Glossary of insurance related terms used by Lloyd's and market participants. The following definitions are intended for general guidance. They do not override or qualify any definition that appears in any Lloyd’s byelaw or regulation, in any contract or in any other document.
This may refer to –
(a) property that is rescued from danger on land or at sea; or
(b) an award that is paid to someone for voluntarily rescuing property at sea from a marine peril.
The estimated cash amount that would be received if damaged property were to be sold.
A ‘service company coverholder (referred to in the Code simply as a “service company”)’ is an approved coverholder which Lloyd’s has agreed can be classified as a “service company” by reason of it being a wholly owned subsidiary of either a managing agent or of a managing agent’s holding company and which is normally only authorised to enter into contracts of insurance for members of its associated syndicate and/or associated insurance companies.
See freedom of services
Each member underwrites for his own account and is liable accordingly for his share of all claims and expenses that are incurred by the syndicates in which he participates.
When an insurance contract is terminated prior to its expiry date by the insured any return premium that is payable will usually be calculated on a time on risk basis. The result is that the insured will receive less return premium than would be the case if the return premium was calculated on a pro rata basis (see pro rata cancellation).
A type of insurance where claims are usually made during the term of the policy or shortly after the policy has expired. Property insurance is an example of short tail business. The opposite of short tail business is long tail business.
This refers to the amount of a given risk that an underwriter has agreed to accept. It may be the same as the underwriter’s written line or, if there is signing down, a lower amount.
The amount of a syndicate’s signed line should be shown in a table in the policy, where one is issued.
Where a risk is oversubscribed, which is to say that the underwriters’ written lines exceed 100% then, absent some contrary instruction, those lines will be proportionally reduced ('signed down') by the broker until they total 100%. An underwriter may insist on preserving his written line in which event the written lines of the other underwriters will be proportionally reduced until they total 100% when added to the preserved written line of the other underwriter.
There are two types of underwriting slip: a placing slip and a signing slip.
A placing slip is a document created by a broker that contains a summary of the terms of a proposed insurance or reinsurance contract which is then presented by the broker to selected underwriters for their consideration. Underwriters may delete, amend or add terms on a slip as they consider appropriate for the purpose of providing an indication or a quotation.
A signing slip is a document that is created by a Lloyd’s broker after a quotation has been accepted for the purpose of processing premiums under the contract that is evidenced by the placing slip. It is a cleaned up version of the final placing slip and shows underwriters’ stamps, signed lines and underwriting references, these details being inserted by each underwriter at the request of the broker.
Provided that it shows the underwriters’ stamps, signed lines and underwriting references a placing slip may be used as a signing slip.
A signed slip which is agreed to be a policy where the insured or the reassured does not require a separate policy.
Society of Lloyd’s [*]
The Society incorporated by Lloyd’s Act 1871 by the name of Lloyd’s.
When the availability of some or all classes of insurance or reinsurances is high relative to demand for such insurance or reinsurance. Competition amongst insurers and reinsurers leads to downward pressure on premiums and to the availability of more extensive coverage terms. Compare hard market.
Special reserve fund
A reserve that is held on behalf of a member and comprising part of his funds at Lloyd’s. The reserve, which is held within the premiums trust fund of the member, may be only built up by setting aside a proportion of past profits and funds can only be withdrawn from it in the event of the payment an overall underwriting loss or on the death or resignation of the member following the closure of all years of account in which he underwrote. It is separate from the personal reserve fund of a member.
A corporate member which participates in a number of syndicates.
Stop loss reinsurance
Also known as excess of loss ratio reinsurance. This is a form of excess of loss reinsurance which provides that the reinsurer will pay some or all of the reassured’s losses in excess of a stated percentage of the reassured’s premium income in respect of its whole account or a specified account, subject (usually) to an overall limit of liability which may be expressed as a percentage of the relevant premium income or an amount.
The right of an insurer which has paid a claim under a policy to step into the shoes of the insured so as to exercise in his name all rights he might have with regard to the recovery of the loss which was the subject of the relevant claim paid under the policy up to the amount of that paid claim. The insurer’s subrogation rights may be qualified in the policy.
In the context of insurance subrogation is a feature of the principle of indemnity and therefore only applies to contracts of indemnity so that it does not apply to life assurance or personal accident policies. It is intended to prevent an insured recovering more than the indemnity he receives under his insurance (where that represents the full amount of his loss) and enables his insurer to recover or reduce its loss.
A person that bids for underwriting capacity in a capacity auction.
Substitute agent [*]
A person or body appointed in accordance with part K of the Underwriting Byelaw.