential Reports Variations that are expected to be managed through the effective use of access control lists (ACL). The following generic variations are dealt with in Accounting and Settlement: Premium process flows Version 1.0 16 Non cash settlement The Technical Account message Includes provision for identifying payment means other than cash, including cheque and other document collection facilities. 17 Direct payment to third parties 18 Direct Settlement Principal to Principal or none value transactions The end vision enables the initiator of a transaction to specify another party to be the recipient of any payment. The end vision enables cedants and clients to initiate transactions directly to their (re)insurers. 19 Bulk collections Grouping mechanisms exist within the Settlement which would support the collection of many amounts on different Technical Accounts. There would seem to be little business needs for bulk collections as currently operating in the end vision. 20 Corrections These are corrections to transactions initiated by broker, third party or cedant/client. In the majority of cases claims would be corrected by a subsequent advice using a Claim Movement message. 21 Mid Term Broker Change 22 Market Subscription Change 23 Where Claim broker and Accounting broker are different When a broker takes over another broker s book of business they must continue to use the original broker s UMRs and the UCRs of any open claims. Not a situation that would arise on an open claim. Brokers should be aware of the carriers on risk for a specific claim and notify them accordingly. Carriers are expected to reject transactions where they are not on risk. The end vision enables the initiator of a transaction to specify another party to be the recipient of any payment. Page 25 of 36

5.2 Letters of Credit It is intended that only minimal changes be made to the current methods of setting up LOC s within the London market. Implementers will have to work with their trading partners and where appropriate LSTFO to consider how best to undertake this. Page 26 of 36

6. Description of ACORD Claims Message Flows 6.1 Purpose of the ACORD Claims messages There are a number of ACORD messages and supporting information that are required to be communicated between sender and receiver to process claim related business transactions. The purpose of each message is shown below: Claim Movement Message - The ACORD Claim Movement message is used by the sender (usually the broker) to report claim information to the receiver (usually the carrier). The Claim Movement message may only report details relating to a single loss relating to a single insurance or reinsurance contract. The Claims Advice Message (ClaimMovement) is used by the sender to report claim information to the receiver. This message will be used for all claim advices from first notification through subsequent advices and payment requests. Technical Account The ACORD Technical Account message provides data relating to the carrier s share of the claim and specifically establishes the transactional amounts and other related data. With the exception of Proportional Treaty balance Statements, each Technical Account will refer back to the Claim Movement message by quoting the appropriate references. The TechAccount is the equivalent of an invoice or claim payment request (LCCF). It reports technical entries which together make up the cash balance of an account. Settlement - The ACORD Settlement message informs the carrier of the release of the Technical Account for settlement.. The ACORD Settlement message indicates that the claim amount is ready to be paid in accordance with the agreed settlement approach. The ACORD Settlement message is used: to advise that one or more items are available for settlement: each item will have previously been advised and agreed on an individual ACORD Technical Account message, to advise the actual amounts to be paid in a settlement currency, for items that have been accounted on ACORD Technical Account messages in a currency that is not used for settlement, to advise the means by which payment will take place Acknowledgement Message - For each message sent an ACORD Acknowledgement is returned to confirm, query or reject a message received. Refer to A+S Technical Information Section 4 Message Management for further details. Claim Documents Claim documents will be transmitted and held electronically within an electronic claim file. A claim file will normally contain a reference to electronic slips, premium and closing information and any other evidence of the contract, and a copy of other documents including claim notifications, correspondence, reports and payment requests. Use of the Insurers Market Repository (IMR) currently operated by Xchanging Insurance Services, will enable a central utility for transmitting documents, although repositories in place within individual firms will also be used. Documents can be made available before their related business messages, but must be available at the time the business messages are sent. Page 27 of 36

6.2 Claim Lifecycle Example Market Reform Example of an illustrative claims lifecycle (individual carriers managing their own claims) Business Event Broker Carrier Submit claims documentation Consider claim Record response First Advice (Initial loss advice with documents and financials) Submit claim movement Handle response positive completion Send response Time passes while the Broker informs their client and awaits further instructions Subsequent advice without payment request (Reserve change no documents) Submit claim movement Handle response Consider claim positive completion Record response Send response Time passes while the Broker informs their client and awaits further instructions Submit claims documentation Consider claim Record response Submit claim movement Closing payment request (with documents) Submit technical account Handle response Handle response positive completion Handle technical account positive completion Send response Send response System checks that positive completion was sent for CM, and triggers auto response for TA System checks that positive completion was sent for TA, and triggers auto response for Settlement Submit settlement Handle settlement Record response Handle response Notes: -Although the payment request messages are shown sequentially in this model, they could be submitted at the same time; -This example should be read in conjunction with sections 2.1 to 2.5 positive completion Send response Trigger Settlement Page 28 of 36

