Chapter 5 - Structure of the London Market Flashcards
What is Lloyd’s?
A marketplace made up by a Society of Members
What is the role of the Corporation of Lloyd’s?
Providing the infrastructure for the marketplace, together with the responsibility for international liaison
What is the Council of Lloyd’s?
When was it created?
Who is it made up by?
What is its authority?
The Council of Lloyd’s is responsible for the management and liaison of the market
It was created in 1982 under the Lloyd’s Act
It is made up by 18 members.
It can make decisions and issue resolutions, requirements, rules and byelaws. It can also discharge some functions to other bodies and/or committees in Lloyd’s.
Describe the different members in the council
Who are they regulated by
6 working members - share capital provider in Lloyds. either actively working in the market or just retired. managing agents/brokers.
6 external members - a share capital provider but otherwise outside the other scope of above
6 nominated members - outside of Lloyd’s, like non exec directors
They must be regulated by the FCA
What are byelaws? Who makes them?
Market laws which organisations within the market must comply with. They can only be made by the Council
Describe Lloyd’s regulation
Managed by the FCA & PRA.
Lloyd’s brokers and member’s agents are only regulated by the FCA
Who are brokers regulated by?
FCA
What is the role of the Lloyd’s Franchise Board
Sets market strategy and responsible for risk management and profitability targets across the market. Provides guidelines to managing agents and business planning in order to improve profitability and build financial strength of the market.
Who delegates responsibility to the Franchise Board?
The Council
What are Syndicates?
Syndicates are groups of private individuals/corporate investors who carry the risks. These investors are known as members/Names
Who is a Lloyds member?
Investors into the syndicates who take the risk (individual or corporate)
Who is a Lloyd’s Name?
Investors into the syndicates who take the risk (individual or corporate)
How are syndicates recognized in law?
They are not recognised as a separate legal entity. They are merely a sum of their members
How are limited liability companies regonised in law?
They are a company that exists separate from its shareholders
How long does a Syndicate exist for?
1 year, known as an Annual Venture
What is a managing agent?
Employed by the syndicate to appoint underwriters to write business on behalf of the syndicate
Who are managing syndicates regulated by?
The FCA (financial conduct) and the PRA (for prudential requirements)
What does capital mean?
Capital is the money that members/names put into the market via syndicates
What is the lifecycle of risk under a syndicate?
3 years
1 year - accepting risk
24 months - keep the book open to let premium come in/claims to be notified
after 3 years it works out its profit/loss
What is a member agent?
A member agent advises names/members on the disadvantages/advantages of investing in the market. Whether they should invest in one or more syndicate, etc.
They are communication channels between the managing agents and the investors.
What does the FCA regulate insurance companies for?
companies in London for conduct of business issues.
What does the PRA regulate insurance companies for?
regulates london based insurance companies on prudential requirements (ie solvency / levels of capital)
What are EU insurance companies regulated by?
Their own home regulator
What is the trade body for the company markets called?
The International Underwriting Association of London - has no regulatory power
What are the different formats, outside of Lloyds, that insurance companies may take?
- Limited liability companies
- Mutual indemnity companies (owned by like-minded customers, having a managing agent to run the business)
- Mutual companies (owned by policyholders, usually working in same sectors etc). Profits are retained or paid back to shareholders in dividends
- Captive insurers
How do limited liability and mutual companies raise capacity?
Through shareholder capital.
How does a mutual company raise capital?
Charging premium based on size of risk bought to pool
Who regulates a broker?
FCA
What’s the role of the LMA?
Representation, information and technical advice to the underwriting business. It identifies and resolves issues in the underwriting market, working with the Corporation of Lloyds. All managing agents and members are part of the LMA
What’s the role of the International Underwriting Association (IUA)?
Representing insurance and reinsurance companies (not Lloyds). It is a rep body ie it has no control over its member organisations.
Its priorities are:
- process efficiency and business attraction to london
- promote expertise and innovation in underwriting and claims
- influence public policy and compliance
What is the role of the Association of British Insurers (ABI)?
Voice of the UK insurance, investment and long term savings industry.
Role is to
- Inform public policy debates, policymakers
- Encourage customers to understand the products
- Promote a competitive industry
What’s the role of British Insurance Brokers Association?
Major trade association for brokers. Aim to promote the highest standards of business practice of brokers to protect and enhance insurance brokers/members
What’s the role of the London Market Regional Committee (LMRC)?
used to represent purely Lloyds brokers operating worldwide. Now merged into BIBA
What’s the role of the London and International Insurance Brokers’ Association? (LIIBA)
Independent trade body representing brokers operating in London and international markets. Priorities are:
- Representing to government
- Modernising business processes
- Supporting members with legislative/technical changes
What’s the role of the Managing General Agents Association?
For MGAs only.
4 reasons why London is the leading world insurance market?
Capacity
Entrepreneurial spirit
Good claims service and knowledgeable personnel
History and experience
What is contract certainty? How do we ensure this in Lloyds?
The concept that both parties are fully aware of the coverage and T&Cs of the policy prior to inception. In Lloyd’s we have a MRC (slip)
What is XIS?
The central Market database
In a contract, which Parties agree a claim?
Those listed as agreement parties.
