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Chapter 5 Flashcards

1
Q

Who are the main providers in the LM?

A

•Insurance + reinsurance companies
•Lloyd’s syndicates
•Protection + indemnity clubs (dealing w/ aspects of marine liability insurance)

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2
Q

What is the Franchise Board in Lloyd’s?

A

Allows the businesses to run in the Lloyd’s market - providing the facilities + infrastructure for that business to carry on

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3
Q

Where does the capital come from in Lloyd’s?

A

The members (those that invest in the businesses that are running Lloyd’s)

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4
Q

What are the 2 different members in Lloyd’s?

A

1.Corporate groups
2.Private individuals

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5
Q

What do members agents do in Lloyd’s?

A

•Provide advice for the members as to which syndicate they might invest
•Decides how to run the syndicate, including sourcing capital
•Acts as communication between the member + various managing agencies running the syndicates, receiving profit reports of the syndicates

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6
Q

What are syndicates in Lloyd’s?

A

Groups of private individuals or corporate investors who carry the risks - known as underwriting members or Names

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7
Q

What are managing agents in Lloyd’s?

A

•Limited companies who employ underwriters + others to run the business - + they may accept risks on behalf of the syndicate
•They manage the underwriting of 1 or more syndicates

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8
Q

What are service companies in Lloyd’s?

A

•Risks for individuals, such as motor or household, are often bundled together + put into underwriting schemes, which are run by service companies
•Syndicates + managing agents will delegate underwriting to these companies to underwrite business on its behalf

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9
Q

How do companies access Lloyd’s?

A

Via brokers

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10
Q

What is Lloyd’s of London?

A

A society of members + the corporation of Lloyd’s company provides infrastructure for the marketplace w/ responsibility for international liaison

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11
Q

What is the council of Lloyd’s?

A

•Responsible for the management + supervision of the market
•They can discharge some of its functions directly by making decisions + issuing resolutions, requirements, rules, + byelaws (market laws)

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12
Q

What are the 3 types of members in the Council of Lloyd’s?

A
  1. Working member: works in Lloyd’s for a broker or managing agent, or did immediately before retiring - needs to provide capital for the market + has to be member of the Society of Lloyd’s
  2. External member: member of the Society of Lloyd’s
  3. Nominated member: a capital provider but comes from outside the market
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13
Q

Who are the Society of Lloyd’s + Lloyd’s managing agents regulated by?

A

The FCA + PRA

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14
Q

Who are Lloyd’s brokers + members agents regulated by?

A

FCA

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15
Q

What is the annual life of a syndicate?

A

•They exist for 1 year of account, so membership needs to be renewed for each new year of account

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16
Q

When will syndicates accept risks?

A

•During the year they have on policy + are liable for claims arising from those risks
•They’ll keep book open for another 24months to let premium finish coming in + to allow claims to be notified + resolved

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17
Q

In relation to Lloyd’s syndicates, what is ‘reinsurance to close’ (RITC)?

A

If syndicate wants to close its books but claims are still notified in the future, they can reinsure the outstanding liabilities w/ the syndicate’s next year of account

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18
Q

What is ‘open years’ in relation to syndicates + ‘reinsurance to close’ (RITC)?

A

If an agreement can’t be reached to reinsure the liabilities of any syndicate year of account, then that year is left open until more clarity is obtained

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19
Q

What was the ‘reconstruction + renewal’ process in Lloyd’s?

A

•Modern syndicates faced big claims w/ unlimited liabilities from the 1950s, so many become bankrupt
•So, they rebuilt the process + Lloyd’s started fresh in 1993

20
Q

What is the syndicate capacity in Lloyd’s?

A

Members govern the amount of business that each syndicate can underwrite each year

21
Q

What is capital in Lloyd’s?

A

The investment put into the market by the investors (the members / Names)

22
Q

Why is unlimited liability dangerous?

A

As someone could keep asking you for money even when you’ve run out, so you would go into debt, + may become bankrupt

23
Q

When a managing agent gives a new member into Lloyd’s a ‘security of tenure’, what does this mean?

A

•Member has right to participate in the following year of account of the syndicate + managing agent cannot terminate their involvement w/out the agreement of Lloyd’s
•This type of capacity is a tradable asset, so a member can trade it every year in the Lloyd’s Capacity auctions

24
Q

When a managing agent gives a new member into Lloyd’s a ‘limited tenancy’, what does this mean?

