LO 6: Understand the structure of the London Market Flashcards
what is lloyds of london
market place
society of members
lloyds act 1982
- brought council of lloyds into creation
role of the corporation of lloyds
- provides infrastructure for the market plaec
- responsible for international liasion
regulators of lloyds
- society of lloyds
- managing agents
- brokers
- member agents
top 2 = fca and pra
bottom 2 = fca
lloyds council structure
3 working = works for broker or managing agent now or before retiring
3 external = member of societuy oif lloyds (gives capital)
9 nominated = from outside the market
- working and external elected by lloyds members
- chairman and deputy chairman are ellected annually by the council
- all members are fca approved
lloyds council powers
can issue
- resolutoins
- requirements
- rules
- byelaws (30 atm)
to organisations working within the market
syndicate
- definition
-
-
- groups of private individuals or corporates (aka names or underwriting members) that give capital
- sum of members, not a separate legal entity hence they have to be reinstated each year
- each has own unique name/number combo
‘syndicates in a box’ definition
write innovative new business
managing agent definition
- definition
- does the day to day ‘insurer’ operations for the syndicate
- company
- can manage one or more syndicates
managing agent
- jobs
- ## appoint underwriters
annual life of a syndicate
- lasts a year
- stays open for 24 months after, receiving premium and claims
- closes books after year 3, reinsures the possibility of future claims with the next years account (reinsurance to close)
reconstruction and renewal 1992
- rebuilding of the market
- movement away from private individual names and towards corporations
- creation of equitas = reinsurance vehicle
syndicate capacity
how much business they can write
member agents
- advise corporate and individual names on their investment (who they provide capital to)
- advise on the advantages and disadvantages of investing in the london market
limited liability vehicle
how private members now enter the market
- namecos
- limited liability partnerships
- minimum capital funding £350,000
- each member must do £100,00 for LLP
- losses limited to the amount in the vehicle
security tenure
- agreement to give member an automatic right to participate the next year
- tradeable asset
limited tenure
- termination after a fixed time or notice period
- syndicates that operate on this model need permission from lloyds
insurance undertakings
company transacting in london market
pra authorisedd
PRA role in london markets
regulates prudential solvency and levels of capital
FCA role in london markets
regulates for conduct of business isues
structure of nonlloyds insurers
- types
- limited liability companies
- mutual indemnity associations = professional managers fun a pool of risk composed of like minded individuals (Protection and Indemnity Associations for marine liability)
- mutual companies = owned by the policyholders, profits are either retained in company or returned to the policyholders (national farmers union)
- captive insurers = solely write the risk of sister companies
- service company = writes business for a lloyds syndicate
broker definition
professional intermediary that acts on the behalf of the re/insured in the claims and placing process
broker regulation
fca
lloyds, nonlloyds brokers can still operate in the lloyds market
managing general agents
- acts on behalf of the insured to accept risks, issue documents and handle claims
- authority given by a binding authority contract
can international insures operate in the london market?
