Matthew Chandler: holding the pen

After the wind and the subsequent deluge, New Orleans infrastructure fell apart frighteningly quickly in the aftermath of Hurricane Katrina last year. This naturally led to an administrative nightmare for the insurance industry and in particular Lloyd's managing agents with binding authorities in Louisiana.

Computers and paperwork were destroyed leaving thousands of policyholders in the dark, and questions were raised as to the exact detail of risks and the paucity of information certain managing agents held.

However Lloyd's did react quickly to the disaster which was not publicised at the time. Lloyd's head of admissions within the general counsel's division, Matthew Chandler who oversees all new coverholder applications and binding authority issues said: "One of the challenges after Katrina, with the enormous infrastructure damage, was to respond immediately to policyholders affected.

"There were 141,000 policies through coverholders in the region, and we established a helpdesk in the first 48 hours which took 5,000 calls.

"Lloyd's has, since 1998, endeavoured to raise the standards of control and oversight over binding authorities at Lloyd's which can be written across the globe. Chandler says it was a "personal crusade" to change the way brokers and underwriters managed and controlled binding authorities and to introduce a code of practice by 2000 and an infrastructure by 2004.

With its ambitious plans to expand its presence in China and India from 2006, outside investors are often concerned at the lack of direct, operation controls that Lloyd's managing agents have over coverholders.

"In 2000 we had 8,000 binding authorities which has been cut back to 4,700. We knew that when the Lloyd's strategic plan was being discussed there was a reputational risk if tighter controls weren't introduced. It was too easy to become approved coverholders and there was inadequate assessment of franchisees."

One of Chandler's first moved was to put all registration online, as brokers were still walking up to the 5th floor at Lloyd's to get registrations literally rubber-stamped. Then the actual wording was re-written. This received a British Standards Institution kitemark in 2004 for the accessible, plain English used. Now the man hours have dropped to just three to four hours for a registration and issue of a certificate when before it was days.

Since underwriters and brokers had "made it through the fear of the unknown", according to Chandler, the competency levels of underwriters and brokers has improved. But he is fully aware that underwriters must keep a close eye on the application.

"Approximately 15 managing agents write 70% of binding authorities in this market. Managing the risks better is the way forward and the new coverholder applications are risk assessed much better by brokers and underwriters, then with the underwriter. It is about getting it right before the application is made," says Chandler.

Binding authorities

Binding authorities set out the scope of delegated authority, allowing coverholders to enter into contracts of insurance and issue insurance documents on behalf of Lloyd's managing agents.

There are 2,400 coverholders which administer binding authorities make up 25% of Lloyd's gross written premium - roughly £3.5bn.

Geographically, the three largest territories are the US, Canada and the UK.

There are 130 accredited Lloyd's brokers which have binding authorities, and roughly 20 of these administer 65% of binding authorities at Lloyd's.

Kent Chaplin: setting the claims standard

It seems Jeremy Pinchin's five-year "claims revolution" has undergone something of a personality change. Pinchin was the former head of claims at Lloyd's who put forward a plan to streamline the claims process.

"At first the change was revolutionary in its concept for this market," says Kent Chaplin. "But, since then it is probably more appropriate to say that the change has become evolutionary."

It is not just the claims movement that has matured, so it seems has its personnel.

Chaplin has stepped out of Pinchin's shadow, and now it is he who must continue the claims charge; work with the market to enhance its performance; and ensure that Lloyd's' age-old claims' reputation remains intact.

But with Pinchin's departure in July 2005 has the "revolution" stumbled?

"It hasn't slowed even a fraction," he insists. "In fact, if anything it has sped up. Everything Jeremy set out last year has either been achieved or is well on track to being achieved."

Central to the Chaplin-led strategy is "consultation and consensus".

"We are not imposing this change," says Chaplin. "Yes, it is revolutionary, but it is done very much in consultation. We are taking the market with us and we are actually responding to what they want."

But how much has claims actually "evolved" over the past 12 months?

On Chaplin's tick sheet of achievements is making sure the Claims Agreement for Followers, or peer review as it was known pre-revolution, is a mandatory process.

With a legal framework in place and increased resource from the market it is now a "robust and transparent" contract with Xchanging Claims Services (XCS).

Next on his tick sheet is the creation of the Claims Service Review Board, which is made up of representatives from five managing agents, two representatives from Lloyd's and two from XCS.

It manages the market's investment in XCS and monitors the services' performance in fulfilling its obligations under the XCS Services Agreement.

It also plays an important role in managing issues which arise out of the services agreement.

But, the "cornerstone" of Lloyd's' claims strategy is still "best practice" and that is delivered through the framework of eight claims management principles and related minimum standards.

Three minimum standards, which focus on claims reserving, disciplined procurement procedures and the measurement of claims management, were introduced last year.

The market has kindly been given six months to "get a feel for those standards" and during the next couple of months the remaining five will be rolled out, together with a second set of principles currently out in the market for consultation.

"The big issue in 2006 will be monitoring that performance," says Chaplin.

"Everything that we are doing on claims is to improve performance, deal with claims more quickly, more pro-actively, more efficiently, overall it is about reducing the cost and improving results."