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.
Depending on the context this term may refer to:
(a) the employees of managing agents, insurance companies and reinsurance companies and their respective underwriting agents that underwrite insurance or reinsurance risks;
(b) the members or other carriers that underwrite a particular contract of insurance or reinsurance;
(c) members collectively; or
(d) insurers and reinsurers collectively.
Underwriting agent [*]
A managing agent or a members’ agent.
Depending on the context this term may refer to:
(a) a member’s allocated capacity
(b) syndicate allocated capacity, with or without the addition of cover from qualifying quota share reinsurance;
(c) the total underwriting capacity of all syndicates combined, with or without the addition of cover from qualifying quota share reinsurance; or
(d) the underwriting capacity of an insurance company or a reinsurance company.
The stamp that is applied to a slip by an underwriter to signify his acceptance of a risk. It shows the number and pseudonym of the syndicate or the name of the (re)insurance company for whom the underwriter acts and has a space for his underwriting reference to be inserted. The underwriter will insert his line on a slip next to his underwriting stamp.
The proportion of premium that relates to the unused period of cover.
Utmost good faith
Contracts of insurance and reinsurance are contracts of utmost good faith. In the event that either party fails to observe utmost good faith towards the other in regard to the negotiation of cover then the other party may avoid the contract. The duty of utmost good faith requires each party to inform the other all material facts during the negotiation of the placement, renewal or alteration of cover.
An insured has a separate duty of good faith when making a claim under an insurance policy.
See agreed value policy
A contract which has no legal effect and is therefore unenforceable in a court of law. For example, an insurance contract where the policyholder does not have an insurable interest.
A contract which may be voided at the option of either party. For example, an insurer may avoid a policy from inception for the misrepresentation or non-disclosure of material facts during the negotiation of the placement, renewal or alteration of cover. A insurer may also avoid a policy from the date of the presentation of a fraudulent claim.
War and civil war risks exclusion agreement
An agreement between Lloyd's underwriters and non-marine insurance companies that they will not cover certain war and civil war risks on land.
War risk waterborne agreement
A marine market agreement whereby underwriters will only cover goods against war risks whilst they are on the vessel subject to a time limit after arrival at the port of destination. There is reduced cover for offloading and transhipment at the port of destination.
Where an insured or reassured promises that something will or will not be done during the period of cover or that a particular state of affairs exists or does not exist at the inception of cover. If the promise is untrue or is not kept then the insurer/reinsurer may disclaim all liability under the policy from the date of the breach, regardless as to whether the false declaration was material to the underwriting of the contract or causative of any loss.
Wear and tear
The amount deducted from a claims payment in recognition of the depreciation of the property insured through usage of it over time. Where cover is provided on a 'new for old basis' ie where the insurer agrees to replace an old item with a similar new one, no such deduction is made.
A member who occupies himself principally with the conduct of business at Lloyd’s by a Lloyd’s broker or underwriting agent, or a member who has retired but who immediately before his retirement occupied himself in this way.
The amount of a risk that an underwriter is willing to accept on behalf of the members of the syndicate or company for which he underwrites. This is commonly expressed as a percentage of the sum insured which is written on the broker’s placing slip. If, on completion of the broking exercise, the written lines exceed 100% then, absent some contrary instruction, they will be signed down by the broker, which is to say they will be reduced proportionately so that they total 100%.
An outsource provider of policy, premium and claims processing services to the Lloyd’s market and others. These services are delivered via its operating subsidiaries, Ins-Sure Services and Xchanging claims services.
Year of account
The year in which an insurance or reinsurance contract that is underwritten by a syndicate is allocated for accounting purposes and into which all premiums and claims arising in respect of that contract are payable. Insurance or reinsurance contracts are generally allocated to years of account according to the calendar year of their inception date so that a contract that commences in 2005 will normally be allocated to the 2005 year of account. Historically syndicates have operated a three year accounting system which means that each calendar is normally left open for two further years before a profit or loss is determined. A year of account is normally closed by reinsurance to close at the end of 36 months. Compare open year of account
and run-off account