Module 6: London Market Structure

Question 1

When did Lloyd’s begin?

Answer 1

Lloyd’s formal history dates back to 1688 and Edward Lloyd’s coffee house.

Question 2

What is the London Market?

Answer 2

1. The worlds leading market for internationally traded insurance and reinsurance business.
2. It comprises insurance and reinsurance companies, Lloyd’s syndicates, mutual insurers and brokers.
3. It’s business is primarily general insurance (non-life) and reinsurance, with an increasing emphasis on high-exposure risks.

Question 3

When was the Sun insurance company founded?

Answer 3

1710.

Question 4

When did Lloyd’s underwriters begin writing non-marine insurance?

Answer 4

Late 1880s.

Question 5

What are the competitive strengths of the London Market?

Answer 5

1. Number, diversity and expertise of the competing insurers, based in close proximity.
2. The presence of highly skilled “lead” underwriters whose judgments on rates and terms are often followed by other insurers in London and other markets across the globe.
3. Brokers can find the capacity and expertise required for underwriting virtually any type of risk.
4. Brokers control most of the business placed in the market.
5. Brokers know the strengths, specialisms and reputations of the underwriters and can readily tap the combined underwriting capacity for all sectors of the market.
6. Buyers can meet insurers and market information is spread rapidly among all participants.

Question 6

The London Market is largely a subscription market. What does this mean?

Answer 6

Two or more insurers, which may be insurance companies, Lloyd’s syndicates, or both, underwrite risks together in varying proportions.

Question 7

What is risk appetite?

Answer 7

An analysis of how much risk an insurer, either a company of Lloyd’s name is prepared to take in terms of the likely volatility.

Question 8

When was a committee formed taking the running of Lloyd’s out of the coffee house and into the hands of the insurance fraternity?

Answer 8

1771.

Question 9

What is the purpose of the Lloyd’s Market Association (LMA)?

Answer 9

To represent, inform and provide technical services to underwriting agents at Lloyd’s.

It’s mission is to provide a single voice for the Lloyd’s underwriting market and a range of quality services that improve members’ profitability.

Question 10

When did the Company Market begin?

Answer 10

Mid-1800s,

Senior members of marine insurance companies met informally to discuss policy wordings and other matters of common interest in the Jerusalem Coffee House and the Jamaica Wine Rooms, close to the Royal Exchange.

Question 11

What three parts is the Company Market made up of?

Answer 11

1. Insurers focused exclusively on London Market business.
2. Specialist London Market divisions of major UK composite insurers.
3. London Market divisions of major overseas/multinational insurers.

Question 12

What is the International Underwriting Association (IUA)?

Answer 12

The acknowledged market association for the London company market.

It exists to promote and enhance the business environment for its member companies operating in or through London.

Question 13

What is the IUA’s four key priorities?

Answer 13

1. Improving the efficiency of doing business in London.
2. Advancing the development of market expertise and innovation.
3. Influencing public policy and compliance developments.
4. Fostering relationships with the broking community and other client related stakeholders.

Question 14

When was LIRMA formed?

Answer 14

1991 from the merger of previous insurance associations established in the 1960s and 1970s to support non-marine insurance business and reinsurance.

Question 15

What does LIRMA stand for?

Answer 15

The London International Insurance and Reinsurance Market Association (LIRMA).

Question 16

When was the ILU formed?

Answer 16

1884.

A proposal was first made to establish a formal representative underwriting association in July 1882 and two years later the new ILU took up offices in the Royal Exchange Buildings.

Question 17

What does ILU stand for?

Answer 17

The Institute of London Underwriters (ILU).

Question 18

What is the role of the broker?

Answer 18

1. The broker acts as agent for his client. His role includes advice on insurance options, choice of cover and risks to be insured.
2. The broker is able to obtain quotations from a number of insurers and advise his client on the available terms.
3. The brokers also passes on the insured’s premium to the insurer.
4. The broker uses his expertise to decide who to go and see in the London Market.

Question 19

What is the LRO?

Answer 19

The Legislative Reform Order (LRO).

Question 20

What did the LRO change?

Answer 20

With the passing of the LRO, there is no longer a requirement to be a Lloyd’s broker to operate within the Lloyd’s market.

Question 21

What is BIBA?

Answer 21

The British Insurance Broker’s Association (BIBA).

Question 22

When was BIBA founded?

Answer 22

1977. It was founded to represent independent insurance brokers.

It is the largest broker organisation in the UK.

Question 23

What is the principal aim of BIBA?

Answer 23

To raise standards of insurance broking in the UK.

They intend to ensure that new enhanced means of protecting consumer interests are made effective.

Question 24

What is LIIBA?

Answer 24

The London & International Insurance Brokers’ Assocation (LIIBA).

Question 25

When was LIIBA formed?

Answer 25

1 January 2010.

Question 26

Who does LIIBA represent?

Answer 26

1. It represents the interests of insurance and reinsurance brokers operating in the London and international markets.
2. It represents members who handle in excess of £30bn of premiums through the London Market and many billions more across the world.

Collectively, they generate £1.9bn in invisible earnings for the UK economy.

Question 27

What is LIIBA’s mission?

Answer 27

To ensure that London remains where the world wants to do business by continuing the transformation of market processes and maintaining the highest professional standards.

Question 28

Who were Protection & Indemnity Clubs (P&I) originally formed to protect?

Answer 28

Shipowners in respect of risks not covered in the commercial marine insurance market.

Question 29

What is the Market Reform Group (MRG)?

Answer 29

A strategic group made up of senior representatives from the Lloyd’s, company market and broking communities.

Question 30

What was the Market Reform Group (MRG) established for?

Answer 30

It was established to drive a programme of process reform and modernisation across the London Market.