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.
Approved run-off company
A company that is permitted by Lloyd’s to perform specified functions that would normally be performed by a managing agent of a run-off syndicate on behalf of that agent or a substitute agent.
Another name for an insured.
Another term for inception date, being the date on which an insurance or reinsurance contract comes into force.
Attorney in Fact
A person appointed by a power of attorney to act on behalf of another person.
A Lloyd’s attorney in fact is a representative appointed by Lloyd’s to represent Lloyd’s and Lloyd’s underwriters in a particular country or US state. An attorney in fact may be a natural person or a company and performs a similar role to a Lloyd’s General Representative.
A person (usually a firm) that has been approved by the Financial Services Authority (FSA) to carry on one or more FSA regulated activities.
If the sum insured under non-marine insurance is expressed to be “subject to average” and that sum is less than the value of the subject matter of the insurance then any claim that is agreed under the policy will be reduced proportionately to reflect the under insurance.
Section 81 of the Marine Insurance Act 1906 say that an insured shall be his own insurer as regards any under insurance.
In marine insurance the term average may also refer to one of two types of loss, general average and particular average.
Avoidance of a contract ab initio
The cancellation of an insurance or reinsurance contract from its beginning by an insurer or reinsurer on the basis of the misrepresentation and/or non-disclosure of material facts. The result is that the insurer/reinsurer has no liability under the contract but must repay the premium to the insured/reassured.
See prior years.
A person who holds the property of another person (the bailor) under a contract or agreement according to which the property held is to be returned to the bailor or delivered somewhere to his order. A bailee for reward is paid for his services.
Basis (of insurance) clause
A clause that makes the declarations contained in an insurance proposal form the “basis” of any contract of insurance that is made in consequence of the completion of that form. Such declarations are thereby converted into warranties with the result that if one of them is found to be untrue then the insurer may disclaim all liability under the relevant contract 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.
Basis of insurance clauses are not normally found in personal lines insurance contracts sold in the United Kingdom and, where they appear in other contracts, they may be qualified by the inclusion of a term in the proposal form that the declarations made in that document are true to the best of the knowledge and belief of the person making the declarations.
Beyond economic repair
Where the cost of repairing the insured property, eg a car, exceeds the market value of that property. In such circumstances the insurer will pay the insured the market value of the insured property at the date of loss, subject to the terms of the policy (assuming the insurer is not under any obligation to provide a replacement).
An agreement between a Lloyd’s managing agent and a coverholder under which the Lloyd’s managing agent delegates its authority to enter into a contract or contracts of insurance to be underwritten by the members of a syndicate.
A list of premiums payable and claims paid or due which is prepared by a coverholder for a managing agent or by a reassured for its reinsurer. Bordereaux are commonly produced on a monthly or quarterly basis. They breakdown block premium payments that are made to underwriters and detail claim payments made on behalf of or due from underwriters.
Each syndicate has a box in the underwriting room at Lloyd’s from which business may be transacted with Lloyd’s brokers. Each box comprises a couple of opposite facing benches and desks at which the underwriters employed by the managing agent of the syndicate sit, plus some stools for the visiting Lloyd’s brokers to sit on. Most boxes have computer terminals as well as access to other information technology.
At Lloyd’s, brokers act as the agent of the insured or reinsured to arrange insurance or reinsurance with Lloyd’s syndicates. Brokers may be registered Lloyd’s Brokers who are able to enter into terms of business agreements with any Lloyd’s managing agent. Non-Lloyd’s brokers may also enter into terms of business agreements subject to the managing agent assessing that the broker meets certain minimum standards. Only brokers registered as Lloyd’s Brokers may refer to themselves as a Lloyd’s Broker. Many broking firms are also approved by Lloyd’s to act as a coverholder (See Coverholder).
The commission that is payable to a broker for placing an insurance or reinsurance contract with an insurer or a reinsurer. Compare fee for service.
Although brokerage is payable by the insured as part of the gross premium the amount of brokerage is agreed by the insurer. The insured may request his broker to state the amount of his brokerage on a given placement. Similar considerations apply to reassureds under reinsurances.
Sometimes the term brokerage may be used to refer the business of a broker.
Business process reform
An initiative to increase the speed and efficiency with which business is transacted at Lloyd’s and also to reduce of the cost of doing business at Lloyd’s. It includes the promotion of contract certainty.
In the context of general insurance this refers to the purchase of cover in respect of an otherwise excluded peril by means of the payment of additional premium.
The primary rules made by the Council of Lloyd’s regarding the conduct of insurance business at Lloyd’s.
A clause in an insurance contract which permits an insurer and/or an insured to cancel the contract before it is due to expire. The clause may provide for a return of premium in respect of the unused portion of the policy.