Chapter 9 - Delegated underwriting Flashcards
What is delegated underwriting?
Authorising another party to underwrite risks on your behalf
Can authority be given to different parties? Who?
Yes
Another insurer - consortium or lineslip
Broker or another entity - binding authority
What is a consortium? Is there a lead? How long do they last?
A consortium is a group of insurers which have formed an agreement to accept risks
together (to criteria), in a set proportion
One insurer will be the consortium leader/manager
Year - four number code
What is a lineslip aka facility?
Similar to consortium but key difference is group of insurers set up by a broker
Authority is given to 1 or 2 of them to bind the other insurers to any risks
Can lineslips be found with no delegation involved?
Yes
What is a binding authority?
Delegating authority to a non insurer separate party aka coverholder
Broker can be a coverholder - conflict of interest as both client and insurer are their clients
What is an MGA - Managing General Agent?
Coverholder who has no other clients than insurers
Broker cannot be an MGA - might have sister company in large corporate structure
What is the first step for a binder?
Identify a likely coverholder
Can a coverholder be a service company which is a member of the same wider
corporate group as the insurer?
Yes
Is approval needed by Lloyd’s to be a Lloyd’s coverholder? What do they consider? How do they apply? How long does it take for Lloyd’s to approve? Is it needed for company market?
Yes
Suitability, experience, systems and controles, financial status, authority to operate in specified territories
ATLAS - online platform - 25 days for Lloyd’s to approve
Must sign ‘coverholder undertaking’
No
Do applications from new Lloyd’s coverholders have to be sponsored by a broker and supported by a managing agent?
Yes
Can also be sponsored by a managing
agent without a broker being involved
What is required by an insurer supporting the approval of a new coverholder?
Due diligence - only delegate authority to competent organisations
Can coverholders have either full or limited binding authorities?
Yes both
Is there a consortium template for insurers to use?
Yes
What are the 3 parts to a binding authority?
Schedule
Wording
Non-schedule agreement (looks like a MRC)
What does the Lloyd’s registration process do?
Monitors whether coverholders are receiving binder authority wider than their approval
Who manages the Lloyd’s registration process?
Companies internally
What controls are over delegated underwriting?
Agreements are clear
Limit type and extent of risks written
Review is required of reporting received from coverholder
Regular auditing
Are premium payments and risk data capture centralised by insurers? Are they outsourced to Xchanging Ins-sure services for both Lloyd’s and Company Markets?
Yes
If an insurer is acting in a lead capacity, are they usually involved in claims? Or do they outsource?
Yes - can outsource if they wish to do so
Is there a centralised claims office within the Lloyd’s market? What do they do?
Yes - handles the data capture and movement of money for Lloyd’s claims
How is movement of claims money done in Company market?
Automated once the agreement parties agree the claims, with no further system entry work required by Xchanging
What are the benefits of a consortium to a broker, consortium leader, followers, all parties?
Broker - placing process is shorter, accepts larger share of risks with 1 visit, 1 signature
Consortium leader - commission and fees to consortium leader IRO responsibilities
Followers - access to business without seeing a broker, saves time and effort
All parties - admin of smaller risks
Does the lead of a lineslip receive commissions for the agreement?
No
What is a declaration?
The individual risk that is being presented for agreement by the broker so
it can be attached to the lineslip.
What is a bulking/non-bulking lineslip?
aggregate premium presentations into Xchanging (bulking lineslip)
or whether the premium for each risk declared under the lineslip must be presented individually (non-bulking lineslip).
Why might an insurer want to delegate underwriting authority?
Manpower. There are not enough hours in the day for the insurer to underwrite
everything directly.
Local access. The insurer wants to get access to local business without setting up
offices out of London.
Other access. The insurer wants to get access to business that would not otherwise
come into the London market.
What information is held on ATLAS?
Core information such as updated PI certificates and financial information are provided to Lloyd’s centrally once a year
Also sign a coverholder annual attestation
confirming no details have changed
Do an approved coverholder and a service company have to pass a Lloyd’s approval process?
Yes
What types of authority will be given to the coverholder (by any type
of insurer)?
Full authority, where complete control is given to the coverholder.
Pre-determined rates, where possible price matching or discretion are allowed for
renewal businesses.
Pre-determined rates with no discretion, where no change at all is made from the
rating matrix.
Prior submit, where all risks are to be referred to the underwriter prior to the bindin
What is included the delegated authority Principles for doing business at Lloyd’s?
Principle 1: Underwriting profitability
Expects: that the underwriting strategy sets out the appetite for use of
delegated authority;
Principle 4: Claims management
Expects: a clearly articulated appetite for outsourcing of claims; and
Principle 5 – Customer outcomes
* Expects: that the conduct culture set by the board promotes good customer outcomes
(which includes the Consumer Duty referred to earlier); and
Principle 11 – Regulatory and financial crime
* Expects: that systems and controls implemented by coverholders to deliver contracted
activities are at an appropriate standard and that financial crime training is done;
Does Lloyd’s require the registration of all binding authority agreements? What system is registration performed? What does it do?
Yes
Delegated Contract Oversight
Manager (DCOM).2 - capture information about the contracts being entered into with each coverholder, including the types of business being conducted under
the binding authority.
What happens when a binding authority is registered successfully?
a date and unique number are allocated,
which have to be put onto the binding authority MRC elements before submission to Xchanging for entry onto the risk data systems.
Monthly or quarterly bordereaux reporting received from the coverholder allows the insurer to identify potential breaches of authority. Who’s responsibility is it to request the info?
Insurer
What is Delegated Data Manager (DDM) ?
central bordereaux management system for the London Market
a single set of market approved delegated data and reducing the need for different parties to duplicate the data entry
