Customer Oversight referrals

Information on applying for an exemption from Lloyd’s master/group Policy Level Requirements can be found on the Master and Group Policies page.

Why guidance is needed

Binding authorities and coverholder appointment agreements should provide for a notice of termination to enable the parties to bring the binding authority to a close before expiry. This notice period is important as it allows the coverholder to continue to offer cover to policyholders and maintain continuity while it seeks replacement capacity.

However, in some circumstances a managing agent may require that a coverholder ceases underwriting immediately or on short notice, either by terminating the binding authority entirely, or by removing underwriting authority.  

Any circumstance where underwriting authority is withdrawn without use of the full notice period set out in the binding authority constitutes a removal of underwriting authority on short notice. This includes immediate termination in line with the binding authority terms or changing the level of authority granted to the coverholder to ‘prior submit’.

Short notice removal of underwriting authority can negatively impact both policyholders who may not be able to obtain renewal terms or have their existing policy serviced and coverholders who may not have the opportunity to find replacement capacity. If not properly justified, it can also have a negative reputational impact on Lloyd’s and may draw regulatory investigation.

Lloyd’s expectations for managing agents’ oversight

Managing agents should only take steps to remove a coverholder’s authority on short notice where it is able to demonstrate good reason for taking such action.  The managing agent’s considerations should include at least the following:

• Customer detriment
• Impact on the coverholder
• Regulatory requirements
• Tacit renewals
• Timing of notice
• Reputational damage to the coverholder, the managing agent and/or Lloyd’s

Lloyd’s Requirements

Previously managing agents were required to refer proposed removals of underwriting authority from coverholders to Lloyd’s. Lloyd’s would review the referral, engage with relevant stakeholders and provide its decision to the managing agent within five working days.

This process has been changed to a notification model:

1. Prior to a managing agent taking any steps that would have the effect of substantially terminating the underwriting authority of a coverholder on short notice, the managing agent should notify Lloyd’s. This includes any proposal to terminate for breach or to reduce underwriting authority to ‘prior submit’. If in exceptional circumstances, it is necessary to remove underwriting authority without first notifying Lloyd’s the managing agent may terminate underwriting authority and notify Lloyd’s as soon as practicable.
2. The managing agent should make the notification by completing the form below and sending it to the email address listed below and their Customer Oversight Manager.
3. Lloyd’s will seek to engage with the managing agent promptly to discuss any concerns in relation to the termination.