C1 -B

Question 1

International nature of the London Market - Insurers

Answer 1

insurers have a choice
as to whether to enter the London Market at all, or remain within their home markets.

reason that many insurers decide to set up an office in London is the proximity
to all the other insurers

This increases the
opportunity to participate in networking, market forums

Many insurance companies now rent space in the Lloyd’s building – not to become a
syndicate but to take advantage of the fact that it is an open trading floor where brokers will potentially walk past them every time they enter the Lloyd’s building

Question 2

Source of risks

Answer 2

Only about 12% of the risks written in the Lloyd’s Market come from the UK – the balance comes from elsewhere in the world.

For the company market, the latest IUA statistics report suggests that a much larger
proportion being 55% of their gross income overall is from the UK and Ireland.

Question 3

International licences

Answer 3

Lloyd’s has licences and authorisations to trade in over 200 countries and territories.

This means that Lloyd’s is either a licensed or an eligible surplus lines insurer, or is authorised or registered as a reinsurer only.

Question 4

US licensing

Answer 4

• the licensing of insurers operates on a state by state basis
• insurance companies have to negotiate for permission with each individual state regulator rather than once with the Federal Government.

most common criteria for the permission granted by the overseas regulators is
the regular provision of data concerning risks originating in the country concerned and any
claims attaching to those risks.

in many countries, taxes and other charges are payable on risks located in those countries, as well as a requirement in some countries that specific funds of money are held there.

In addition, individual states have guarantee funds for certain classes of business which will operate in much the same way as the Financial Services Compensation Scheme in the UK.

Question 5

Systems and controls to ensure compliance

Answer 5

this means putting in place the safety nets to try to avoid something happening
rather than just telling people something has happened after the event.

most important ones are probably training and
education.

Within Lloyd’s there are in-house Principles for doing business, on which all managing agents will be measured.

Responsibility for meeting the Lloyd’s Principles rests with each managing agent’s board,
whether their underwriting is undertaken in house, whether any underwriting authority
is delegated to a third party