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Loz Cert CII - LM1 > The Structure of the London Market > Flashcards

The Structure of the London Market Flashcards

1
Q

Why do many choose to place risk in the London Market?

A

It is where many sizeable and complex risks from all over the world are placed.

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2
Q

What is the Council of Lloyd’s responsible for?

A

It is responsible for the management and supervision of the Lloyd’s market.

Created under the ‘Lloyd’s Act 1982’

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3
Q

Who is Lloyd’s regulated by?

A

Lloyd’s is a dual regulated institution.

Both the FCA & PRA.

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4
Q

How many people typically constitute the Lloyd’s Council?

A

15 members in total:

3 working
3 external
9 nominated

All members are approved by the FCA

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5
Q

What are syndicates?

A

Syndicates are the groups of private individuals or corporate investors who CARRY the risks.

A syndicate has a unique name/number; e.g. HIS/33.

Syndicates are made up of members or names.

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6
Q

How long does a syndicate exist for?

A

Accepts risks for 1 year.

But, the syndicates books remain open for another 24 months to allow premium to come in, allow claims to be notified, and resolve claims that have been notified.

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7
Q

What else are syndicates described as?

A

Annual ventures.

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8
Q

What does the size of a syndicate indicate?

A

It’s capacity to accept risks.
NOT its amount of employees.

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9
Q

What is a managing agent?

A

A managing agent appoints the underwriters who accept risks on the behalf of the syndicate.

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10
Q

Who are managing agents regulated by?

A

Both the FCA and PRA.

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11
Q

How many syndicates can managing agents manage the underwriting of?

A

Can manage the underwriting of one or more syndicates.

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12
Q

What is Capital?

A

Capital is the investment put into the market by the investors known as members/names.

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13
Q

Who are members/names?

A

Members/names invest into syndicates.

They provide the capital, and determine a syndicates capacity to accept risks.

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14
Q

What does ‘Reinsure to close’ (RITC) entail?

A

Syndicates will reinsure their outstanding liabilities into their ‘next year of account’.

Occurs when claims have still not yet been resolved or are notified late.

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15
Q

What do members agents do?

A

Advise members’ investment in the market.

Members’ choice of syndicate should reflect their attitude to risk.

E.g. a ‘risk seeking’ members may invest in syndicates writing classes of business that are more volatile like offshore energy.

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16
Q

Who is the company market regulated by?

A

Both the FCA & PRA.

17
Q

Who is the trade body for the company market? What powers do they have?

A

The International Underwriting Association of London (IUA).

The IUA has NO regulatory power.

18
Q

How do the Lloyd’s and Company markets interact differently with overseas regulators?

A

Lloyd’s: Liaises with overseas regulators on the behalf of the whole Lloyd’s market.

Company: Individual companies must liaise with overseas regulators themselves.

19
Q

What formats can different insurers take in the company market?

A
  1. limited liability companies
  2. mutual indemnity associations
  3. mutual companies
  4. captive insurers
20
Q

What is a limited liability company?

A

Is a private company whose owners are legally responsible for its debts and capital (most common).

E.g. AXA, Aviva, Churchill, Zurich.

21
Q

What is a mutual indemnity association?

A

A group of individuals who collectively require the same insurance, who contribute to their own insurance pool for their individual risk.

E.g. P&I Club (aka: Protection and Indemnity Association)

P&I Clubs are comprised of shipowners and do this for marine liability.

22
Q

What is a mutual company?

A

Is owned by its policyholders that generally serve a specific interest group. All profits made are either retained within the company or returned to the policyholder.

E.g. NFU.

23
Q

What is a captive insurer?

A

Insurance companies who are solely insuring risks from sister companies.

24
Q

What is the role of a broker?

A

Brokers are professional intermediaries who serve as the middle-man between the insured/insurer.

They act as the agent of the re/insured in both the placing and claims process.

25
Q

Who are brokers authorised by?

A

The FCA.

But, brokers can apply to Lloyd’s to obtain a second accreditation as a Lloyd’s broker.

26
Q

What is a Managing General Agent (MGA)?

A

Is an organisation given authority on the behalf of an insurer to accept risks, issue documents, or handle claims.

Essentially: An insurance broker is delegated underwriting authority by an insurer (in either the Lloyd’s/company market).

27
Q

What is a binding authority?

A

This is the contract used to provide authority to an MGA to underwrite on the behalf of an insurer.

28
Q

What is the role of the Lloyd’s market Association (LMA)?

A

Market association of the Lloyd’s market.

Providing representation, information, and technical services to underwriting businesses (managing agents) in the Lloyd’s Market.

29
Q

What is the role of the International Underwriting Association of London (IUA)?

A

Market association of the Company market.

Represents re/insurance companies operating in, or through London, and aims to strengthen the business environment.

30
Q

What are the 3 priorities of the IUA?

A
  1. efficiency and business attraction to London
  2. expertise/innovation in underwriting & claims
  3. influencing public policy & compliance
31
Q

Name 2 differences between the LMA (Lloyd’s) and the IUA (company) market associations?

A
  1. The IUA is solely a representative body & can exercise no control over the activities of its member organisations like Lloyd’s can.
  2. Lloyds: Liaises with overseas regulators on the behalf of the whole Lloyd’s market.

Companies: Does not liaise centrally on the behalf of its members. Individual companies must liaise with overseas regulators themselves.

32
Q

What is the role of the British Insurance Brokers’ Association (BIBA)?

A

Encourages its members to comply with the fundamental principles that govern the professional conduct of insurance intermediaries, such as, conducting business with good faith, and representing the best interests of customers.

33
Q

What is the BIBA mission statement?

A

‘to represent & protect the best interests of our insurance broker and intermediary members’

34
Q

What is the role of the London Market Regional Committee (LMRC)?

A

Represents the interests of brokers operating in the London & worldwide re/insurance markets.

35
Q

What is the role of the London and International Insurance Brokers’ Association (LIIBA)?

A

Represents the interests of brokers operating in the London & International re/insurance markets.

Aims to ensure London is where the world wants to do business by continuing the transformation of market processes & maintaining the highest professional standards.

LIIBA is the MAIN body representing brokers in the London Market.

36
Q

What is the role of the Managing General Agents Association (MGAA)?

A

Represents MGA’s in the insurance market who hold delegated underwriting authority on the behalf of insurers.

Aims to be MGA’s voice and drive best practice.

37
Q

What are some benefits of writing business in the London Market?

A
  1. capacity to write large/unusual risks
  2. prepared to look at new and unusual risks
  3. good claims service
  4. history & experience

(1. capacity, 2. entrepreneurial, 3. claims, 4. history)

38
Q

What is the Market Reform Contract (MRC)? What does it show?

A

Aka: “slip”

The broker places a summary of the risk on the “slip” and the suggested T&C’s.

The “slip” is signed by each underwriter & shows the % of the risk they are willing to carry.

39
Q

What is Xchanging Ins-sure Services (XIS)?

A

The MRC/”slip” is uploaded here by the broker.

It facilitates the payment of premium and claims for the broker.

Claims and premiums are paid via the broker.

Loz Cert CII - LM1 (7 decks)

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