Chapter 5 - Structure of the London Market Flashcards
What do the Council of Lloyds do?
Responsible for management and supervision of the market
What makes up the council in terms of members?
- three working
- three external
- nine nominated
working and external elected by Lloyd’s members, all approved by FCA
What is a syndicate?
Groups of private individuals or corporate investors who carry the risks
Both types fo investor called Names
How long does a syndicate exist?
One year
What is a managing agent?
Each syndicate employs a managing agent (company) and they appoint the underwriters who accept risks on behalf of the syndicate
- finds how to source capacity
What is capital?
Investment put into the market by investors, known as Names or members
How can you become an investor?
Must satisfy Lloyd’s you have the means to pay any claims
Why were asbestos claims a problem?
- each syndicate lasts a year and will accept risks for that year
- each syndicate keeps books open for 24 months after closing to allow claims to be notified
- syndicate wants to close books on 3rd year to work out profit/loss, but need to cover unresolved claims
- reinsure with themselves next year (give premium forward) called Reinsurance to Close
- were not anticipating such long-tail claims so did not bring forward sufficient premiums
How did the market rebuild after asbestos?
- reconstruction and renewal
- entire london market 1992 year of account reinsured on new vehicle Equitas
- no more unlimited liability names can join, but still allowed if already doing
What is corporate capital?
Investors who are commercial organisations by their own right
What is the syndicate capacity?
Capital support allocated to each syndicate by members
What is a members’ agent?
- advises members where to invest their capital
- choices of syndicates should reflect attitude to risk
What is an insurance undertaking?
A company authorised by the PRA to transact insurance in the london market
What are the structures of company market insurers?
- limited liability companies
- mutual indemnity associations
- mutual companies (like NFU)
- captive insurers
How do LLC and mutual companies source capacity?
Shareholders provide capital
Define a broker
Professional intermediaries and act as the agent of the re/insured in both placing and claims process
What is a managing general agent?
Organisation which has been given authority on behalf of the insurer to undertake different tasks like accepting risks or handling claims
What does the London Market Association (LMA) do?
Provides representation, information and technical services to underwriting businesses (managing agents) in the Lloyd’s Market
- identify and resolve issues of particular interest to Lloyd’s underwriting community
What does the International Underwriting Association of London (IUA) do and what are their main priorities?
Exist to protect and strengthen business environment for its member companies operating in or through London
NOTE NO CONTROL OVER MEMBERS
- process efficiency and business attraction to London
- promote expertise and innovation in underwriting and claims
- influence public policy and compliance
What does the Association of British Insurers (ABI) do?
- bring right people together to inform public policy debates
- engage with politicians, policymakers and regulators
- public voice for insurance sector
- encourage customer understanding
- support competitive insurance industry in UK and abroad
What does the British Insurance Brokers Association (BIBA) do?
Represent and protect the best interests of insurance broker and intermediary members
What does the London Market Regional Committee (LMRC) do?
Maintains a lobbying role and represent the sector to UK regulators, Europe, the UK government and other stakeholders
What does the Managing General Agents Association do?
Represent MGAs in the insurance market, drive best practice in the industry
Why would someone choose the London Market?
- capacity
- risks shared
- entrepreneurial spirit
- good claims service
- history and experience
Describe the flow of business through the London Market
- broker presents risk to insurers, if prepared to accept indicate on a slip
- broker receives premium from client and pays to insurers less brokerage
- Xchanging maintains central market database for premiums and claims, moves money through central settlement systems
- claims presented to insurers and if agreed, funds paid via broker
