2. Lloyd's and Insurance Market Flashcards
When do intermediaries not need to be authorised
If EU passporting applies
How many limbs to Fit and Proper test
3
Do brokers have to complete Lloyd’s accreditation process
No
What is the only Article for which there are applicable exclusions under FSMA
Article 10
If insurer UW risk in different country, what must they ensure?
Licensed in accordance w/ local laws
What is a broker
A of insured w/ specialist knowledge
What is an excess
Sits under policy limit, paid by insured - if within excess, policy not triggered
327 FSMA states what exemption
No need for authorisation if work incidental
What is an ‘authorised person’ for FSMA?
Lloyd’s syndicate
Who regulates the intermediaries in Lloyd’s?
FCA
What is the ‘approved person’ regime?
Approval by FCA to perform 1+ controlled functions on behalf of ‘authorised person’
What is a regulated activity
Specified Activity and Specified Investment
Who are subject to compulsory J of Financial Ombudsman
Insurers
Why are spent convictions under ROA still considered for Fit and Proper test
ROA (Exceptions) Order requires disclosure for certain positions
What is acceptance on subscription market
Scratching placing slip
What will the FCA consider if criminal record
Nature of crime - e.g. basis of theft is dishonesty
How many links in the Chain of Security?
Three
What is considered for ‘Competence’ in Fit and Proper test
Qualifications
What is an insurance tower
Risk spread out in layers
What two entities regulate insurance Cs and Lloyd’s entities
FCA + PRA
What is Solvency II
Aimed at consumer protection + enhancing competition through three pillars
What are the sanctions under 23 FSMA
Criminal - imprisonment and/or fine
What is the ‘subscription market’?
Risk is shares between insurers, and premium pro-rated
Two biggest areas of Lloyd’s
Property and casualty
Third limb to Fit and Proper test
Financial soundness
What do brokers use for contract certainty on subscription market
Checklist to ensure satisfying Contract Certainty principles, and Market Reform Contract for standardised slip
What powers do Council of Lloyd’s have for breach of its byelaws
Enforcements Ps and impose a range of sanctions (from fines to bans)
Three kinds of intermediaries at Lloyd’s
Managing A, coverholders and brokers
What happens on subscription market if later insurer changes terms?
Only applicable to that insurer
How is there internal regulation at Lloyd’s
Byelaws created by the Council of Lloyd’s
What Principles/Rules are applicable for PRA
8 Fundamental Rules
What happens if 19(1) FSMA still applies
Need FCA authorisation
What contains vetted policy wording that can be incorporated by mere ref to relevant clause in slip
Lloyd’s Wordings Repository
What Principles/Rules are applicable for FCA
11 Principles for Business
What is the nature of all names admitted to Lloyd’s - LLC, unlimited etc.
Limited + severally liable
What are ‘Funds at Lloyd’s’ in the CoS
Names provide capital calculated by syndicate’s business risk, held in trust
What case showed that insured has separate Cs w/ each insurer on a subscription market
General Reinsurance
Second link in Chain of Security
Funds at Lloyd’s
Possible exemption for 19(1) FSMA
327 FSMA
Four specified activities (number)
10, 56, 57, 58
Who provides claims handling services for Lloyd’s?
XChanging
Upside of Solvency II
Permits continued EU passporting after Brexit
What three things must approved persons do to become approved persons
Meet Fit and Proper test, comply w/ APER + COPs, and report anything that may affect ongoing suitability
General rule under FSMA
19(1) General prohibition against carrying out RA unless authorised or exempt
What is an example of a controlled function for 59 FSMA
D of syndicate
What is a downside of Solvency II
Onerous capital requirements
What are managing As
Managing day-to-day of the syndicate
What are ‘Syndicate Level Assets’
Sufficient reserves held by each syndicate in trust.
First link of Chain of Security
Syndicate Level Assets
What is the FOS
Consumers + small businesses can complain to FOS for free, or pays compensation if authorised firm unable
What is the ‘Central Fund’
Annual contributions from Names + subordinated debt
What is a coverholder
MAs delegate authority to UW to other C/P - that C/P = coverholder
Does the FOS apply for commercial (re)insurance?
No
What is a ‘Follow the Leader’ clause?
Followers bound by lead’s decisions on claim liability + quantum
First limb to Fit and Proper test
Honesty
How do brokers become permitted to conduct business at Lloyd’s
Meet high standard of business conduct, agree TOBA w/ each MA it wishes to deal w/, and MA satisfied broker meets Lloyd’s standards
Where is the Fit and Proper test
FCA Handbook FIT 2.1 - 2.3
Who are followers on a subscription market
Those that UW business below the lead UW on the placing slip
In subscription market, who usually negotiates policy wording and premium, and controls claims handling?
Lead UW
Aim of FCA regulation
Protect consumer
What is a deductible
Deducted from claim payment, so that the sum insured is actually less the deductible
What requires a person to be an approved person to carry out controlled functions?
59 FSMA
Where are the sanctions for breaching 19(1) FSMA
23
Why does Lloyd’s have a Chain of Security?
Helps to support market confidence
General Reinsurance showed what?
Insurance has separate Cs w/ each insurer on a subscription market
If one percentage is to stand, what do you do before signing down
Subtract from % of total risk available
What is considered for ‘Honesty’ in Fit and Proper test
Criminal record, and if D of now insolvent C
What is an offer on the subscription market
Presentation of slip to UW
Where is 50% of Lloyd’s business from (what J?)
US + Canada
What is the Lead UW
Usually the UW at the top of the placing slip
What part of FSMA defines regulated activity
22
Two specified investments (number)
75 and 86
Second limb to Fit and Proper test
Competence
Third link in CoS
Central Fund
What is the formula to sign down
(% of total risk available / % of total risk wanted) x % wanted by individual UW
What is signing down?
More than 100% of risk UW, so each percentage taken by insurer is signed down
Two possible exclusions for Article 10 FSMA
11 and 12 (EEA insurance + vehicle breakdown cover)
What is a signing slip
Produced after all risk UW to tidy up placing slip
When can a percentage of risk not be signed down
UW said percentage ‘to stand’
