6. Legal and Regulatory Flashcards
Definition: Admitted basis
London market companies must be admitted by the regulator of different countries to write business there.
There are often requirements around this such as setting up an office and high levels of reporting (such as submitting any premiums)
Regulation is provided on an individual state basis in the US
Lloyds facilitates compliance centrally, but insurance companies have to engage individually.
Definition: Conduct risk
A set of principles which cover how best to treat customers fairly
Definition: Byelaws and regulations
Known as the primary rules of operating within the Lloyd’s market.
Set out the fundamental concepts which must be abided by
Definition: Surplus lines basis
Lloyds had surplus lines status meaning it is a second tier or export market, which can only be accessed if the local or admitted market is not able to accept the risk (normally due to size or complexity of risk)
Definition: Solvency and capital adequacy
Capital adequacy and solvency are the initial requirements for setting up a new insurer.
A solvency margin is the amount by which assets must exceed liabilities.
Capital adequacy factors in the risk factors for this equation to add more weight to volatile risks.
Definition: Consumer duty
Sets out the standard of care that regulated firms should give their retail customers.
Definition: Protected disclosures
It is unlawful for an employer to punish an employee for whistle-blowing as long as the report was made in good faith
Definition: Whistle-blowing
Technically known as making a qualified disclosure. It is the public allegation of a firm’s concealed misconduct, usually from within the same organisation - employee’s cannot be punished for this.
Definition: Central fund
Lloyds has an unusual position where it maintains its own central pot of money as a contingency in case the members that underwrote the risk are not in a position to pay claims
Definition: Fair treatment of customers
Principle 6 states a firm must pay sue regardless of to the interests of its customers and treat them fairly
Definition: Run-off
A Lloyds syndicate is put into ‘run-off’ if they fail to meet their requirements and are wound up. This prevents them from taking on any further business.
Definition: Commercial customer
A customer who buys insurance on behalf of their company, rather than being a direct consumer
Definition: Lloyd’s Market governance
Governed by FCA and PRA:
- Society of Lloyd’s
- Managing agents
Governed by FCA:
- Brokers
- Members agents
The regulators allow Lloyd’s to self regulate as they want Insureds to have the same degree of protection as if insured by a non-Lloyd’s insurer
The Council of Lloyd’s are the governing body for the market
Definition: Requirements
Known as the secondary rules of operating within the Lloyd’s market.
Contain the detail of what needs to be undertaken to comply with the primary rules.
What are the three regulators within the UK?
Financial Conduct Authority (FCA)
Prudential Regulation Authority (PRA)
Financial policy committee
