9 Delegated Underwriting Flashcards
What’s delegation
Empowering someone to do something on your behalf
What tasks do insurers/brokers delegate?
Insurers - some or all of activities for eg to another insurer, broker or another entity altogether
Brokers - document production
Insurer - how does delegation to another insurer(s) work
Via either a consortium or a line slip
Insurer delegation - consortium
What are the benefits
Arranged by insurer
Consortium - group of insurers taking risks in a proportion. One insurer is manager and accepts/declines/handles claim. Usually set up for 1 year.
Benefits
- For broker, placing process is shorter
- For consortium leader, commission/fees for their responsibilities
- Followers - Access to business without having to deal with broker, saves time
Insurer delegation - line slip
Arranged by broker
Broker finds insurers who are interested in writing similar business on similar terms. Either on delegated authority or not (where insurers still agree to their participation)
Advantages
- For broker, pre set security, more efficient
- For followers, access business without having to agree risks individually
Less usual for leader to have commission on a line slip
What’s open market
Visiting Insurers individually
Bulking vs non bulking lineslip
Bulking lineslip - can aggregate premium presentations to XCS ie bordeaux. Less admin but hard to tell what premium relates to what risk.
Non bulking lineslip - risks presented separately, premiums paid individually per Declaration
Insurer delegation - non insurer - eg broker or another entity
Via binding authority / a binder
Lloyds input re delegated authority
Lloyds very strict about discipline it imposes on Syndicates who operate using delegated underwriting authority
Why would an insurer delegate?
More manpower
Local access, licensing without setting up offices
Accessing business outside of local markets
Who is the cover holder in delegated authority
Diff between coverholder and MGA
a non-insurer entity that the insurer delegates to. Can be a broker - be careful of conflict of interest
managing general agent is when the entity is separate so has no other direct clients other than insurers, no conflict of interest. can be part of a broker still. subset of coverholder
How many cover holders are there in Lloyds
Approximately 4200, 30-35% of Lloyds premium income. As different offices recorded separately, actually separate entities are more like < 4000
Best way to manage conflicts of interested in delegated authority for broker
Individual conflicts - chinese walls - specific people allocated to work on the delegated authority so no interaction with those facing insured
Steps in setting up a cover holder
Application via ATLAS, electronic system, process is started by the broker
- Insurer has to obtain approval from Lloyds. This is usually sponsored by a broker and managing agent. Sometimes just a managing agent.
- Managing agent must complete due diligence into the new cover holder. Because should only delegate to competent and well-run organisations. Brand reputation very important.
On ATLAS application, coverholder should indicate what work they want to do, what areas of world
- Lloyds will consider if the coverholder has:
- Experience
- System and controls in place
- Good financial status
- Authority to operate in specific territories
- Indemnity insurance/certificates
Lloyds decides in 25 working days
if approved, ‘coverholder undertaking’ is signed where coverholder agrees to Lloyd’s standards
Where can you find info on Lloyds cover holders
Atlas. Centrally available. PI certificates, financial statements, etc provided once a year.
What is Delegated Contract Oversight Manager DCOM
ATLAS soon to be replaced by Delegated Contract Oversight Manager DCOM - this will be compliance check for both delegated binding authority and delegated claims agreement parties (under one umbrella)
Advantages for coverholders/delegated claims administrators:
- only providing info once
- consistent / better data from one system
- more efficient
Advantages for brokers:
- less administration
- single source of data
Advantages for managing agents:
- less administration
- better quality, consistent data
- approval times proportionate to complexity of request
Types of cover holders
Approved coverholder / service company
Both have to pass Lloyds approval. Additional approval processes if EEA from Lloyds Brussels
Service company is set up by a managing agent as a separate company (usually another country) with authority under a binding authority from a syndicate. Helps to access oversea business.
Benefit of a service company
Syndicates can access other types of personal lines insurance eg motor that isn’t efficient to underwrite in Lloyds
Different types of authority - Full authority
Complete control
Different types of authority - Pre determined rates
Price matching / discretion allowed for renewal business
Different types of authority - Pre determined rates with no discretion
Only if no change at all made from rating matrix
Different types of authority - Prior submit
Referred to UW prior to binding
What three parts make a binding authority document
Schedule (includes restrictions/reporting requirements)
Wording
Non schedule sections - mirror MRC
Binding authority document - schedule key elements
Agreement number - given by broker or insurer, no format
UMR - by broker
Narrative (address etc)
Section 2 - Period
Section 3 - Who is authorised / responsible
Section 6 - Conditions
Section 7 - What classes are covered
Section 8 - What classes are excluded
Section 9 - Geographical location of insured/risks/any limits
Section 10 - Policy Limit
Section 11 - Premium / deductibles / excess
Section 12 - Premium income limits (and a trigger point to when reaching near)
Section 13: Period coverholder can accept policies
Section 14 - Amendments
Section 16- Commissions
Section 19 - Applications/proposal forms/any information relating to risk itself
Section 20 - wording, endorsements, conditions, clauses, exclusions etc
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