Enterprise Risk Management

Risk management is progressively embedded within the business. Our aim for effective risk management is ultimately to lead to more efficient use of capital. More details can be found in our 2006 annual report in the "Risk Factors and Risk Management" section.

Risk Governance

During 2006 our Risk Management Framework has sought further to link risk appetite and risk management to our governance structure. This has been achieved through a "three lines of defence" approach using (i) policies, (ii) methodologies and (iii) independent assurance through audit activities.

An efficient operational capability, delivering leading edge structures and processes, will be a key contributor to the Group achieving its goals and strategy in terms of profitability, growth, market position and control of risks and customer service and satisfaction.

Operational Strategy

Brit's Operational Strategy is aligned to our Group strategy and is based on our "five-star" plan. The themes within this strategy are:

• Technology Strategy - leveraging fit-for-purpose technologies to set us apart from our competitors
• Process Re-engineering - driving efficiencies and delivering service excellence through continuous improvement
• Data Improvement - delivering quality management information to enhance our business performance
• Premises and Infrastructure Strategy - supporting our growth through first-class premises and infrastructure and
• Operational Accountability - Improving our operational accountability and quality of data entry through cross-team working.

To underpin the delivery of our five-star plan, we will also focus on a series of 'People' related initiatives designed to ensure that staff have all the support they need to deliver the Operational Strategy.

The insurance industry, and particularly the subscription market, is undergoing a process of rapid and fundamental change to its structures and processes. It is important for the Group to build and maintain the right processes, infrastructure and distribution support so that these features become a competitive advantage to Brit Insurance in the marketplace.
We believe this Operational Strategy will put Brit Insurance in such a position and enable it to:

• Lead industry-wide process reform
• Grow our book of business substantially over the coming years in line with the Group's overall strategy
• Decrease operational dependency on central functions conducted by Lloyd's and London Market Bureaux as our business mix becomes more heavily weighted to the broader, non-bureau, company market
• Win new business on the back of service quality and operational efficiency and
• Integrate efficiently any acquisitions should the opportunities arise.

Achievements in 2006

During 2006, Brit Insurance embarked on a broad programme of operational enhancements.  We have made a significant investment in technology to support and strengthen our overall operations platform in support of the Group's strategic aim. Key achievements include the following:

• Technology Strategy - Technology will play a critical role in delivering our strategic goals of enhanced customer service and improvements in revenue. Deliveries in 2006 have provided Brit with a strong foundation for future growth, as well as stabilising our systems and monitoring them within agreed SLAs. Developments in this area are now well advanced and we have already commenced work on the delivery of some new key programmes, including Brit Gateway, Product Builder, Broker Relationship Management and Broker Ledger
  
• Process Re-engineering - By reviewing our end-to-end processes, we will ensure that we have "best in class" efficiency and effectiveness across our business. We have completed the initial mapping exercise of ten critical processes and their 91 respective sub-processes. We are also either well underway or in the process of undertaking a series of detailed process activities across the business
  
• Data Improvement - Ahead of the implementation of our Data Warehouse, we have been proactively improving the quality of our data in the source systems through a number of initiatives.
  
• Premises and Infrastructure Strategy - Our approach to premises contributes significantly to our strategic ambition of being an "employer of choice" by delivering a Brit Insurance image with a secure, flexible and dynamic environment for our staff. Our Infrastructure Strategy will also ensure ongoing technology upgrades, regulatory compliance and HR support.
  
• Operational Accountability - we have achieved contract certainty targets (and legacy policy reduction) ahead of schedule and developed a new financial control framework.

We have also continued with our recruitment programme, successfully attracting people with the appropriate skills from insurance and other industries. This programme should give Brit Insurance a competitive advantage as the insurance industry undergoes rapid and fundamental change to its structures and operational processes.