A

•The members agreement w/ the managing agent terminates after a predefined period of years, or by managing agent giving period of notice
•This offers members t become more involved in syndicates more easily

25
What does ‘insurance undertakings’ mean?
Companies wishing to transact insurance in the LM, must be authorised by the PRA
26
Who regulates insurance companies operating in London?
•PRA for prudential requirements (e.g. levels of capital) •FCA for conduct of business issues
27
Who are EU companies regulated by?
Their own home regulator - so, UK companies would need a EU based operates so they can write + service European business
28
What are the 4 formats of non-Lloyd’s insurers?
1. Limited liability companies - most common 2. Mutual indemnity associates - individuals pooling together to create an insurance pool 3. Mutual companies - owned by policyholders + serve a specific interest group (e.g. National Farmers Union) 4. Captive insurers - insurance companies who insure risks from sister companies in the same group
29
What are the sources of capacity for limited liability + mutual companies?
Shareholders provide capital + hence capacity for an insurance company to accept risks + do business
30
What is the source of capacity in a pure mutual organisation?
Risks are coming from the members of the group who charged premium based on the size of the risk brought into the pool
31
Who are brokers?
Professional intermediaries + act as the agent of insured/reinsured in the placing + claims process
32
Who are brokers authorised by?
Authorised by FCA + can also apply to obtain 2nd accreditation as a Lloyd’s broker
33
Who are managing general agents?
•Organisations who’ve been given authority on behalf of an insurer to undertake a number of different tasks, such as accepting risks + handling claims •Authority given by contract called binding authority
34
What is Lloyd’s Market Association (LMA)?
•Provides representation, info, access to policy wordings, + technical services to underwriting businesses (managing agents) in Lloyd’s market •All managing + members agents are members
35
What is International Underwriting Association of London (IUA)?
•Largest representative for the international + wholesale insurance/reinsurance companies •It protects + strengthens the business environment for its member companies operating in or through London
36
What are the priorities of the International Underwriting Association of London (IUA)?
•Transforming business processes by driving modernisation •Deliver knowledge + expertise for innovative underwriting + claims handling •Represent members on matters of public policy + regulation
37
What is the Association of British Insurers (ABI)?
The voice of UKs insurance, investment, + long-term savings industry
38
What is British Insurance Broker’s Association (BIBA)?
•A major trade association for insurance intermediaries •It preaches the need to comply w/ fundamental principles + conduct business w/ good faith
39
What is London and International Insurance Broker’s Association (LIIBA)?
•Independent trade body, representing the interests of insurance/reinsurance brokers operating in London + international markets •Ensures that London remains where the world wants to do business by continuing the transformation of market processes + maintaining high standards
40
What is Managing General Agents Association (MGAA)?
Provides representation on behalf of MGAs in the insurance market, to be their voice + to drive best practice within the industry
41
Why does business come to the London Market?
•Capacity - insures in LM have capacity to take large risks •Entrepreneurial spirit •Good claims service •History + experience
42
What is a subscription market?
Risk shared between 2 or more insurers
43
What is the process of placing a risk?
1. Broker obtains quotations from UWs + advises client 2. Insured decides what quote to accept, then broker has firm order of business 2. Brokerage + terms + premium agreed 3. UW will sign the slip + risk is submitted + premium paid - broker submits info using Accounting + Settlement to XIS 4. XIA records the risk + premium on the central market databases for Lloyd’s + company market UWs, + facilitates payment of premium
44
In Blueprint 2 project, what does the digitisation of the London market involve?
•Moving to environment where placement process is entirely digital •A lot done on the Core Data Record: the transaction related to data that’s required at the point the contract is concluded to allow downstream processes to take place, such as claims matching at 1st notification of loss •This data will be entered into placement platforms, so there’s only a single record of the contract •Market Reform Contract v3 issued in March 2023 - has greater structure + discipline
45
What is the process of presenting a claim?
•Broker receives claims + will need to identify the agreement parties (the insurers of the insured) •Broker present claim using Electronic Claims File •Data is circulated to insurers using Xchanging systems •If insurer needs experts, this is done via the broker •For settlements, this is done electronically from insurer’s bank account to the broker, then forwarded to insured

Lm1 (9 decks)

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