Chapter 9 - Delegated Underwriting Flashcards
What is a consortium and what are the benefits for the broker, consortium leader, followers and all parties?
A consortium is a group of insurers which have formed an agreement to accept risks together, in a set proportion
Broker - placing process is potentially shorter
consortium leader - provide for a commission and sometimes fees to the leader due to their responsibilities
followers - have access to business without needing to see a broker, saving time and effort
All Parties - If they can be placed with a pre-set group of insurers, admin of smaller risks will be easier
What is a lineslip and benefits?
Similar to consortium, but broker brings the insurers together rather than them creating their own group
Broker benefit - having pre-set security in place is more efficient
Followers - gain access to business without having to individually agree the risks themselves
how is delegation to a broker or another entity done?
binding authority or binder
why might an insurer delegate some UW authority?
Manpower - not possible for insurer to UW everything directly
Local access - insurer wants to get LM access without London office
Other access - insurer wants to get business access which would otherwise not come to the LM
what does a coverholder for a Lloyd’s syndicate need and what criteria is considered?
Needs Lloyd’s approval.
Criteria:
Suitability and experience of the individuals
Systems and controls used
Financial status
Authority of applicant to operate in specified territories
Application done via a system ATLAS
what must a Lloyd’s coverholder sign?
Coverholder undertaking - sets out formally the high standards expected by Lloyd’s
what are the types of authority?
Full authority - complete control is given
Pre-determined rates - possible price matching or discretion are allowed for renewal business
Pre-determined rates with no discretion - no change at all is made from the rating matrix
Prior submit - all risks are to be referred to the UW before binding
what does the document used to evidence binding authority include and what is a common example of one?
3 parts:
Binding authority schedule
Binding authority wording
Non-schedule sections (mirrors MRC elements)
Example = US Non-Marine Binding Authority Agreement
What Principles for doing business at Lloyd’s apply to delegated authorities?
Principle 1 - UW profitability
Principle 4 - Claims management
Principle 5 - Customer outcomes
Principle 11 - Regulatory and financial crime
What are some controls over delegated authority?
Clarity of agreement setting out levels of authority
Registration
Reporting
Documentation
Auditing
What other activities can be outsourced (as well as UW)?
Two functions of data capture of risk info and money movement for premiums have been centralised, so outsourcing means less in-house resources are needed
Claims handling
How does delegation of the claims function within different delegated authority arrangements look?
Consortium - often the claims handling is handled by the leader alone.
Lineslip - claims tend to be handled in accordance with claims handling rules for Open Market business, but can be delegated to the leader
Binding authority - some authority can be given to coverholder - usually up to a certain financial limit and excluding certain contentious types of claims irrespective of size. Or, the insurer can delegate authority of claims handling to a separate entity such as a loss adjuster or third party administrator/delegated claims administrator.
