CHAPTER 9 - C

Question 1

What are the fundamental responsibilities of any organization within the Lloyd’s market?

Answer 1

The Principles for doing business at Lloyd’s

These principles include guidelines on delegated authorities.

Question 2

What does Principle 1 regarding underwriting profitability expect?

Answer 2

• Underwriting strategy sets appetite for delegated authority
• Processes and controls for approval of delegated authority
• Business written under delegation aligns with main business plan
• Suitable reporting to enable challenges
• Visibility of costs incurred by delegation
• Pricing under delegation aligns with syndicate pricing
• Guidance on ESG matters for delegated authority partners

Question 3

What does Principle 4 regarding claims management expect?

Answer 3

• Clearly articulated appetite for outsourcing of claims
• Detailed reporting from outsourced claims parties and oversight

Question 4

What does Principle 5 regarding customer outcomes expect?

Answer 4

• Conduct culture set by the board promotes good customer outcomes
• Proper engagement, management, and oversight of third-party service providers

Question 5

What does Principle 11 regarding regulatory and financial crime expect?

Answer 5

• Appropriate systems and controls by coverholders
• Completion of actions from financial crime audits
• Annual financial crime report considers risks from delegated authorities
• Documented policies for identification and mitigation of financial crime risk

Question 6

What is vicarious liability in the context of delegated underwriting?

Answer 6

Insurer retains responsibility for actions of its agent, even if unaware

This applies particularly to compliance with Principles around customer outcomes.

Question 7

What is the purpose of the lineslip and binding authority MRC formats?

Answer 7

To capture key details about levels and extent of authority

These formats are mandatory in the London Market.

Question 8

What system does Lloyd’s use for the registration of binding authority agreements?

Answer 8

Delegated Contract Oversight Manager (DCOM)

Question 9

What is the purpose of the registration process in the Lloyd’s market?

Answer 9

To capture information about contracts with coverholders, including types of business

Registration checks compliance with original approval restrictions.

Question 10

What should insurers analyze in the monthly or quarterly bordereaux reporting from coverholders?

Answer 10

Potential breaches of authority

Insurers must specify required reporting items to coverholders.

Question 11

What system did Lloyd’s introduce for bordereaux management?

Answer 11

Delegated Data Manager

Initially mandatory in some areas, now an elective service.

Question 12

What must documentation issued by coverholders comply with?

Answer 12

• Binding authority agreement
• Local regulations

Question 13

What should an insurer’s audit policy state?

Answer 13

• Frequency of audits
• Scope for review
• Details of auditors’ skills required

Question 14

Who is generally responsible for organizing audits of coverholders when a binding authority is written by multiple insurers?

Answer 14

The leader insurer

Question 15

What areas should be examined in an audit of delegated underwriting?

Answer 15

• Underwriting
• Accounting
• Financial reporting
• Credit control
• IT systems
• Documentation controls
• Compliance with regulations

Question 16

What should occur at the end of an audit?

Answer 16

A follow-up with the coverholder to discuss concerns