chapter 5

Question 1

what is lloyds of london?

Answer 1

• a society of members
• not an insurer.
• Instead it is
  a marketplace.

Question 2

Lloyd’s Act 1982

Answer 2

Council of Lloyd’s was created

Lloyd’s is a dual regulated institution

the Society of Lloyd’s and Lloyd’s managing agents being regulated by both FCA and PRA,

Lloyd’s brokers and members’ agents are solely regulated by the FCA

Question 3

what is a working member?

Answer 3

actively working in the Lloyd’s Market either for a broker
or for a managing agent, or did so immediately before retirement

Question 4

what is an external member?

Answer 4

somone who is a member of the Society of Lloyd’s (eg provider of capital)

Question 5

what is a nominated member?

Answer 5

not a member of the Society and a capital provider but comes
from outside the market.

The nearest equivalent would be the non-executive directors of a
company who are not involved with the day-to-day operation of the business

Question 6

syndicates

Answer 6

groups of private individuals or corporate investors who carry the risks

known as underwriting members or Names.

currently 92 - used to be 400

the membership of the syndicate needs to be renewed for each new year of account

Question 7

Managing agents

Answer 7

Each syndicate employs a managing agent and it is that entity which appoints the underwriters who may accept risks on behalf of the syndicate.

Managing agents are
companies specifically established to manage the underwriting of one or more syndicate

regulated by PRA and FCA

Question 8

what is capital?

Answer 8

the term used for the investment put into the Market by the investors

Question 9

the syndicate capacity

Answer 9

By allocating their capital support to each syndicate every year, the members govern the amount of business that each syndicate can underwrite each year

Question 10

member agents

Answer 10

an underwriting agent who carries on the regulated activity of advising on syndicate participation at Lloyd’s.

The member can spread their investment across several different syndicates, not necessarily
all managed by the same managing agency.

their choice of syndicates should
reflect their attitude to risk.

Good relations between managing agents and members’ agents are very important

Question 11

insurance undertakings

Answer 11

Any company wishing to transact insurance in the London Market must be authorised to do so by the PRA. The term for such companies is ‘insurance undertakings’.

The regulators must be satisfied that the applicant complies with the conditions laid down in UK legislation and European Union directives

Question 12

regulations

Answer 12

There is no additional regulation provided for companies in the same way that managing agents and syndicates are subject to Lloyd’s regulation.

The trade body for the company market – the International Underwriting
Association of London – has no regulatory power.

Question 13

international liason

Answer 13

Lloyd’s engages in liaison with overseas regulators on behalf of the whole Lloyd’s Market but individual companies have to make this contact with the regulators separately.

Question 14

Captive insurers

Answer 14

these are insurance companies who are solely insuring risks from sister companies in the same group

Question 15

brokers are..

Answer 15

professional intermediaries and act as the agent of the re/insured in both the placing and claims process.

An intermediary can be defined as a middle-man and can exist in many different areas of business, not just insurance.

They must be authorised by the regulator (FCA), but brokers can apply to Lloyd’s to obtain a
second accreditation as a Lloyd’s broker.

Non-Lloyd’s brokers are not prevented from placing
business in the Lloyd’s market

Question 16

managing general agent (MGA)

Answer 16

an organisation which has been given authority on behalf of an insurer to undertake a number of different tasks such as accepting risks, issuing
documents or handling claims.

The authority is given using a type of contract called a
binding authority.

MGAs can be located in London, other
parts of the UK, and around the globe.
These types of organisations are a very important part of the London Market’s overall
distribution network, with

Question 17

International aspects of the London Market

Answer 17

Many of the organisations working within the London Market either have their roots or links outside the UK.

Many US insurers are now operating in the London Market either as a company or via a Lloyd’s syndicate as this provides them with the optimum platform to access business from a worldwide client base.

In addition to insurers being international, the business coming into the London Market is
also truly international with only a relatively small proportion of business placed in both the Lloyd’s and company markets originating in the UK.