Levels of Acknowledgement Messages Market Reform The acknowledgement levels 1 to 3 are used by systems to ensure receipt and validation of messages. A level 5 acknowledgement message is sent when a carrier completes a claim message. Refer to A+S Technical Information Section 4 Message Management. Each claim transaction will consist of one or more occurrences of a business message submission and response message (a message pair), together with the delivery of claim information as documents. The ClaimMovement message will be used to trigger claims. The following sections describe the use of each of the messages. 6.3 Submit Claim Documentation Refer to A+S Technical Information Section 4 Message Management for details of message flows and acknowledgements DOCUMENTS FOR THE CLAIMS PROCESS The claims processes described in this document requires the support of an electronic claim file containing the documents needed to support claims decisions. Although the ACORD messages enable documents to be packaged with a business message the normal mode of operation is expected to be the separate submission of documents using ACORD DRI messages with documents referencing the relevant business messages. It is expected that where parties use a market repository they will be able to be provided with an alert message from the repository notifying that a document has been added. TYPES OF DOCUMENTS Claims files consist of many types of documents and it would be unwise to produce a limited list. The types of document required will include, but are not limited to: A copy of the final version of the signed down placing slip, showing carrier participant agreements Attachments that formed part of the placing slip Slip endorsements, showing carrier agreements, and endorsement attachments Off-slips Supporting calculation documents or spreadsheets Bordereaux or exposure listings Cedant accounts Loss adjuster reports Correspondence Photographs Bills Invoices Lawyers reports Client information Page 29 of 36

FORMAT OF DOCUMENTS Documents may be in a number of formats including, PDF files, scanned images, spreadsheets, word documents, images or other ACORD messages. Full details of acceptable types will be available in the Technical Documentation for A&S. TIMING OF DOCUMENTS Claim documents may be made available in advance of the business messages to which they refer. To enable the receiver to successfully complete processing of a business message, documents must be available at the point a business message containing reference to those documents is sent. If the receiver is unable to successfully process the business message as a result of not being able to access documents referenced by the business message, a level four query will be returned to the sender. USING DOCUMENT REPOSITORIES Documents can be provided and made available in a number of ways. Documents may be placed in a repository by the sender of a business message (ClaimMovement, TechAccount, Settlement) for access by the receiver. This may be by the following methods: Using a repository operated by the sender, Using a repository operated by the receiver, Using a repository operated by a third party supplier on behalf of individual senders or receivers, or segments of the market. Using the Insurers Market Repository operated on behalf of market customers by Xchanging. In all cases the sender should reference each document to the appropriate business message(s) to which it relates. To ensure consistency and uniqueness documents will be referenced by using the following ACORD data elements: document type; UUID; UMR; document name or ID, and version. WITHIN MESSAGE PACKAGES Alternatively, documents may be included as separate files alongside the business messages within a message package i.e. a message package could contain one or more business messages and could also contain one or more documents. The receiver may store the documents within their own repository or a market repository. Where this method is used the sender should still reference the document(s) to the business message(s) to which it relates. 6.4 Submit ClaimMovement CLAIMMOVEMENT MESSAGE FOR EACH CARRIER Page 30 of 36

A ClaimMovement message is sent by the broker for each individual carrier on the risk and only represents the individual receiving carrier s line and reference. Any amounts contained within this message, however, are expressed at the 100% of order level and NOT at the receiver (carrier) share level. Only one ClaimMovement message per claim per risk section per carrier is normally required as multi currency amounts can be represented on a single message, unlike other ACORD messages that are original currency specific. On receipt of the ClaimMovement message the carrier validates the message using both system validation rules and business checking rules. Any failure against validation must be reported back to the sender via Acknowledgement messages. Successful processing must also be reported back to the sender via Acknowledgement messages. The message can then be used to create the receiver s claim record and reference the claim, on the risk record created by the carrier during placing. FLOW OF THE CLAIMMOVEMENT MESSAGE A ClaimMovement message is used to notify claims information and trigger claims activity by the carrier. Acknowledgement messages are returned to respond to each ClaimMovement message sent. Different levels of responses are possible by setting the C413 <AcknowledgementLevelIndicator>; level 2 translation_level, level 3 application_level ; level 4 business_response and level 5 transaction_complete. Level 4 can be used for ongoing dialogue of business queries raised whilst Level 5 completes the transaction. INITIAL AND SUBSEQUENT ADVICES The broker will issue an initial ClaimMovement to each carrier on risk with C171 <ClaimAdviceInitialOrSubsequentIndicator> set to initial_advice. Subsequent ClaimMovement messages will be used to advise changes in the claim. In all cases, the ClaimMovement message must contain all unchanged claim data as well as the updated data items i.e. it is a snapshot of the claim data at a particular point in time. C499 <ClaimMovementAmountsIndicator> and C185 <ReserveChangeIndicator> should be used to indicate whether the ClaimMovement message contains updates to amounts or not. CONSORTIA & POOL ARRANGEMENTS Where a carrier on risk is a consortium, pool or agency manager who is operating at all levels on behalf of the component carriers a ClaimMovement message is required for the consortium, pool or agency manager as a single carrier. Where settlement is for individual members of the consortia, pool or agency individual ClaimMovement messages will be needed for each individual member. Where ClaimMovement messages are used for each member, TechAccounts will need to follow to at least the same level of breakdown. MESSAGE GROUPING Page 31 of 36

