Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

LM2 > Chapter 9: Delegated Underwriting > Flashcards

Chapter 9: Delegated Underwriting Flashcards

1
Q

Delegation

A

Asking another person/organisation to perform on your behalf

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Who is underwriting authority delegated to?

A
  • Another insurer
  • A broker
  • Another entity
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Delegation to another insurer

A

2 main forms:

Consortium
Lineslip

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Consortium

A

Group of insurers forming to accept risks together in a set proportion

Usual practice is all risks written are sub-divided among individual members

Usually set up for a year

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Consortium leader

A
  • One of the insurers in a consortium who brokers visit
  • insurer accepts or declines risks on behalf of the consortium
  • could handle claims
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Benefits of consortium - Broker

A
  • Placing process potentially shorter due to only needing one visit/signature to accept a larger share of a risk
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Benefits of consortium - Consortium Leader

A
  • Collection of consortium lead fee/consortium
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Benefits of consortium - Followers

A
  • access to business without needing to interact with broker (saves time and effort)
  • Consortia are usually set up in niche specialist arears/insurers.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Benefits of consortium - All parties

A

Administration of smaller risks is easier if they can be placed with a pre-set group of insurers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Lineslip

A

Set of insurers brought together by a broker rather than creating a group like a consortium

broker finds bunch of insurers interested in writing similar business with similar terms

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Lineslip advantages - Broker

A

More efficient for placing risks that fall within a set criteria when the security is pre-set

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Lineslip advantages - Followers

A
  • Gain access to business without having to agree risks individually
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Declaration

A

Individual risk that is written to be attached to lineslip

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Bulking Lineslip

A

Xchanging processing involves aggregate premium presentations

Easier to admin for broker but more difficult to determine how much premium relates to which risk for insurer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Non-Bulking

A

Premium for each risk declared presented individually

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Facility

A

Another term for lineslip

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Binder / Binding authority

A
  • delegation of UW authority to a broker or another entity
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Reasons for DUA

A

Manpower - not enough time to underwrite everything directly

Local access - wants access to local business without setting up a new office

Other Access - Insurer wants access to business not written in London Market usually

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Coverholder

A

partner chosen for DUA

typically chosen due to its professional reputation and has a strong presence in home market.

Typically has specific expertise in a niche product/territories

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Broker as a coverholder

A
  • Brokers client base is not only insured clients but also insurer clients for where it is the coverholder

Can give rise to conflict of interest

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Issue with broker as coverholder

A

Supposed to act with the best interest of their insured clients at heart but if they are a coverholder at the same time it may be tempting to favour placing it with the insurer they are coverholding for.

Alternatively might decide to not place business with coverholder which would starve it of business

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Managing conflict of interest

A

Best option is to identify one or two people within the first who can hold the authority

Splits the people that deal with the insurer vs insured clients

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Managing General Agent

A

Entity with authority under binder who has no other clients than insurers (no potential conflict)

Subset of coverholder

Can be part of a wider corporate group including brokers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Setting up new coverholder - Company Market

A

decision to work with coverholder is driven by internal processes, coverholder needs no external approval

