Restricted coverholders

All managing agents are required to record their relationships with restricted coverholders. All of the relationships that are created in the system will appear on the register of coverholders.

• What is a restricted coverholder?

  A restricted coverholder is any company or partnership whose name has been entered in the register of restricted coverholders .
  
  To be a restricted coverholder it must be:

  • Either a company whose registered office is in the United Kingdom, or is a partnership based in the United Kingdom.
  • Only have delegated authority under the terms of a “restricted binding authority” (described below).
  • Must have the Financial Services Authority’s permission to act as an insurance intermediary. (This permission may be either as an authorised company or as an appointed representative.)
  • Must enter into a contract directly with the insured or issue the insurance documents to the insured. If a coverholder does not deal directly with the insured it is not a restricted coverholder and so must be approved by Lloyd’s. This does not prevent a restricted coverholder from using an ‘introducer’ to refer business to them or to send on insurance documents on their behalf.

  A restricted binding authority  is one which:

  • Prescribes the terms and conditions to be included in each contract of insurance to be entered into by the coverholder under the binding authority;
  • Contains comprehensive arrangements for the determination of the premium to be charged in respect of each contract of insurance to be entered into under the binding authority. These arrangements must not give the coverholder any significant discretion in calculating of the premium or making any adjustment to it.
  • Only authorises the coverholder to enter into contracts of insurance where:
    - The contract is concluded in the United Kingdom. 
    - The property to be insured under the contract is situated in the United Kingdom; or 
    - The property to be insured is a motor vehicle which is registered in the United Kingdom; or 
    - The risk to be insured is a travel or holiday risk and the contract is for a duration of 4 months or less. 
    - The risk to be insured is a “liability risk”.

  In practice, there are two main ways to make sure a restricted coverholder cannot exercise any discretion when calculating premiums. These are either:

  • to give the restricted coverholder a rating schedule, basis or guide.
  • to require the restricted coverholder to refer each proposed contract of insurance to you so that you can set the premium to be charged. (This is sometimes called a ‘prior submit’ arrangement.)  The referral can be made via electronic means such as an internet referral arrangement.

  If a coverholder meets the criteria to be a restricted coverholder, it will not need Lloyd’s approval and the restricted binding authority does not need to be registered on the Lloyd’s binding authority registration website (the BAR). However, the restricted coverholder’s details must be recorded on the register of restricted coverholders. A managing agent must keep complete and up-to-date records of all restricted coverholders to which it has delegated authority. (Lloyd’s does not register restricted binding authorities.)

• Registering restricted coverholders - an overview

  Lloyd’s obtains a weekly download of FSA data, from which managing agents can easily select the restricted coverholder to be registered. If a firm is not on the FSA download, it cannot be registered as a restricted coverholder and it may not be eligible as a restricted coverholder.

  The FSA data shows only the head office address of each firm. The restricted coverholders website therefore only holds one record per restricted coverholder, irrespective of how many offices of that firm have restricted binding authorities.

  Managing agents are asked to answer the following 9 questions for each of their restricted coverholders. These questions allow Lloyd’s to understand and profile the risks posed by each restricted coverholder:

  1.    Please confirm that you are satisfied that this firm is eligible to be recorded on this register as a restricted coverholder.

  2.    Will you be entering into a restricted binding authority with this firm? (As opposed to a binding authority which requires registration and the coverholder to be approved)

  3.    How many offices of this restricted coverholder will enter into contracts under your restricted binding authorities? (The drop-down box allows a choice of broad bands covering a number of branches)

  4.    On behalf of which of your managed syndicates will you delegate authority to this firm under restricted binding authorities? (Select one or more from a dropdown list of your syndicates)

  Then for each syndicate please answer questions 5 to 9:

  5.    The routes through which you intend to manage the restricted coverholder, including the names of any placing Lloyd’s brokers (or service companies), along with any wholesale coverholders and their contract numbers (all from drop-down lists).

  6.    Classes of business (choice of one or more of the 4 classes allowed).

  7.    Gross premium income (choice of one of 3 premium income bands)

  8.    Whether the restricted coverholder has the ability to settle claims, and, if so, the level at which they have to refer claims to underwriters (choice of one of 3 claims bands).

  9.    Whether the documentation issued by the restricted coverholder clearly identifies you as the insurer and, if not, the contract reference number used in its documentation.

  For Questions 5 to 9, if there is more than one office, the answers should be aggregated for the restricted coverholder as a whole.

  If the restricted coverholder has already been recorded on the website by one managing agent, any other managing agent wishing to grant them a restricted binding authority must record its interest. The process is identical to that used for registering a new restricted coverholder.

  If the FSA data for a restricted coverholder changes (name, address, authorised status or loss of FSA permissions) the website will generate automatic e-mails to the managing agents who have recorded their interest on the website. Please note that, particularly with apparent loss of status or permissions, managing agents should always make their own enquiries to confirm this.

  Managing agents are responsible for the ongoing maintenance of the details they record. There is an ongoing obligation on managing agents to keep the register up-to-date.

• E-mail recipients

  All automated e-mails are addressed to the person already nominated by the managing agency to receive automated e-mails from the BAR website.

  When creating and maintaining restricted coverholder records, the names of any Lloyd’s brokers who place the restricted coverholder’s binding authorities, or act as placing broker for wholesale coverholders are recorded. Relevant e-mails (re new restricted coverholders, changes of details, change of FSA status or lost permissions) are automatically copied to those Lloyd’s brokers.

• Access for managing agents

  For access to the Restricted coverholders website, please contact your devolved administrator.

• Access for brokers

  Brokers do not have access to the Restricted coverholders website.

• Problems with the Restricted coverholders website

  If you are experiencing technical difficulties or need help registering a relationship, please contact your devolved administrator. If your devolved administrator cannot help you, they should pass all users' queries to the Coverholder systems heldesk on +44 (0)20 7327 6276.