Chapter 9 - Delegated underwriting

Question 1

What is delegated underwriting?

Answer 1

Authorising another party to underwrite risks on your behalf

Question 2

Can authority be given to different parties? Who?

Answer 2

Yes

Another insurer - consortium or lineslip
Broker or another entity - binding authority

Question 3

What is a consortium? Is there a lead? How long do they last?

Answer 3

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

Question 4

What is a lineslip aka facility?

Answer 4

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

Question 5

Can lineslips be found with no delegation involved?

Answer 5

Yes

Question 6

What is a binding authority?

Answer 6

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

Question 7

What is an MGA - Managing General Agent?

Answer 7

Coverholder who has no other clients than insurers

Broker cannot be an MGA - might have sister company in large corporate structure

Question 8

What is the first step for a binder?

Answer 8

Identify a likely coverholder

Question 9

Can a coverholder be a service company which is a member of the same wider
corporate group as the insurer?

Answer 9

Yes

Question 10

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?

Answer 10

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

Question 11

Do applications from new Lloyd’s coverholders have to be sponsored by a broker and supported by a managing agent?

Answer 11

Yes

Can also be sponsored by a managing
agent without a broker being involved

Question 12

What is required by an insurer supporting the approval of a new coverholder?

Answer 12

Due diligence - only delegate authority to competent organisations

Question 13

Can coverholders have either full or limited binding authorities?

Answer 13

Yes both

Question 14

Is there a consortium template for insurers to use?

Answer 14

Yes

Question 15

What are the 3 parts to a binding authority?

Answer 15

Schedule
Wording
Non-schedule agreement (looks like a MRC)

Question 16

What does the Lloyd’s registration process do?

Answer 16

Monitors whether coverholders are receiving binder authority wider than their approval

Question 17

Who manages the Lloyd’s registration process?

Answer 17

Companies internally

Question 18

What controls are over delegated underwriting?

Answer 18

Agreements are clear
Limit type and extent of risks written
Review is required of reporting received from coverholder
Regular auditing

Question 19

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?

Answer 19

Yes

Question 20

If an insurer is acting in a lead capacity, are they usually involved in claims? Or do they outsource?

Answer 20

Yes - can outsource if they wish to do so

Question 21

Is there a centralised claims office within the Lloyd’s market? What do they do?

Answer 21

Yes - handles the data capture and movement of money for Lloyd’s claims

Question 22

How is movement of claims money done in Company market?

Answer 22

Automated once the agreement parties agree the claims, with no further system entry work required by Xchanging

Question 23

What are the benefits of a consortium to a broker, consortium leader, followers, all parties?

Answer 23

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

Question 24

Does the lead of a lineslip receive commissions for the agreement?

Answer 24

No

Question 25

What is a declaration?

Answer 25

The individual risk that is being presented for agreement by the broker so it can be attached to the lineslip.

Question 26

What is a bulking/non-bulking lineslip?

Answer 26

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).

Question 27

Why might an insurer want to delegate underwriting authority?

Answer 27

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.

Question 28

What information is held on ATLAS?

Answer 28

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

Question 29

Do an approved coverholder and a service company have to pass a Lloyd's approval process?

Answer 29

Yes

Question 30

What types of authority will be given to the coverholder (by any type of insurer)?

Answer 30

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

Question 31

What is included the delegated authority Principles for doing business at Lloyd's?

Answer 31

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;

Question 32

Does Lloyd's require the registration of all binding authority agreements? What system is registration performed? What does it do?

Answer 32

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.

Question 33

What happens when a binding authority is registered successfully?

Answer 33

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.

Question 34

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?

Answer 34

Insurer

Question 35

What is Delegated Data Manager (DDM) ?

Answer 35

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