Where more than one message that relates to the same risk is being sent to the same recipient the ACORD group reference and number of items in group fields must be completed by the sender. This will advise receivers that they have more than one message to process together and enable checks to ensure that they have received all of the appropriate messages. Within the London market it is mandatory for the sender to complete the ClaimMovement grouping elements R137 <GroupingReference> and Q015 <ItemsInGroup>. The ClaimMovement grouping elements R137 <GroupingReference> and Q015 <ItemsInGroup> can be completed by the sender to group together ClaimMovement messages which need to be grouped for a reason, e.g. relating to the same multi-currency claim or where one currency ceases to exist (submit two grouped ClaimMovements, one closing the old currency and another ClaimMovement opening in the replacement currency. Within the London market it is mandatory for the sender to complete these grouping elements. Where the ClaimMovement can be processed independently of other ClaimMovement messages R137 <GroupingReference> should be set to 1 and Q015 <ItemsInGroup> 1. CAF ARRANGEMENTS Within the Lloyd s market, on receipt of a ClaimMovement, the carrier will check if they are a follower on the claim. If they are a follower on the claim, they will automatically forward the ClaimMovement to the Lloyd s CAF operator. In addition, the follower will not be able to send a level 5 acknowledgement to the broker, until they have received the level 5 acknowledgement from the Lloyd s CAF operator. If the carrier is an agreement party on the claim they will process their own ClaimMovement.. On completion of the processing of the ClaimMovement, the Leader will send a ClaimMovement to the Lloyd s CAF operator so that the Lloyd s CAF operator can complete their work. During the agreement party s processing they will liaise with the Lloyd s CAF operator as required under the Lloyd s Claims Scheme. 6.5 Submit Technical Account Messages (TechAccounts) TIMING OF THE TECHACCOUNT MESSAGE TechAccounts should be sent whenever a ClaimMovement message includes a payment request. The TechAccount does not itself trigger settlement (as this is achieved by the Settlement message). Note that where the TechAccount is in respect of a Proportional Treaty Balance Statement and a group of carriers operate a collective claims management process (e.g. under Lloyd s Claims Scheme) the TechAccount is used by carriers to trigger claims activities: there is no requirement to use a ClaimMovement message. TECHACCOUNT MESSAGES - GENERAL Unlike the ClaimMovememt message all of the amounts identified within a TechAccount are expressed as receiver (carrier) share and not 100% of order, i.e. are the amounts relating to the specific carrier for whom the message is being sent. Separate TechAccounts will be issued to each carrier on the claim to provide data relating to the account and specifically to establish the actual claim amount and other accounting data. Page 32 of 36

Each TechAccount will need to cross refer back to the ClaimMovement (except where it is a Proportional Treaty Balance Statement) by quoting the appropriate references. This includes accounting for the following: Different reference currencies (original currencies) Different target currencies (settlement currencies) Where the original (reference) currency is not the settlement (target) currency, the TechAccount does not carry a rate of exchange nor stipulate an estimated settlement currency amount, it will however signify in what currency the settlement will be made. Where the settlement currency amount is explicitly known, e.g. if a set exchange rate has been pre agreed, the settlement currency amount can be shown in the balance of the TechAccount. On receipt of the TechAccount the recipient should carry out validation. The message can then be used to append to the receiver s risk records. Any failure against system validation must be reported back to the sender via an Acknowledgement. Each TechAccount will include a transaction reference provided by the sender that must be unique to each carrier to cater for instances where a carrier writes more than one line on a risk. For details of referencing refer to A+S Technical Information Section 4 Message Management MESSAGE GROUPING Where more than one TechAccount message that relates to the same claim is being sent to the same carrier and they need to be processed together, the processing group reference and number of items in group fields must completed by the sender. This will advise receivers that they have more than one message to process together and enable checks to ensure that they have received all of the appropriate messages. Similarly where for example claim and reinstatement premium need to be settled together, the settlement group reference and number of items in group fields must completed by the sender. MONETARY AMOUNTS Each monetary amount within a TechAccount is identified as either for information or cash. By doing this, detailed breakdown of amounts payable or receivable can be shown. There are specific areas within the TechAccount message for specific types of amount data e.g. there exists a specific section to provide tax information. The cash balance for each TechAccount is shown separately and accumulates all cash items shown as individual monetary amounts. A TechAccount is required even if the transaction has a zero cash balance as it will include the non-cash elements. PAYMENT MEANS To provide a standard process for the London market, the Payment Means on every TechAccount should be set to As per Settlement indicating that settlement will only occur once a Settlement message has been processed. Page 33 of 36

