Service companies Code of Practice

Key features:

• The differing processes for starting new service company applications and new branch applications.
• Service company coverholder qualification criteria and sub-delegation to approved Lloyd's coverholders.
• Maintenance of protocols that clearly outline how multi-platform managing agents use their Lloyd's versus other platforms.
• The linkage between the classes of business in the syndicate’s approved business plan and the authorities delegated to the service company must be maintained by managing agents.
• A referral framework for all classes written in all service company coverholders should be maintained by managing agents.
  

Service companies Code of Practice (176KB, pdf)

Service companies Code of Practice

Please see the following market bulletin for important information relating to the Service companies Code of Practice::

Y4311 Service companies Code of Practice (45KB, pdf)

• Things to consider when setting up a service company

  Seek legal advice
  
  • process of establishment
  • options for type of venture
  • local regulations, e.g.: business allowed; capital requirements; local tax advice; employment law
  
  Branch vs. company
  
  • for example, in Europe the IMD enables a branch to be set up via “passporting” rather than incorporating a new company
  Full service operation vs. contact office
  • cost comparison
  • underwriting credibility; how business is normally conducted there
  • local regulations re where business is deemed to have been bound
  • claims service and related regulations (e.g. response times / licensed individuals)
  • location of back office functions (accounting, reporting, HR, policy production), i.e. in the service company, managing agency in London, or outsourced
  
  Dual platform
  
  • will this apply – if so, consider: transparency/clarity of operation; and extent of Lloyd’s knowledge & experience of local staff
  
  Branding
  
  • identify which operating model is to apply and familiarise with related brand guidelines
  Governance & Franchise Standards
  • reporting lines; committees / board structure
  • planning; monitoring to plan / board reports
  • procedures, and monitoring compliance (e.g. exception reports, internal audit)
  • demonstrating to Lloyds how minimum standards will be met
  • bedding-in period; cultural issues

  Brand Guidelines for Service Companies

  
  IT systems
  
  • enabling prompt data capture (for internal/external reporting and monitoring)
  • enabling remote oversight
  
  Staff
  
  • ex pat vs. local (higher cost of ex pat; alignment of local staff to corporate culture)
  • training and induction (IT; procedures)
  
  Tax
  
  • critical to get good local advice (corporate tax; payroll tax; VAT; GST)
  • contact Lloyd’s tax dept
  • risk of setting wrong precedent for other managing agents in the future
  
  XIS
  
  • most DU business is processed via XIS (to enable regulatory reporting)
  • can opt for non-cash processing (i.e. just the data, to enable regulatory reporting)
  • business processed outside of XIS has to be declared to Lloyds (for reg reporting)
  • managing agents need a CSN if no broker (1 day training/assessment on abilities)

  
  Setting up a service company in Australia
  
  Setting up a service company in Hong Kong
  
  Setting up a service company in Asia

• Related regulatory communications

  
  Overseas Underwriting Byelaw
  
  LMA3078 Service Company Underwriting Agreement (80KB, pdf)
  
  LMA Bulletin, 18 November 2008, LMA 3078 Service Company Underwriting Agreement (32KB, pdf)
  
  LMA3078 Service Company Underwriting Agreement - Guidance notes (72KB, pdf)

• The application process

  If you are considering a service company coverholder application, please call Stephen Burns on 020 7327 6126 to discuss.

  A meeting to discuss the service company coverholder application, and how it fits in with the strategy for the syndicate will be arranged.  We’ll talk about the application process via Atlas, our expectations regarding the Letter of Support, and the steps that we go through here at Lloyd’s in order to approve your application.
  
  Every application requires a Service company coverholder undertaking to be completed. We do not require the original signed document. Please upload a scanned copy to your Atlas application.

  
  Service Company Coverholder undertaking to Lloyd’s