Control Framework
A warm Welcome
to
the March
market Breakfast Group
Control Framework
Breakfast Group agenda
9:00
Arrival, breakfast & networking
All
9:15
Welcome
Ali Dove
9:20
Audit coordination & Tools
Lindsey Davies &
Sandra Sherlock
Lloyd’s
9:40
Coverholder audits- the challenges
Craig Scarr &
Adrian Butland
Grant Thornton UK LLP
10:00
Phase II update
Jaana Rouvari
10:15
Q&A
All
10:30
Close
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Audit coordination project
Lindsey Davies
5 March 2014
© Lloyd’s
AGENDA
► Vision
► What can we do to help?
► Where are we now?
► What are we doing to help?
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© Lloyd’s
Vision
► Coverholder experience is improved
► Market experience is improved
► Regulators confidence in DA improved
► Consistent but flexible application of
audit questions
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► Efficient & effective application of a
common audit scope
► Less duplication
► Less compliance for compliance sake
© Lloyd’s
what can we do to help?
► Educate and accredit auditors
► Coordinate audits centrally
► Centralise compliance functions,
remove market duplication and costs
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► Drive standards
► Facilitate and encourage STP
© Lloyd’s
WISH LIST FOR 2014
► Coordinate audits and findings centrally
starting with Lloyd’s broker
Coverholders
– One central system
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– Audit MI
– Test audit scope application
© Lloyd’s
where are we now?
► Coordination project running for 2014
– Coverholders identified for 2014
– 2013 Recommendations coordinated
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– Manual process agreed
► Lloyd’s Broker Coverholder Audits
– Top ten LB Coverholders identified
– Meetings being arranged
– Scope to be agreed centrally with
auditors; brokers and MA’s
© Lloyd’s
what are we doing to
help?
► Conference booked 12th May
► Accreditation process to be agreed
– Conference pre work
– Utilisation of tools
► Resource to be allocated
► System for coordination to be sourced
© Lloyd’s
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► Risk Locator Tool (RLT) & Crystal
assistance with international
regulations & taxation
requirements
► Register for RLT/Crystal account
– Receive international reg & tax updates
– Access to international reg & tax requirements
► Complete Crystal Assist
– Gain a basic understanding of Lloyd’s licences
– Improve knowledge on ‘establishing location of
risk’
– International regulatory and tax considerations
► Attend a RLT/Crystal training session
– x 30 sessions on GY11 for market participants
(keep running subject to demand)
– x 4 sessions scheduled for auditors (via Webex)
in April 2014
© Lloyd’s
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► Risk Location
RLT/Crystal training
session for auditors
– Importance of identify the locations of risk for
regulatory and tax purposes
– Impact for getting location of risk wrong
– Risk location triggers
► Compliance business tools
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– Risk Locator tool (content & functionality)
– Crystal (content & functionality)
► Communications
– Monthly updates
– What’s new report and archive
► Tax and Regulatory experts available to
address auditors questions.
LITA@lloyds.com
© Lloyd’s
Coverholder Management
© Lloyd’s
Coverholder audits –
the challenges
Wednesday 5 March 2014
© 2014 Grant Thornton International Ltd. All rights reserved.
Agenda
• Introductions
• Issues and challenges facing the market
– market risks
– operational issues
• Objectives
• Solutions
– options for a solution
– solution design
• Considerations
• Learning from the past
• Summary
© 2014 Grant Thornton International Ltd. All rights reserved.
Introductions
© 2014 Grant Thornton International Ltd. All rights reserved.
Introductions
Craig Scarr
Adrian Butland
Craig has worked in the London Market for 27 years. He first
qualified as a Chartered Accountant and has since
supplemented his qualifications with the Institute of Risk
Management, Institute of Internal Audit and Chartered
Institute of Insurers. Craig is also a Certified Fraud Examiner
and sits on the working party for the UK Fraud Advisory
Panel. Craig is also a member of the Chartered Institute of
Arbitrators.