FURTHER ACCOUNTING/STATISTICAL SPLITS Carriers in particular will have requirements and responsibilities for creating and/or reporting statistical or regulatory data. Where a carrier delegates this to a service supplier the carrier can either send the raw data to the supplier (copies of the messages and supporting information) or could provide the analysis of the data. This is particularly relevant for Lloyd s syndicates who have to satisfy Lloyd s Franchise reporting requirements. The particular method for providing data to the Franchisor, and the rules for so doing, will be defined in other documents. CAF ARRANGEMENTS In the end vision there is no process requirement to route TechAccount messages to the Lloyd s CAF operator. There may be other requirements yet to be determined which would be best satisfied by routing TechAccount messages to the Lloyd s CAF operator. Within the Lloyd s market, on receipt of a TechAccount the carrier will check if they are a follower on the claim. If they are a follower on the claim, they will wait for the level 5 acknowledgement automatically routed from the Lloyd s CAF operator with respect to the associated ClaimMovement and then automatically validate the TechAccount against the CAF operator agreement and respond automatically to the broker. If the carrier is an agreement party on the claim they will process their own TechAccount. 6.6 Submit Settlement TIMING OF THE SETTLEMENT MESSAGE When a claim payment request has been agreed through a previous ClaimMovement message and associated TechAccount messages a Settlement message will be issued to release the TechAccount into the agreed settlement process. On receipt of the Settlement message the recipient should carry out validation including checks against the previously processed TechAccounts. The message can then be used to append to the receiver s risk records. Any failure against system validation must be reported back to the sender via an Acknowledgement. SETTLEMENT MESSAGE - GENERAL The Settlement message is used: to advise that an item is available for settlement, or, to advise that a number of items are available for settlement, to advise the actual settlement amounts, for items that have been accounted on a TechAccount in a non-settlement currency, to advise the means by which payment will take place When an individual TechAccount balance amount (i.e. the balance of all the cash elements in a TechAccount) is ready for settlement, the broker will provide a Settlement message for Page 34 of 36

each carrier, one for each TechAccount issued. The item amounts shown on the Settlement message will match the original currency balance amount shown on the related TechAccount and therefore are at carrier share level. The Settlement message will include: reference to the individual TechAccount the original (reference) currency amount the actual settlement (target) currency amount. Note: the rate of exchange is NOT shown but can be calculated by the receiving system if required the Settlement Type which must be set to Payment Request where the net balance of the message is a debit from the receiver, or Remittance Advice where the net balance is a credit to the receiver the Payment Means (see below) The item included in each Settlement message should be reconciled by the receiving system against the related TechAccounts to confirm that settlement can now occur. Once this action is completed, the receiver will send an Acknowledgement message to confirm and settlement can be triggered using the settlement method agreed between the parties. The structure of the Settlement message is such that more that one TechAccount balance item can be included in a single Settlement message. In this way a single message can include the settlement trigger for a number of items. SETTLEMENT MESSAGE GROUPING Settlement messages can contain more than one TechAccount balance item for settlement. A number of such items within a single Settlement message can be grouped e.g. where a cancel and replace must be settled together, or where a reinstatement and a claim are to be settled together. Also, a number of separate Settlement messages can be sent and can be grouped together e.g. where different settlement currencies apply to a risk and these need to be settled together. PAYMENT MEANS Where used for individual items the payment means would typically include: Cheque; Payment to bank account; London central settlement. The method would be agreed between the parties. CAF ARRANGEMENTS In the end vision there is no process requirement to route Settlement messages to the Lloyd s CAF operator. There may be other requirements yet to be determined which would be best satisfied by routing Settlement messages to the Lloyd s CAF operator. Within the Lloyd s market, on receipt of a Settlement message the carrier will automatically check if they have sent a valid acknowledgement to the broker for the associated TechAccount(s). If a valid acknowledgement has been sent and the Settlement message has Page 35 of 36

been automatically validated successfully, then they will automatically send the validated Settlement to the Lloyd s Central Settlement Operator. The Lloyd s Central Settlement Operator will trigger settlement for the whole of the Lloyd s share, subject to any offset arrangements. 7. Acknowledgements, queries, rejections/re-submissions & corrections Refer to A+S Technical Information Section 4 Message Management 8. Referencing, Group References within ACORD Messages, Party IDs, Refer to A+S Technical Information Section 4 Message Management. Page 36 of 36