Question 18

Lloyd’s Market Association (LMA)

Answer 18

The LMA provides representation, information and technical services to underwriting
businesses (i.e. managing agents) in the Lloyd’s Market.

All managing and members’ agents
are members of the LMA and are actively involved in its work – participating on its board, committees or business panels.

Question 19

International Underwriting Association of London (IUA)

Answer 19

The IUA is the world’s largest representative organisation for international and wholesale insurance and reinsurance companies.

It exists to protect and strengthen the business
environment

You might still hear references to two older company market trade bodies who merged
to form the IUA.

The Institute of London Underwriters (ILU) represented marine and aviation companies, and London Insurance and Reinsurance Market Association (LIRMA)
represented non-marine insurance and reinsurance interests.
An important distinction between the IUA and Lloyd’s is that the IUA is solely a representative body and can exercise no control over the activities of its member organisations,
whereas Lloyd’s does have such ability to control and influence the activities

Question 20

Association of British Insurers (ABI)

Answer 20

The ABI is not a London Market body specifically but some insurance companies with London Market operations will also be members. According to its website, the ABI is the voice of the UK’s insurance

The ABI’s role is to:
- bring the right people together to inform public policy debates, and to engage with
politicians
- be the public voice of the sector, promoting value and highlighting the importance of
insurance to the wider economy
- encourage customer understanding
- support a competitive insurance industry both in UK and abroad.

Question 21

Broker-related organisations

Answer 21

British Insurance Brokers’ Association (BIBA)

London Market Regional Committee (LMRC)

London and International Insurance Brokers’ Association (LIIBA)

Question 22

British Insurance Brokers’ Association (BIBA)

Answer 22

BIBA is the major trade association for insurance intermediaries

membership of more
than 1,800

it is a non-statutory trade body.

BIBA draws its members’ attention to the need to comply with the fundamental principles that govern the professional conduct of insurance brokers and intermediaries.

Its rules
emphasise the need for members to conduct business with good faith and to represent
the best interests of their customers.

Question 23

London Market Regional Committee (LMRC)

Answer 23

The LMRC is integrated within BIBA’s wider regional structure to represent the interest of brokers operating in the London and worldwide

The intention is to maintain a lobbying role and to represent the sector to the regulators, Government and other stakeholders.

Question 24

London and International Insurance Brokers’ Association (LIIBA)

Answer 24

LIIBA is an independent trade body, representing the interests of insurance and reinsurance brokers

It was set up in 2009 when BIBA
changed its London Market

LIIBA’s mission is to ensure that London remains where the world wants to do business by continuing the transformation of market

LIIBA’s key priorities are:
- Representing members’ interests to Government, the regulators,
- Assisting members to operate within the market and the relevant tax and regulatory
systems.
- Supporting members with regarding legislative and technical changes.

Question 25

Managing General Agents Association (MGAA)

Answer 25

The MGAA provides specific representation on behalf of MGAs in the insurance market, to be their voice and to drive best practice within the industry.

managing general agents who hold delegated underwriting authority write in excess of £6bn gross written premium.

Question 26

Subscription market

Answer 26

This term means that the risk is generally shared between two or more insurers rather than written 100% by one insurer.

Question 27

contract certainty

Answer 27

ensures that all parties are fully aware of the coverage and terms of the policy before a risk starts to be covered.

it 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 28

when has the market decided that EOC needs to be issued?

Answer 28

evidence of cover must be issued within
30 days of inception.

can be formal policy, a copy of the slip or
broker-produced evidence of cover such as a Broker Insurance Document (BID)

Question 29

Reasons for coming to the London Market:

Answer 29

• large capacity;
  – a subscription market where risks are shared between insurers;
  – long history and significant knowledge in the market;
  – London Market insurers are entrepreneurial in nature; and
  – market provides good claims service.