After starting his career in external audit Craig moved into
forensic work and financial crime via secondments to the
UK’s Serious Fraud Office as well as the FBI in America. He
was then asked to lead the Governance , Risk and Internal
Control business line of a London accounting practice. Craig
was subsequently appointed the UK Head of Insurance with
clients across General , Life and Broking as well as
Lloyd’s entities.
Adrian has over 40 years’ experience of working in the
Insurance Sector.
He originally worked for 9 years on the Underwriting Box of a
leading Lloyd’s Marine Syndicate followed by 10 years in the
Underwriting Operation of a leading London Market
underwriting agency underwriting very large Non-Marine,
principally North American Casualty, but also Professional
Indemnity and Property risks, on behalf Company Insurers
and for four years he was based in the agency’s Bermuda
operations.
Over the last 23 years, he has been working in the insurance
and reinsurance services market, providing specialist
consultancy services to Lloyd’s, Lloyd’s Syndicates and
large London Market Insurance and Reinsurance
Companies.
Craig was appointed Chairman UK Insurance at Grant
Thornton UK LLP in 2014.
About Grant Thornton
Grant Thornton is one of the world's leading organisations of independent assurance, tax and advisory firms.
Over 31,000 Grant Thornton people, across 100 countries, are focused on making a difference to clients,
colleagues and the communities in which we live and work.
In the UK, we are led by more than 200 partners and employ 4,000 of the profession's brightest minds, operating
from 27 offices. We provide assurance, tax and specialist advisory services to over 40,000 privately-held
businesses, public interest entities and individuals nationwide.
© 2014 Grant Thornton International Ltd. All rights reserved.
The issues and
challenges facing
the market
© 2014 Grant Thornton International Ltd. All rights reserved.
Market risks
• Lloyd’s
– Excess capital
– Coverholder growth
• Risk issues and governance
– Expansion within Board risk appetite
– Solvency II
– Control framework
© 2014 Grant Thornton International Ltd. All rights reserved.
Operational issues
•
•
•
•
Cost effective
Impact on Coverholders
Audit co-ordination
Regulatory requirements
– Lloyd’s
– Prudential Regulation Authority/
Financial Conduct Authority
• Benchmarking
• Timescale
• Verifiable
© 2014 Grant Thornton International Ltd. All rights reserved.
Objectives
© 2014 Grant Thornton International Ltd. All rights reserved.
Objectives
• Proactive management
of Coverholders
• Regulatory requirements
• Lloyd’s control framework for
regulatory and tax reporting
(Phase II)
– Board assurance
• Lloyd’s minimum standards –
underwriting
• Benchmarking of Coverholders
© 2014 Grant Thornton International Ltd. All rights reserved.
Simple to do
business with.
Lloyd’s
Solutions
© 2014 Grant Thornton International Ltd. All rights reserved.
Options for a solution
• Core requirements:
– System based product
– Simple to understand work product
– Cost effective
© 2014 Grant Thornton International Ltd. All rights reserved.
Options for a solution (continued)
• Providing:
– Comfort to insurers
– Evidence based assurance for
Managing Agents Boards to meet
control framework requirements
– Ease of reporting to regulators
– Peer organisation benchmarking
– Ease of reporting to following markets
– Minimum disruption to Coverholders
© 2014 Grant Thornton International Ltd. All rights reserved.
Solution design
Integrated
System based
Verifiable
Audit timescale
Standard scope
and report
Coverholder self
assessment
Cost effective
© 2014 Grant Thornton International Ltd. All rights reserved.
Considerations
© 2014 Grant Thornton International Ltd. All rights reserved.
Considerations
Use of work product
•
•
•
•
•
Client
Following Market
Regulatory
Solvency II
Future market
© 2014 Grant Thornton International Ltd. All rights reserved.
Costs
Legal considerations
• Audit opinion
• Future liability
Learning from
the past
© 2014 Grant Thornton International Ltd. All rights reserved.
Lessons learned
Banking
sector
© 2014 Grant Thornton International Ltd. All rights reserved.
Lack of
planning
Basel II
Basel III
Summary
© 2014 Grant Thornton International Ltd. All rights reserved.
