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Lloyd's Insurance Market > Module 10: Transacting Business > Flashcards

Module 10: Transacting Business Flashcards

1
Q

What are proposal forms?

A

Proposal forms are prepared questionnaires issued by the insurers, which ask specific questions about the subject matter of the insurance.

The underwriter will use the information to assess both the risk itself and the premium to be charged.

They are typically used for personal lines business, such as

  • household risks,
  • motor insurance and personal accident risks amongst others,

usually where the risk is small enough to allow on insurer to accept the risk in full.

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2
Q

What six questions are the on proposal forms?

A
  1. Description of the proposer.
  2. Description of the subject matter of the risk.
  3. Amount of sum insured or limit of liability.
  4. Details of previous insurance/character of the proposer.
  5. Declaration in proposal forms.
  6. Additional questions.
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3
Q

What is a slip?

A

An abbreviated written form of request.

It sets out:

  • the type of insurance,
  • sum insured or limit of liability,
  • period, location, clauses and conditions,
  • and most other essential details found in an insurance policy.
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4
Q

What are the three basic types of market reform contract (MRC)?

A
  1. Open market
  2. Binding authorities
  3. Line slip
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5
Q

Who are ACORD?

A

A non-profit association whose mission is to facilitate the development and use of standards for the insurance, reinsurance and related financial services industries.

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6
Q

What is the ACORD Global Placing Document (GPD)?

A

An international standard for the placing of subscription business.

It draws on the same contract certainty principles as the Market Reform Slip.

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7
Q

What is the Global Placing Documents (GPD) purpose?

A

To give non-UK trading partners a clearer understanding of London contract certainty processes.

To facilitate e-commerce trading initiatives.

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8
Q

When did the MRC become the mandatory standard for London Market placements?

A

1 November 2007.

Before that date, business may have been placed using the MRC’ predecessor, the Market Reform Slip.

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9
Q

What are the six sections of the Market Reform Contract (MRC)?

A
  1. Risk Details
  2. Information
  3. Security Details
  4. Subscription Agreement
  5. Fiscal and Regulatory
  6. Broker remuneration and deductions
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10
Q

What is the purpose of the Market Reform Contract (MRC)?

A

To provide the underwriter with the terms and conditions of the risk which he is being asked to accept.

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11
Q

What does the Market Reform Contract (MRC) aim to facilitate?

A

A faster and more accurate production of wordings/policies, delivering improved service to the client by:

  1. Delivering contract certainty at the time of placement.
  2. Resolving issues at the earliest opportunity.
  3. Using standard clauses and wordings wherever possible.
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12
Q

What types of business is the Open Market MRC used for?

A
  1. Open market insurance and reinsurance business placed by London Market brokers.
  2. Marine open cargo covers and declarations attaching thereto.
  3. Declarations or offslips attaching to lineslips (where it is not appropriate to use the Lineslip MRC).
  4. Applicable declarations of limited binding authority agreements, where the coverholder, broker and insurers agree that it is appropriate.
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13
Q

Define Marine open cargo.

A

Risks where the insured has, or is expected to acquire, an Insurable interest in each declaration bound.

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14
Q

In what two permitted exceptions is the MRC not used?

A
  1. Contracts marked “Market Reform Exempt - Client Requirement”
  2. Contracts relating to motor, personal lines or term life business that will not be processed by Xchanging Ins-Sure Services (XIS).
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15
Q

What is peer-to-peer messaging in electronic placing of risks?

A

Brokers and carriers can exchange messages and information about a risk in the ACORD standard format.

This is to support risk placement and potentially avoid the need to duplicate the entry of risk data into their respective broker/underwriting systems.

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16
Q

What is a trading platform in electronic placing of risks?

A

Risk information is made available by the broker.

Carriers can log on to the platform to review the information, raise queries, provide quotations and eventually bind the contract “on line”.

Currently this service is provided by RI3K for reinsurance business and is currently being extended to include insurance transactions.

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17
Q

What is a leading underwriter?

A

The underwriter who offers terms which, if approved and accepted by the insured, govern the contract of insurance (for the London Market).

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18
Q

What is a following underwriter?

A

Those who write a risk, the initial terms of which have been set by the leader.

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19
Q

What is an occurrence policy?

A

A policy that will respond for claims arising from risks occurring during its currency
(e.g. a private car insurance policy).

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20
Q

What is a claims made policy?

A

A policy that will respond for claims actually made against the insured during the policy period.

This is regardless of the date of the discovery of the consequences of events which happened long before the inception date of the policy (e.g. a products liability insurance).

21
Q

What does SANR or SANR Ldr stand for?

A

Subject to acceptance, no risk.

When a broker is not certain that he has a firm order, he will write these letters on a slip.

22
Q

What is contract certainty?

A

The requirement that at the time the risk incepts, both parties know exactly what the contract terms are.

23
Q

How does the Contract Certainty Code of Practice define contract certainty?

A

“Contract certainty is achieved by the complete and final agreement of all terms between the insured and the insurer by the time that they enter into the contract, with contract documentation provided promptly thereafter.”

24
Q

What three things could happen if there is an uncertain insurance contract?

A
  1. Insurers cannot determine their exposures.
  2. Intermediaries are exposed to legal actions.
  3. Insureds do not know whether or not they have actually transferred risks to insurers.
25
Q

What four types of contract document can insurers issue to their insureds?

A
  1. An insurance policy
  2. A schedule of cover
  3. A certificate of insurance
  4. A copy of the complete slip
26
Q

Who can provide contract documentation?