- how
- why
yes through
- syndicates
- company
lloyds brand adds to theirs
access to worldwide client base
lloyds market association (LMA)
- purpose
- what
- who
enable the success of our memeber and of the lloyds market in delivering expertise, education and connecting and synthesisng market opinion
provides representatio, information and technical services to underwriting businesses
all managing and member agents + associate membership for brokers n lawyers
international underwriting association
- purpose
- what
- who
- transform business processes by driving a moderning agenda
- deliver knowledge and expertise for innovative underwriting and claims handling
- represent memebers on matters of public policy and regulation
- representative organisation for international and wholesale insurance and reinsurance companies
- institute of london underwriters (ILU)+London Insurance and Reinsurance Market Association (LIRMA)
- no power over memebers
association of British insurers
- purpose
- what
- who
-
- bring the right people together to inform public policy and debates
- be public voice of the sector
- encourage customer understanding of the sectors products and practices
- support a competitive insurance industry in the uk and abroad
- all of uk with some london market memebers
british insurance brokers association (biba)
- what
- purpose
- major trade associate of insurance intermediaries
- encourages fundamental principles that govern professional conduct
- ‘to represent and protect the best interest of our insurance broker and intermediary memebers’
promoting
maintaining and developing
supporting memebers
aiming
london market regional commitee
within biba, represents interest of london based memebers
london and international insurance brokers association (LIIBA)
- key priorities
- define
- ‘ensure london remains where the world want to do business by continuing the transformation of market processes and maintain the highest professional standards’
key priorities
- represent member interests to government and regulators
- assist with tax and regulatory systems
- support members with legislative and technical changes
managing general agents association
- key priorities
- define
- voice of managing general agents and drives best practices within the industry
key points
- represent (views of memebers to government and member interest to regulators)
- set
- assist
- work
- create
- promote
- seek
- listen
strong points of the london market
- capacity
- entrepreneurial spirit (take on new risk)
- good claims service using knowledgeable people
- history and experience
risk placing process
- broker makes slip
- finds a leader who sets terms and accepts a certain amount
- broker finds other underwriters from any market to fill the slip
- once filled the riskis submitted to Xchange Ins-sure Servies (XIS)
- ## premiums paid to insurers (facilitated by XIS) with the brokerage deducted
market reform contract
- aka slip
- summary of risk and the suggested terms and conditions
- provided by the broker
contract certainty
- all parties are fully aware of the coverage and the terms of the policy at the time of inception
- contract documentation can be provided afterwards (within 30 days)
policy
copy of slip
broker insurance document (bid)
claims process
- broker notified by the client and helps to maintain evidence
- broker identifies the agreement party = group of insurers that need to see/agree the claim
- present the claim on paper or electronically
- Xchanging systems shares the claim to all insurers on the risk
- broker liaises with any experts (lawyers, surveyors, loss adjusters) requested by the insurers
- money for settled claims goes from insurers to third party (broker/lawyer)
- notification of payment theough Xchanging
- money forwarded to the client
Insurance act 2015 effect
information known by the broker is considered as known by the client unless it is confidential and obtained from another source
electronic placing systems in the london market
PPL
Whitespace
are brokers restricted interns of who they can use to insure risk?
any market including lloyds and company market
inking a slip?
confirm acceptance of the risk on the slip
Role of Xchanging Ins-sure Services
manages the central market risk of lloyds and IUA companies and facilitates the transfer of funds
london premium advice notes
used to present the premium information in a standard format
unique market reference
- definition
risks unique code
marine insurance act 1906
brokers is responsible to the insurers for payment of the premium
for changes to the risk
- how
- what happends
- client contacts broker
- may be conditional on more premium or changes to terms and conditions
- broker send info to XIS for recording
Xchanging Claims Service
maintains lloyds central claims database
interacted with through the electronic claims file, by brokers
enterprise act 2016
gives insured up to a year o claim damages for late payments
accounts for
- type of insurance
- size and complexity of the claim
- any factors outside of the insurers control
why insurers take part of a risk
- size of risk and authority levels
- balancing the portfolio
- insurance broker input
- new class of business
subscription
risk is shared between insurers, each taking a fixed percentage
leaders role in subscription market
review the risk
accept or not
decide the terms and conditions
quote premium
needs to be credible and supportable for the following market
following market
- writes their own contract with the insurer
- if one secures more premium the others dont auto increase
- different t&c creates different leaders (can lead to ghost leaders that never intended to lead or be involved in claims)
leaders of a subscription market risk
overall = writes first
slip = 1st in the london market (lloyds or company)
bureau = 1st lloyds writer
agreeing changes to risk
part 1 - leader only
part 2 - leaders and some agreement parties (any number)
part 3 - all underwriters
single claims agreement party
agreed at placing that claims will be agreed by a single insurer only
