Lloyd's - Placing risk

Before a risk can be placed in the market a number of interactions must take place:

• The customer (which might be an individual, company or other Lloyd's syndicate) approaches a Lloyd's accredited broker with the details of a risk to be insured.

      
            To find a Lloyd's accredited broker - click here

• The Lloyd's broker approaches a specialist underwriter (a leader) in the relevant class of business to discuss premium, terms and conditions. If the underwriter is interested, a proposal will be made to accept a percentage of the total risk. A number of underwriters may accept portions of one risk. This is known as a subscription market.
• The broker feeds back information to the customer to enable the customer to place an order.
• The broker prepares a 'slip' with the details of the insurance, which is signed by the lead underwriter. The broker then approaches the other (following) underwriters with a view to obtaining written lines of insurance which total 100% or more of the risk.
• XIS, (see the link on the right), processes the slip and the broker adjusts or 'signs down' the lines if they have exceeded 100% of the risk.
• The premium is paid by the insured to the broker, who deducts any agreed brokerage fee and submits the net amount to Lloyd's Central Accounting (LCA) as part of a regular bulk settlement process. LCA allocates the premium to the managing agent of the syndicates involved.

Overseas clients

Lloyd's is licensed to do business in certain countries. For information on Lloyd's current licensing arrangements, follow the link on the right.

All US business underwritten at Lloyd's must be placed in accordance with US regulatory requirements and coverage must comply with local law. New insurance enquiries from US residents should be directed to an insurance agent or broker who is licensed to conduct business in the relevant state.

Insurance intermediaries

Lloyd's underwriters do not generally deal directly with policyholders. Instead, business is normally accepted by Lloyd's underwriters through the following intermediaries:

Lloyd's brokers - insurance business is generally brought to Lloyd's by Lloyd's brokers who are insurance broking firms accredited by Lloyd's to broke insurance business at Lloyd's.

Coverholders - Lloyd's underwriters may delegate their authority to enter into contracts of insurance to an intermediary known as a 'coverholder'. In such circumstances the general principle is that the coverholder acts as agent of the Lloyd's underwriters (rather than as agent of the policyholder).

Registered Open Market Correspondents - certain brokers are registered as Open Market Correspondents which permits them to negotiate contracts of insurance with the Lloyd's market through intermediary of a Lloyd's broker.

Payments to intermediaries

Intermediaries receive payments in a variety of ways, which may include the payment of commissions. Lloyd's strongly supports the disclosure and transparency of these commission arrangements. A policyholder may ask the intermediary with whom the policyholder deals for details of how and by whom the intermediary is being paid.

Ownership and other financing links to intermediaries

Under the terms of the Lloyd's Act 1982, Lloyd's brokers are prevented from being Lloyd's managing agents or being associated with managing agents. (Lloyd's underwriters accept business as members of syndicates each of which is managed by a 'managing agent').

Lloyd's also has risk management procedures in place in respect of the relationship between Lloyd's managing agents and any related companies that act as intermediaries. This is to ensure that the managing agent makes proper disclosures of any such arrangements. A policyholder may ask the intermediary whom he is dealing with to disclose if it is a related company to a Lloyd's managing agent.

Who insures with Lloyd's?
 

Lloyd's syndicates insure the world's leading businesses:

• 93% of Dow Jones Industrial Average companies
• 90% of FTSE 100 companies

1 FTSE 100, Dow Jones IA, Fortune Global 500, Xchanging Ins-sure Services, March 2005