Lloyd's Approved Coverholders
For coverholders that require Lloyd's approval the lead managing agent will need to take into account, as a minimum, the information required to be provided in the Lloyd's coverholder application form when it conducts its own due diligence. In assessing a new coverholder the managing agent needs to consider the suitability criteria for a Lloyd's approved coverholder (see paragraph six of chapter two of the Underwriting Requirements), including:
- The individuals authorised to enter into contracts of insurance, issue insurance documents and agree claims.
- The coverholder's reputation and standing.
- The coverholder's ability to operate a binding authority.
- The coverholder's financial standing.
- The coverholder's underwriting plan for any proposed binding authority which should be reviewed to ensure that it fits with the managing agent's strategy.
- The ability of the coverholder to comply with all relevant insurance, fiscal and taxation laws and requirements in the jurisdiction in which it is domiciled, trades or provides services under the binding authority. Managing agents are recommended to liaise with the Lloyd's representative or Lloyd's Market Services to establish local requirements.
Where managing agents wish to lead a new binding authority or take over the lead of an existing binding authority with an existing Lloyd's approved coverholder they are expected to undertake their own due diligence of that coverholder.
Managing agents should ensure that, where the binding authority is arranged by a Lloyd's broker, the Lloyd's broker has the necessary resources to administer and service the binding authority effectively.
Where a binding authority is not arranged through a Lloyd's broker then managing agents require prior Lloyd's approval to "deal direct". Managing agents should ensure that they have the controls and resources to carry out all aspects of administering a binding authority that would normally be handled by the Lloyd's broker, including:
- Document production
- Premium and claims handling (including payment of local taxes)
Managing agents should have adequate written procedures for these processes.
Managing agents should ensure that only authorised personnel take the final decision on entering into a binding authority once all the procedures to assess the financial, compliance and underwriting issues of the coverholder have been completed.
Managing agents considering a following role on a binding authority with a new coverholder need to satisfy themselves that the necessary due diligence has been undertaken and must make their own decision as to the suitability of the coverholder.
Restricted Coverholders
Managing agents carrying out due diligence of restricted coverholders to whom they are considering delegating authority will need to adapt the above procedures in accordance with the level and type of delegation.