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Setting up new coverholder - Lloyds
- CH requires approval from Lloyd's - Lloyd's responsible for approval process - New CHs usually sponsored by a broker and application will be supported by managing agent - can alternatively be sponsored by a managing agent without broker involvement
26
Due Diligence
Managing agents should do due diligence before using new coverholder as they should only be delegating to competent, well-run org
27
Coverholder application considerations
- suitability/experience of individuals working for the applicant - System and controls in CH infrastructure - Applicants' financial status - What authority the applicant has to operate in specified territories
28
ATLAS
System used to start application for sponsoring. CHs upload necessary docs so that the application should be considered All info available centrally for all parties with a relationship with CH.
29
ATLAS requirements
PI certifcate Financials
30
Coverholder undertaking
Signed by new coverholder once approved by lloyds - Lloyds standards document
31
Coverholder application proposition
- Types of work in which the CH is applying to be involved - Areas of the world where they operation and where they'll be accepting the risks
32
Coverholder territories
- Authorised in their own domicile, but need specific authorisation to write risks out of other countries EEA countries can be approved in one group
33
Countries which require separate approval
- Australia - Canada - USA - USVI - South Africa - Switzerland
34
Types of coverholders
- Approved coverholder - Service Company
35
Service company
- set up by managing agent as a separate company - Obtains authority to underwrite business as a binding authority from the syndicate - Gains a lloyd's insurer access to more business overseas and have presence in other countries if required. - same rules still apply even though theyre from the same corporate group
36
EEA coverholders
Lloyds coverholders need additional approvals from Lloyd's Brussels for EEA work
36
Service companies and personal lines insurance
- Service companies are used by syndicates to write personal lines (i.e. motor) as theyre not efficient to write traditionally
37
Types of authority
Full authority Pre-determined rates Pre-determined rates with no discretion Prior Submit
38
Full Authority
Complete control given to coverholder
39
Pre-Determined rates
Rating matrix where possible pricematching or discretion are allowed for renewal business
40
Pre-determined rates with no discretion
No changes made from rating matrix
41
Prior Submit
All risks referred to UW prior to binding
42
MRC
Market reform contract captures key information about the risk to present to underwriters`
43
DUA contract documentation
Binding authority schedule Binding authority wording Non-schedule sections (mirror elements of MRC)
44
Agreement number
Number for contract given by broker/insurer no default format
45
UMR
generated by broker and used for all lloyds risks B/4digit broker code/policy ref
46
Coverholder
Name of org receiving delegation
47
Section 2 of MRC
Period - how long policy will last
48
Section 3.1 of MRC
Overall operation and control - Individual employed by coverholder
49
Section 3.2 of MRC
Authorised to Bind
50
Section 3.3 of MRC
Issuance of documents - role is to administer documentation not to agree any insurances
51
Section 3.4 of MRC
Authorised to exercise any claims authority
52
Section 6.1 of MRC
Other conditions relating to the operation of the agreement - other terms relevant to the agreement but not a concern for risks bound
53
Section 7.1 of MRC
Classes of business
54
Section 8.1.5 of MRC
Excluded Classes of business
55
Section 9.1 of MRC
Risks located in
56
Section 9.2 of MRC
Insured domicile
57
Section 9.3 of MRC
Territorial limits
58
Section 10.1 of MRC
Max limits of sum insured limit apply to the size of policy a coverholder can write
59
Section 11.1 of MRC
Calculation of gross premium
60
Section 11.2 of MRC
Deductibles and/or excess
61
Section 12.1 of MRC
GPIL
62
Section 12.2 of MRC
Notifiable % of the limit not to exceed
63
Section 13.1 of MRC
Period of insurance bound
64
Principles for doing business at Lloyd's
1. Underwriting Profitability 4. Claims management 5. Customer Outcomes 11. Regulatory and financial crime
65
Principle 1: Underwriting Profitability
- Processes and controls in place for approval - delegated written business aligns with the main business plan - visibility of costs - pricing aligns with syndicates - ESG is considered
66
Principle 4: Claims management
- Clear appetite for outsourcing claims - Clear oversight and reporting of outsourced claims
67
Principle 5: Customer outcomes
- Conduct culture promotes good customer outcomes - 3rd party service providers are engaged/overseen properly
68
Principle 11: Regulatory and financial crime
- CH systems to deliver activities are appropriate and training (financial crime) is completed
69
Agreement setting out level of authority
MRCs are mandatory for binders and lineslips in london market.
70
Risk reporting
Responsibility of the insurer to make sure the coverholder is providing information in the bordereaux thats required to be reported
71
Auditing coverholders
Regular physical audits should be performed by insurer
72
Audit policy
Frequency of audits Scope for reviewing in audit Details of the auditors
73
Subsciption binders audits
Slip lead is repsonsible for organising the audit, although costs can be shared
74
Audit examination areas
Underwriting Accounting Financial Reporting Credit Control IT systems Documentation controls Compliance with regulations
75
Claims function within consortia
- Handled by consortium leader
76
Claims function within Lineslip
Claims handling done according with the market claims handling rules for Open market business
77
Claims function with Binding authority
Some given to coverholder (usually up to a financial limit) Insurer can delegate handling to separate entity (i.e. loss adjuster) or 3rd party administrator/delegate claims administrator

LM2 (10 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions