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.
Classes of business
The Lloyd's market underwrites five main classes of insurance and reinsurance business: marine, non-marine, motor, aviation and term life insurance. The market rules that previously prevented marine underwriters writing more than one class of business have been abolished. However, the premiums and claims relating to term life insurance must be kept separate from those relating to other classes of business and the rules of the Financial Services Authority (FSA) prohibit a syndicate writing both general insurance and long term insurance as defined by the FSA. Term life may constitute long term insurance.
A year of account that has been closed into another year of account by means of a reinsurance to close contract. Historically most Lloyd’s syndicates have operated a three year underwriting account according to which the profit or loss of an underwriting account is determined by the managing agent 36 months after the beginning of that account which is always the start of a calendar year. According to this system the normal closure date of the 2009 year of account (which commenced on 1 January 2009) was 31 December 2011, with the calculation of the reinsurance to close as at that date being finalised in or about February/March 2012.
This may refer to either of the following situations:
(a) Where two or more insurers underwrite the same risk with several liability such that each insurer is not bound to follow the decisions of any co-insurer unless it has agreed to do so.
(b) Where the insured acts as its own insurer for a specified proportion of the sum insured.
The claims and expenses of an insurer/reinsurer for a given period divided by its premium for the same period. It is normally expressed as a percentage with any figure in excess of 100% signifying a technical underwriting loss.
Coming into line
A biannual procedure currently undertaken in June and November each year which requires members to demonstrate that they have sufficient eligible assets to meet their current underwriting liabilities and to support future underwriting before they may underwrite for the next following year of account.
Insurance which is sold to firms. This term is used in contrast to personal lines.
The termination of a reinsurance contract by agreement of the parties on the basis of one or more lump sum payments by the reinsurer which extinguish its liability under the contract. The payment made by the reinsurer commonly relates to incurred losses under the contract.
Constructive total loss
Section 60 of the Marine Insurance Act 1906 states that, subject to any policy provision, a constructive total loss arises where the subject matter of an insurance is reasonably abandoned to the insurer by the insured on account of its actual total loss appearing unavoidable or because it could not be preserved from actual total loss without an expenditure that would exceed its value.
The term is sometimes used to refer to insured property, e.g. a car, which is damaged beyond economic repair.
Refers to the situation where the terms of an insurance or reinsurance contract are agreed before the inception date of the contract rather than being negotiated afterwards.
A scheme sponsored by a members’ agent which allows an individual member to switch from underwriting on an unlimited liability basis to underwriting on a limited liability basis.
A members' agent who is appointed by a member who has more than one member’s agent to co-ordinate the administration of the member's affairs at Lloyd's.
A member of the Society which is a body corporate (including for the avoidance of doubt limited liability partnerships) or a Scottish limited partnership.
Corporate member syndicate
A syndicate with a single corporate member as its only member.
Corporation of Lloyd’s
The executive of the Council of Lloyd’s, Lloyd’s Franchise Board and their respective committees. The Corporation does not underwrite insurance or reinsurance itself but provides the licences and other facilities that enable business to be underwritten on a worldwide basis by managing agents acting on behalf of members.
Council of Lloyd’s
The Council of Lloyd’s was constituted as the governing body of Lloyd’s by Lloyd's Act 1982. It currently comprises 6 external members, 6 working members and 6 nominated members and is empowered to make byelaws governing the conduct of insurance business at Lloyd’s. Since 2003 the Council has acted by Lloyd’s Franchise Board as regards the development and direction of the implementation of the commercial policy of the Lloyd’s franchise and the direction and regulation of the business of insurance of Lloyd’s.
Insurance or reinsurance as it applies to one or more specific risk exposures.
A document issued by a broker pending the issue of a policy which confirms the arrangement of cover for the named insured/reassured.
Motor insurance cover notes that are issued in the United Kingdom (which incorporate a certificate of insurance) are usually of short duration.
A company or partnership authorised by a managing agent to enter into a contract or contracts of insurance to be underwritten by the members of a syndicate managed by it, in accordance with the terms of a binding authority.
The refusal of an insurer or reinsurer to offer terms of cover.
A corporate member that only participates on one or more syndicates that are managed by the same managing agent or group of managing agents. The term is often used interchangeably with the expression aligned member.