To summarise
Planning
Comprehensive system specification
• Short term
• Medium term
• Long term
Market involvement
© 2014 Grant Thornton International Ltd. All rights reserved.
Should you require any further information,
please do not hesitate to contact:
Craig Scarr
Chair of UK Insurance
T: 0779 292 4228
E: Craig.A.Scarr@uk.gt.com
Adrian Butland
T: 0797 148 3768
E: Adrian.Butland@uk.gt.com
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms
provide assurance, tax and advisory services to their clients and/or refers to one or
more member firms, as the context requires.
Grant Thornton UK LLP is a member firm of Grant Thornton International Ltd
(GTIL).GTIL and the member firms are not a worldwide partnership. GTIL and each
member firm is a separate legal entity. Services are delivered by the member firms.
GTIL does not provide services to clients. GTIL and its member firms are not agents
of, and do not obligate, one another and are not liable for one another’s acts or
omissions.
© 2014 Grant Thornton International Ltd. All rights reserved.
Control Framework
Control framework Phase II
update by Jaana Rouvari
33
© Lloyd’s
Control Framework
Topics for today
1. Challenges in setting a sign-off deadline
2. New roadmap
3. How Lloyd’s will support managing agents and
brokers
4. Communications and next steps
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© Lloyd’s
Control Framework
Challenges in setting a deadline
Individual extensions for managing agents vs. market wide extension?
• Treating managing agents equally
• Align with other Lloyd’s initiatives
• Allow enough time to complete a quality piece of work
• Avoid slowing down the process to achieve sign-off
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© Lloyd’s
Control Framework
New deadline
Lloyd’s worked with those managing agents requesting extension to the
deadline to agree plan and deliverables for December 2014
No re-planning required by managing agents, assume existing plans
will stand
Sign-off can be provided by a managing agent at ANY point prior to
deadline
New market deadline for Board sign off for all managing agents is
December 2015
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© Lloyd’s
Control Framework
2014-2015 Delivery roadmap
Q1 – Q4 2014
Inputs/ Activities
Assess risk, identify controls and gaps
Review of risk ratings and audit plans
Agree on engagement and communications with brokers/ coverholders
Complete risk assessment and detailed analysis to identify gaps
Conduct coverholder audits, Review results and address remediation
Checkpoints
Outputs
For each managing agent:
•
•
•
•
6.
7.
8.
9.
10.
Completed delivery roadmap
Completed risk assessment
Completed gap analysis
Remediation plan for review
Agreed plan/deliverables for up to end of 2014 (agreed between Lloyd’s and each managing agent)
Agreement within managing agents on engagement and communications with brokers/coverholders
Assess risks; identify controls and gaps
Evidence remediation plan
Agree assurance to be shared with Lloyd’s
Q1 – Q2 2015
Q3 – Q4 2015
Develop and implement
Controls
Review, monitor and
Sign-off
Test controls and procedures in operation
Confirm evidence for sign off
For each managing agent:
•
Managing agent evidence of coverholder
compliance and board sign off to Lloyd’s
11. Formal sign off
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© Lloyd’s
Control Framework
Support available from Lloyd’s
• Continued 1-2-1 meetings with managing agents
• Continued 1-2-1 meetings with brokers where Control
Framework impact is high
• Continued engagement with LIIBA and its BOLT group
• QUARTERLY market breakfast meetings
• Control Framework news letter
• Fully updated web pages and downloads on
lloyds.com/controlframework
Phase II will transition to the Delegated Authorities Department at
Lloyd’s from January 2015
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© Lloyd’s
Control Framework
Communications & Next steps
• Control Framework updated in March BOLT meeting
• Followed by LIIBA circular on Control Framework
• March coverholder news letter to include tax and regs message
• Control Framework broker and managing agent contact details/
introduction available from the project team to those involved in
project delivery
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© Lloyd’s
Control Framework
Q&A
40
© Lloyd’s
Control Framework
Close
Further information on Control Framework – controlframework@lloyds.com
Next Breakfast Meeting – 3rd June
www.lloyds.com/controlframework
41
© Lloyd’s