A
  1. The insurer
  2. Another entity to whom the insurer has delegated authority for its provision.

For example: a service provider or the holder of a delegated underwriting arrangement.

  1. The broker - unless expressly authorised by the insurer, this is provided in the broker’s capacity as agent of the insured and is the broker’s responsibility.
27
Q

How soon must contract documentation be provided?

A
  1. Within 7 working days for consumers or non-commercial customers.
  2. Within 30 calender days for all other client classifications.

These timescales are measured from the later of:

  1. The inception date of the contract
  2. The date on which the insured and insurer enter into the contract.
  3. Where there is more than one participating insurer, the date on which the final insurer enters into the contract.
28
Q

From 1 July 2007, what are the three key features of evidencing of cover?

A
  1. Underwriting checks are performed by underwriters prior to entering into the contract.
  2. A complete copy of the slip constitutes underwriters’ contractual document.
  3. Xchanging Ins-sure Services’ Stage 2 signing process has been replaced by a post placement Policy Signing Service.
29
Q

What is PBQA?

A

Pre-Bind Quality Assurance (PBQA).

The PBQA is the process whereby a Lloyd’s underwriter will assess a contract’s completeness and quality before committing to it.

Pre-bind assessments of contracts include contract certainty, tax and regulatory and Lloyd’s advisory and risk management aspects.

30
Q

How must a managing agent approach the PBQA process?

A

A managing agent is expected to take a risk-based approach to the PBQA process.

31
Q

What are the four basic requirements of a policy?

A
  1. Consideration or premium for the contract.
  2. Term or period of the insurance.
  3. Amount of the insurance.
  4. The description of the subject matter insured, the location and the perils insured against it.
32
Q

What is the standard policy form used in marine insurance?

A

A “jacket”.

The front and back cover of the policy document (the “jacket”) lists the specific cover and contains certain standard clauses.

The precise details of the risk are then spelled out in the policy document that is inserted into the jacket. Non-marine insurers also use jackets.

33
Q

What is the standard “jacket” used in the London marine market?

A

The MAR form.

It is used for hull, cargo and freight risks, with appropriated detailed clauses attached.

34
Q

What other standard policy forms are used in the London marine market?

A
  1. Slip policy form
    - this is used where agreed (and in accordance with the slip policy scheme rules) if a full policy is not required to be issued. Many facultative reinsurances are signed on a slip policy.
  2. “J” and “J(a)” forms
    - these are non-marine forms with a minimum of conditions so that appropriate wording can be attached or used for marine business for various types of insurance for which the marine form is not appropriate, for example, marine liability risks.
35
Q

What is an endorsement?

A

An amendment which changes a policy’s terms and conditions.

36
Q

What is the General Underwriters’ Agreement (GUA)?

A

An agreement between the subscribing underwriters on a particular contract relating to the level of delegated authority in respect of post placement alterations.

It determines the basis upon which the specified slip leader and agreement party(ies) can act for the other underwriters’ subscribing to the slip, in respect of changes during the period of the policy.

37
Q

What are the five main purposes of the General Underwriters’ Agreement (GUA)?

A
  1. Create an agreement between the subscribing underwriter on a particular contract for the management of changes and alterations.
  2. Clarify the extent of the delegated authority to the slip leader and agreement parties.
  3. Enable each class of business to define their specific requirements/needs within a common framework.
  4. Allow a single slip leader and/or agreement parties to agree contract alterations where empowered to do so by the GUA.
  5. Ensure all underwriters are notified of alterations, where appropriate.
38
Q

What authority is given to slip leader through the General Underwriters’ Agreement?

A

Limited authority to bind other underwriters on the slip.

39
Q

What is a cover note?

A

A document issued as evidence that insurance has been granted pending the issue of a policy.

40
Q

What is a Broker Insurance Document (BID)?

A

A BID is a document prepared by the broker in its capacity as agent of the insured.

Unless the document is explicitly authorised by the insurer, it cannot be treated as evidence of the contract.

41
Q

For insurers, what money is in use?

A
  1. Incoming premiums
  2. Outgoing claims
  3. Administrative expenditure
  4. Provisions for claims yet to be met on current and expired policies.
42
Q

For insurers, what money is kept in reserve?

A

Solvency margin.

The base upon which he can run the risks inherent in offering insurance protection.

The bigger the solvency margin, the more risks he can run and the more business he can accept.

43
Q

What is Xchanging Ins-Sure Services (XIS)?

A

Company owned by Lloyd’s, Xchanging and the International Underwriting Association (IUA)

It was created to provide a comprehensive policy signing bureau.

44
Q

What is de-linking?

A

Slips can submitted to XIS for signing (i.e. for the obtaining of a signing number and date) without the need for premium to be paid at the same time.

45
Q

What does LORS stand for?

A

Lloyd’s Outward Reinsurance Scheme (LORS).

46
Q

What processes will documents submitted by brokers to Xchanging Ins-sure Services undergo?

A
  1. Document checking
  2. Data entry
  3. Numbering and policy signing
  4. Corrections
47
Q

What is the “separation” process XIS peforms?

A

As policies will still be produced by XIS on request from underwriters, there is a specific process to divide up dealing with the premium and creating the policy. This is called separation

The way this works is as follows:

  • Separation 1 is the processing of the premium.
  • Separation 2 is the processing of the policy
  • Signing and Accounting (S&A) is the processing of both at the same time, although it will be done by separate technicians.
48
Q

What does LPAN stand for?

A

Lloyd’s Premium Advice Note.

Lloyd's Insurance Market (12 decks)

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