Who can delegate all or some of their activities?
Insurers (Lloyds and company market) and Brokers
Who do insurers delegate underwriting authority to?
Another insurers/set of insurers
A broker
Another entity altogether
What is a consortium
A group of insurers which have formed an agreement to accept risks together in a set proportion
One insurer is designated as the consortium leader - They accept or decline risk on behalf of the consortium, and, if required, will handle claims as they arise.
What are the benefits of a consortium
The placing process is potentially shorter
Most consortium agreements provide for a commission and occasional fees to the consortium leader
The other consortium members have access to business without needing a broker
Less administration tasks, especially of smaller risks
What is a lineslip
A lineslip consists of a set of insurers that have been brought together by a Broker
One/two insurers participating on the lineslip will act as a leader(s) and agree risks attaching to the lineslip on behalf of the other insurers
Lineslips may sometimes only have one insurer on them, the benefits of this is that risks can be put into XIS on a bulk basis, rather than submitted individually
What are the advantages of a lineslip
Having pre-set security is more efficientwhen trying to place risks that fall within set criteria
Insurers gain access to business without having to individually agree risks themselves
Declaration
The individual risk that is being presented for agreement by the broker for attachment to the lineslip
Binding authority / Binder
When an insurer delegates underwriting authority to either a broker or another entity
Why do insurers delegate some underwriting authority
The insurer doesn’t have enough time to underwrite everything themselves
They want access to local business without setting up offices out of London
They want access to business that would not come into the London Market otherwise
Coverholder
The partner of a delegated underwriter agreement
Who approves Lloyds coverholders
Lloyds
Their application must be supported by a broker and a managing agent (a company in Lloyds specialised in managing one or more syndicates)
The managing agent must complete investigation into the new coverholder (due diligence)
What criteria does Lloyds have to consider for potential coverholders
Suitability and experience of individuals working for the applicant
Systems and controls
Financial status
Authority of the applicant to operate in specified territories
What is ATLAS
The system which a sponsoring broker starts a prospective coverholders application into Lloyds.
Application should be considered by Lloyds within 25 working days once all information is submitted
Information held of the coverholder is centrally available to all parties who have a relationship with them. Coverholders review their details annually.
Coverholder undertaking
Agreement for new coverholders which sets out formally the Lloyds standards of its coverholders
What are the two types of coverholders
Approved coverholder
Service company (Set up by a managing agent as a separate company - Allows Lloyds insurers to access more business overseas or write insurances which would not be efficient to write in the normal Lloyds format)
Types of authority given to a coverholder
Full authority - Complete control to the coverholder
Pre-determined rates - Price matching or discretion allowed for renewal business
Pre-determind rates with no discretion - No change made from the rating matrix
Prior submit - All risks to be referred to UW prior to binding
Three parts of a binding authority agreement
Binding authority schedule
Binding authority wording
Non schedule sections/agreements
What is a binding authority
A binding authority is a written agreement within Lloyds where a managing agent allows a coverholder to write business on their behalf
What is a managing agent
A company that is authorised by Lloyds to run one or more syndicates on behalf of the members that provide capital
Who follows the Principles for doing business at Lloyds
managing agents, members’ agents, coverholders, and brokers
Whats the difference between a managing agent and a members agent
A managing agent manages syndicates and underwriting on behalf of members, while a members’ agent represents and advises members in relation to their Lloyd’s investments and capital
A managing agent = manages the risk
Members agent = Manages the money
Registration (Binding Authority agreements)
Lloyds requires all binding authority agreements to be registered on an online system called Delegated Contract Oversight Manager (DCOM)
What should every insurer state in their audit policy
Frequency of audits
Scope for review in the audit
Details of the auditos
