Surplus Lines - Lloyds Flashcards
What is Council of Lloyds?
Governing body of Society of Lloyds
Ultimate Responsibility for Management of Lloyds
Top of committee hierarchy
FSA Stands for?
Financial Services Authority
Regulatory Arm of UK Govt. overseeing Lloyds
Financial Services Authority Responsibilities
Regulating Lloyd’s (UK Govt Agency)
1) Direct supervision of Mananging Agents
2) Monitoring Capital Solvency
Function of Lloyd’s Corporation
Manage risk in market to protect Lloyd’s
Central Assets (Capital Requirements)
Brand
Reputation
Who does Council of Lloyds act through?
Franchise Board
Franchise Board
Surrogate for Council of Lloyds
Responsible for developing & directing the Lloyd’s franchise so that long term return to all capital providers is maximised.
Who appoints members of Franchise Board?
Council of Lloyds
Who exercises day to day powers & functions of the Council & Franchise Board?
1) Executive Team
2) CEO
3) Directors of Corporation
Distribution Channel consists of (3)?
1) Brokers
2) Coverholders
3) Service Companies
Who are Coverholders?
Companies authorised by a managing agent to enter into contracts of insurance or issue insurance docs on behalf of the members of a syndicate.
What is a Service Company?
1) An approved Lloyd’s coverholder (corporate version)
2) Wholly owned subsidiary of a managing agent or its holding company .
What do Coverholders do?
Place Risk
What do Service Companies do?
Place Risk
What is a Managing Agent?
Company(ies) that manage one or more Syndicates. Act on behalf of capital providers.
What does a Managing Agent do?
Employs underwriters & handles day to day running of Syndicate operations.
What is a Member?
Those who provide capital for syndicate’s underwriting (assumption of risk).
Who are Members?
individuals
major insurance groups
companies on London Stock Exchange
limited partnerships
What do Syndicates do?
Underwrite risk & terms
What is a Syndicate?
Group of Members willing to assume risk
Underwriting Room
Location at Lloyds where brokers / uw negotiate
What is referred to as the Chain of Security?
Lloyd’s Capital Structure
Lloyd’s Capital Structure (3 links)
1) Syndicate Level Assets (Policy Premiums)
2) Members Funds at Lloyds (FAL)
3) Central Assets
Which Lloyds funds are held in trust?
Syndicate assets & FAL (Members Funds at Lloyds
Are Syndicate & FAL assets mutual?
No, they are several. Each responsible for own losses.
Central Fund
Mutual assets held by Corporation to meet any member’s liabilities.
Mutual Assets
Assets available to meet any member’s liabilities.
Several Funds
Syndicate or Individual members funds held in trust but only available for individual members losses.
MRC
Market Reform Contract
Market Reform Contract
Standardized form used to replace an UW Slip
Delegated Underwriting
UW authority delegated by Managing Agent to Coverholder
MGA (Managing General Agent)
US term for Coverholder
Binding Authority
Agreement setting out coverholder’s responsibilities and authority (issuing/ premium collection/claims handling)
Lloyds “Transaction Train”
Policyholder - Retail Broker - Coverholder - Lloyds Broker - Managing Agents/Syndicates
Role of Lloyds Broker
Negotiate binding authority for Coverholder (agent of Coverholder - point of contact between Managing Agent & Coverholder)
Xchanging
Company that handles Lloyd’s regulatory, tax, premium & claims (Centalized processing)
Duration of a Syndicate
One Year - Refomed annually
Coverholder Levels of UW Authority
1) Full Authority
2) Pre-determined risk selection & rates
3) Prior Submit - managing agent underwrites/coverholder issues
Callable Layer
Mutual Assets of Corporation available to all members
AM Bests - Lloyds
A
Fitch Ratings - Lloyds
A+
Standard & Poors - Lloyds
A+
Elements of the Undertaking
Coverholder contract with Lloyds - Separate from Binding Authority with Managing Agent:
General Conduct / UW Authority / Admin Arrangements incl premium / Dealing with Customers/Dealing with Lloyds Mkt / Local Compliance / Lloyds Powers / Material Change / Data Protection / 3rd Pty Contract Rights / Governing Law (England)
Contract of Delegation
Binding Authority Agreement
Parties to Contract of Delegation
Coverholder & Managing Agent
Key Areas of Binding Authority Agreement
- Prudent Underwriting
- Authorised People (coverholder staff)
- Duration (standard 12 mos. / maximum 18 mos.)
- Contracts of Insurance (LOB)
- Selling Arrangements (local requirements)
- Renewing/Nonrenewing Contracts of Insurance (local requirements)
- Limit on Premium Incomce (Gross for Coverholder)
- Premium Collection
- Insurance Monies - Trust Acct
- Insurance documents standards
- Claims handling / settlement /funds (trust & pay)
- Reporting Responsibilities
- Cancellation - Provisions for binding auth cxl
- Lloyds name use
- Inspection of Records
- Jurisdiction - England
Binding Authority Document Structure
- Standard Wording - Lloyds required content & clauses for bindign authority
- Schedule - Variable/specifics. Signed by contracting parties (coverholder /managing agent).
Numbers on Binding Authority Schedule
“Dec” page incl.
- Agreement Number
- Unique Market Reference Number
What is Contract Certainty?
Complete and final agreement of all terms between parties before binding authority incepts. Required for binding authority to be registered at Lloyds.
Certificate
Sets out terms of insurance contract b/w policyholder & managing agent
Who has ultimate responsibility for claims handling?
Managing Agent
Agreed Value Policy
Insurance contract for a stated amount in the event of total loss without adjustment for depreciation or appreciation. (Property)
Bailee
Person who holds property of another under contract or agreement to be returned or delivered elsewhere.
Bailee fo Reward
Bailee paid for services.
Capacity Auction
Procedure that allows Member to sell his participation in a syndicate for the following year to another Member by means of elecronic bidding at a specified time.
Cash Call
Request for funds made by managing agent to members of a syndicate
Combined Ratio
claims + expenses divided by premium for same time period
Contructive Total Loss
Subject matter of policy abandonned to insurer because actual total loss appears unavoidable or cost to avoid total loss exceeds value
Cover Note
Documetn issued by a broker pending policy issuance.
Ex Gratia Payment
Paymen made by underwriter without admission of liability so as to maintain goodwill
IBNR
Incurred but not reported - estimated losses based on past loss experience
Indication
Non-binding statement by underwriter of the likely premium subject to additional information
Lloyds Dollar Trust Funds
Funds maintained in the US for US $ denominted policies incepted after 08/01/1995. Premium trust fund.
What is Lloyds Policy Signing Office, Ltd. part of?
Xchanging - no longer part of Corporation
Retrocession
Reinsurance of a reinsurer by another reinsurer
Placing Slip
Summary of terms created by broker presnted by the broker to uw for amendment/agreement & quotation or indication.
Signing Slip
Document created by broker after quotation accepted to process premiums under contract outlined in palcing slip. Must have uw stamps, signed lines & preferences.
