Lloyd’s provides the trading platform which delivers various benefits to its managing agents, including a common financial strength rating, cost-effective access to the world’s major insurance markets and a global brand. In return, Lloyd’s has stated requirements of each managing agent.
Lloyd's has overall performance objectives for the franchise. Each managing agent must perform to the standard required for the franchise to succeed overall. To ensure that the requirements are clear, Lloyd's has developed the Franchise Standards.
The franchise standards set out Lloyd’s requirements of each managing agent. They are driven by Lloyd's Franchise objectives, and take into account the expectations of the FSA.
The Franchise Standards have been produced in consultation with the Lloyd's Market Association, representing all Lloyd’s managing agents. The Franchise Standards reinforce Lloyd's brand, thereby maintaining Lloyd's market reputation and the reputation of all firms trading there.
The Franchise Standards apply to existing managing agents, and new entrants seeking admission, as well as to service providers. They also apply to Lloyd's, where applicable.
Franchise Standards structure
Principles and minimum standards
These are statements of business conduct required by Lloyd’s. The Minimum Standards are established under relevant Lloyd’s byelaws relating to business conduct. The Franchise Standards apply to all businesses, regardless of size, complexity, diversity or organisational structure.
Guidance
The 'Guidance' notes which accompany the 'Minimum Standards' have been developed with extensive market involvement and support. These provide a more detailed explanation of the general level of performance expected. They are a starting point against which each managing agent can compare its current practices to assist in understanding relative levels of performance. These 'Guidance' notes are intended to provide reassurance to managing agents as to approaches which would certainly meet the minimum standards. However, it is appreciated that there are other options which could deliver performance at or above the minimum level and it is fully acceptable for managing agents to adopt alternative procedures as long as they can demonstrate that the required minimum standards can be achieved or exceeded.
Advice
Advice may also be issued. This could be tools and practical solutions relating to the required business conduct. Advice may include techniques, templates and worked practical examples which may be adopted by businesses to meet their specific needs.
How will managing agents be assessed against the Franchise Standards?
All managing agents are required to meet the Franchise Standards. These represent the minimum level of performance required of any organisation within the Lloyd’s market.
In assessing performance Lloyd's will take account of the historical record of the syndicate(s) managed and the experience of underwriters, as well as the effectiveness of management procedures.
Managing agents that manage only to the minimum standard required should expect the level of capital within their ICAs to reflect that level of operating risk.
Managing agents able to demonstrate consistently higher levels of performance, by comparison to the minimum standards, may be able to justify lower levels of capital within their ICAs, reflecting lower operating risk.
New applicants for admission to Lloyd’s will be required to demonstrate their immediate capability to meet the Franchise Standards, as an entry criteria.
Measurement & monitoring
Lloyd's will seek assurance that managing agents meet the Franchise Standards, via existing processes of review wherever possible.
Data will be required to assess performance across the market and every effort will be made to ensure that the number of individual data requests by Lloyd's is rationalised and duplication avoided.
Benchmarking information will be provided to managing agents wherever possible, to assist in the management of their own businesses.
Managing agents should be able to measure and monitor their performance to demonstrate that the Franchise Standards are being met. Internal reporting should enable each managing agent’s board to assess performance and respond to those areas which may need improvement.
Lloyd's will work with managing agents in its ‘business partner’ role to assist them in identifying and implementing necessary improvements where requested.
As stated above, each managing agent is expected to at least meet the Franchise Standards and there will be adequate time allowed to address any gaps. Thereafter, any persistent and significant underperformance will be addressed in proportion to the issues involved.
Application of Lloyd's Franchise Standards
The Franchise Board has prescribed the following standards and arrangements for the conduct and administration of insurance business at Lloyd’s provided always that failure to comply with these standards and arrangements shall not invalidate or call into question any contract or agreement entered into by or on behalf of a managing agent or syndicate nor shall failure to comply with these standards and arrangements create any right of action or claim in any third party against a managing agent or syndicate, the authority to enforce compliance being exclusively vested in the Franchise Board.
(Reference to 'Lloyd's in the Franchise Standards section means 'Corporation of Lloyd's') 