Policy Works blog | Commercial lines bliss

Lloyd's Canada Coverholders and the "YOA Shell Game"

Written by Kathleen Kotchon | Nov 30, 2017 1:15:00 PM

As a Lloyd’s Canada coverholder, you know Year of Account (YOA) forms part of your reporting criteria. While YOA is easily managed in year one of low-volume binding authority agreements, there are plenty of events that occur over the lifespan of multiple renewing contracts that make tracking YOA more difficult.

In the second year of a binding authority agreement for example, you’re now responsible for maintaining two bordereaux. First, one that tracks cancellation, claims and endorsement activity for business incepted in year one. Second, a full set of bordereaux by month for tracking all premium and claims activity for business incepted in year two.

That means by the end of year two, coverholders processing bordereaux manually are managing at least 24 months of bordereaux, maybe more if binding authority agreements are longer than 12 months.

So, if you’re a coverholder that thinks manual data entry into an MS Excel spreadsheet is easy-peasy, I have a challenge for you. Let’s call it the, “Year of Account Shell Game.”

Here’s how it works:

The pea. Annual policy subscribed 75% with Lloyd’s and 25% domestic insurers.

Shell 1. The policy is placed under a binding authority term from January 1, 2017 to December 31, 2017 (aka 2017 YOA).

Shell 2. A policy issued on December 30, 2017 will fall under 2017 Unique Market Reference (UMR B099917XXXX) on the declarations and should be reported under the 2017 YOA, even though most transactions like endorsements take place in 2018.

Shell 3. Now, assuming the existing binding authority agreement was renewed under UMR B099918XXXX from January 1, 2018 to December 31, 2018, the policy should renew showing the updated 2018 UMR and will be reported in the 2018 YOA.

Where do all these transactions belong? Step right up ladies and ‘gents, round and round it goes...where it stops, nobody knows!

In the shell game, the hand is quicker than the eye, but when it comes to manual data entry, that’s disadvantageous. In this scenario, the person entering bordereaux data manually needs to understand that there is a difference in how a February 1, 2018 endorsement / cancellation would be reported on a December 30, 2017 or a January 2, 2018 policy.

This is where automation, namely a commercial management system comes into play. By entering contract years into a commercial management system like Policy Works, it ensures all transactions applicable to one contract are identified with the originating contract number, and can be reported to the correct policy term as part of Lloyd’s Lineage upload functionality.

Furthermore, the one-time data entry capability a commercial management system provides solves a multitude of reporting errors that may occur when coverholders use manual entry for bordereau reporting.

For coverholders not uploading via Lloyd’s Lineage, documents like endorsements, cancellations and extensions issued in a commercial management system will still correctly tie all activity to the proper YOA and clearly identify the correct Lloyd’s contract and UMR, which helps with manual reporting efforts.

Lloyd's business cannot be quoted or renewed unless there is a formal binding authority agreement in place. A January 1st binding authority agreement is often not finalized until late December. For Lloyd's business, that means your issuance team cannot quote or issue policies. While this may not be a problem for new business, what happens if issuing renewals 30 to 60 days in advance forms part of your workflow?

The solution lies within a commercial management system that integrates with Lloyd’s Lineage upload functionality, like Policy Works. Staff can’t issue policies until the site administrator has updated the new contract year. This establishes an improved workflow that curtails potential E&O exposure.

For more information on how Policy Works can help improve managing your Lloyd’s book, contact us for a demo.