5. Structure of the London Market

Question 1

What is the responsibility of the Council of Lloyd’s?

Answer 1

Responsible for the management and supervision of the Lloyd’s market. Created under the Lloyd’s Act 1982.

Only the Council can make byelaws.

Question 2

Who makes up the Council of Lloyd’s?

Answer 2

3 working, 3 external, and 9 nominate members

Question 3

What is a managing agent?

Answer 3

A managing agent is employed by a syndicate to appoint the underwriters who accept risk on behalf of the syndicate.

A managing agent is an authorised person, regulated by the PRA and FCA.

Question 4

What is a syndicate?

Answer 4

Syndicates are the groups of private individuals or corporate investors who carry the risk (they provide the financial backing). Both types are known as Names.

Question 5

Describe the lifecycle of a syndicate.

Answer 5

1. Each syndicate lasts for 1 year and accepts risks for that year and will be liable for claims from those risks.
2. The syndicate ‘book’ remains open for 2 years after the end of the year. For premium collection and claims payment.
3. Outstanding liabilities are reinsured by the syndicates following year of account (reinsurance to close).

Question 6

What is a member’s agent?

Answer 6

Advisor to their client of the (Dis)advantages of investing in the Lloyd’s market.

It can also act as the communication channel between the member and the various managing agencies.

Question 7

What does the PRA do?

Answer 7

Regulates insurance companies operating in London for prudential requirements (solvency, levels of capital etc).

Question 8

What does the FCA do?

Answer 8

Regulates insurance companies for conduct of business.

Question 9

What does the international underwriting association do?

Answer 9

Trade body with no regulatory power

Question 10

What is the role of the broker?

Answer 10

To act as the professional intermediary and agent of the re/insured in both placing and claims processes.

They must be FCA regulated.

Question 11

What is a managing general agent (MGA)?

Answer 11

An organisation given the authority on behalf of the insurer to undertake a number of tasks such as accepting risks, issuing documents, or handling claims.

Authority is given using a binding authority.

Question 12

What is the LMA?

Answer 12

Association body providing representation, information, and technical services to underwriting businesses.

Purpose is to identify and resolve issues of particular interest to the Lloyd’s UW community.

Question 13

What is the international underwriting association?

Answer 13

World’s largest representative organisation for international and wholesale (re)insurance companies.

Solely a representative body with no control over the activities of its members.

Question 14

What is the Association of British Insurers?

Answer 14

Voice of the UK’s insurance, investment and long-term savings industry with over 250 members, which together account for around 90% of premiums in the UK domestic market.

Question 15

What is the British Insurance Brokers’ Association?

Answer 15

Major, non-statutory, trade associate for insurance intermediaries.

Question 16

What is the London Market Regional Committee?

Answer 16

Integration of wider BIBA structure to represent interest of brokers operating in the London and worldwide re/insurance markets.

Question 17

What is the London and International Insurance Brokers’ Association?

Answer 17

Independent trade body representing the interests of insurance and reinsurance brokers in the London and international markets.

Question 18

Why is London a leading insurance market? (4)

Answer 18

Capacity
Entrepreneurial spirit
Google claims service using knowledgeable personnel
History and experience

Question 19

Define contract certainty

Answer 19

Contract certainty is achieved by the complete and final
agreement of all terms between the insured and the insurer by the time that they enter into the contract, with contract documentation provided promptly thereafter.

Question 20

Describe the process for placing a risk

Answer 20

1. Broker summarises the risk on a market reform contract (slip)
2. Broker obtains a quote from a lead underwriter.
3. Broker will seek several quotes from multiple leaders and advise the client to differences and guidance on which to take.
4. Broker places a firm order and fills the slip by obtaining shares from multiple UWs for the risk.
5. Broker deducts a % of premium known as brokerage.
6. Risk is recorded on the XIS system.

Question 21

Describe the process for making a claim

Answer 21

1. Broker receives claim notification from the client and identifies the correct group of UWs to review and agree the claim (Agreement Parties).
2. Presents the claim in electronic or paper form.
3. XChanging system used to circulate the associated claim data.
4. Any experts appointed by insurer usually done through the broker.
5. Money for the claim moves from the insurer to the broker to be forwarded to the client.
6. XChanging notifies all parties involved of details and references.