LM2 Chapter 8D & 8E

Question 1

Service Companies

Answer 1

Traditionally, syndicates operating within the Lloyd’s Market have been reliant on the Lloyd’s
broker network to obtain business. As a result they may have missed out on some good
business opportunities which have not come into the Lloyd’s Market. Reasons for this
might be:
* The business is being handled by regional or overseas brokers who are not prepared to
use Lloyd’s brokers to access one particular market and do not need the Lloyd’s Market.
* The client is located outside the UK, traditionally focused and loyal to local insurance
providers

Question 2

Branch Offices

Answer 2

One of the advantages of the Lloyd’s Market is that Lloyd’s obtains regulatory permission
centrally in various countries for syndicates to write risks coming from those countries,
without (in most cases) any physical presence. Where physical presence is required, then
Lloyd’s effects that centrally.
However, insurance companies have to obtain their permission individually and in most
cases that permission is only granted if the insurer sets up a branch office in that country to
write the risks ‘on the spot’.
This of course represents a far higher capital outlay for an insurance company than would be
the case for a syndicate with Lloyd’s centrally-obtained permission.

Question 3

Services

Answer 3

This means that insurers can stay within their own country and write risks
coming out of other countries on what is known as a cross-border basis. They are
regulated only by their home regulator

Question 4

Establishment

Answer 4

This means that insurers can choose to set up an office in another
country and write the risks from there

Question 5

service and establishment

Answer 5

Only within the EU

Question 6

Contract Certainty

Answer 6

Contract certainty can be summarised as all parties to a contract knowing exactly what is
going on at the point the contract comes into force

Question 7

Issues due to lack of contract certainty

Answer 7

• Trying to consider a claim when it is not entirely clear what are the terms and conditions
  of the insurance – is it covered or not?
• Insurance disputes – both sides are more likely to have a different interpretation of
  what they thought they had agreed (as they will of course adopt the stance that suits
  them best).

Question 8

Contract certainty principles

Answer 8

By complete and final agreement, all terms between the insured and insurer, the time that they enter into the contract, contract documentation provided promptly after