The Policy Level and Procedural Requirements apply to all master/group policies written at Lloyd’s. Managing agents should be aware that, in addition, different territories have their own rules and regulations. It is the managing agent’s responsibility to ensure these are complied with at all times. We recommend that legal advice is obtained.
Some areas to consider include:
- The type of cover provided must be permitted to be written under relevant local regulations. Managing agents should give due consideration to the location of the master/group policyholder and the Customers in order to ensure compliance with relevant regulation. Where Customers come from multiple jurisdictions, or where cover is arranged for customers who will not be in their home jurisdiction, more difficult questions can arise and where appropriate suitable legal advice should be obtained.
- Local tax requirements must be satisfied. Managing agents should refer to Crystal, or seek professional advice, to determine the relevant local tax requirements. Consideration should be given to the location(s) of the Customers as well as the location of the master/group policyholder.
- The master/group policy must comply with local conduct of business requirements. Such requirements could include rules in relation to the filing of wordings, the approval of sales literature, the provision of policy information in the local language and complaints handling. Consideration should be given to the location of the master/group policyholder as well as the location(s) of the Customers.
- Managing agents must take particular care as to whether the activities of the master/group policyholder in administering the master/group policy constitute regulated intermediary activity in the relevant territories. If the activities of the master/group policyholder could constitute a regulated activity, the managing agent should ensure that the master/group policyholder has the necessary regulatory authorisations. Whether the master/group policyholder is carrying on regulated activities will depend on the rules of the local territory and the activities that the master/group policyholder will be required to perform to administer the master/group policy.
- Managing agents should take steps to ensure that any business underwritten or arranged by or under the master/group policy does not result in coverage being arranged or any claim paid or benefit provided to or for any party that would expose the managing agent or underwriters to any sanction, prohibition or restriction under any applicable international trade or economic sanctions, laws or regulations.
- Where the tax or regulatory rules of more than one jurisdiction may apply it is important that the managing agent ensures that risks are coded appropriately to ensure that there is compliance with Lloyd’s reporting, funding and statutory tax requirements.
In two territories, particular attention needs to be given to the requirements that apply to the underwriting of master/group policy programmes. These are:
1. The United States – The rules that govern master/group policies in the US are particularly detailed and differ between States. Particular restrictions apply to the writing of master/group policies in New York, Indiana and Tennessee. It is expected that managing agents writing master/group policies in the US are familiar with the relevant requirements and where external legal advice is not sought that they can demonstrate an appropriate level of expertise. The obligation to ensure that the master/group policy complies with relevant US requirements resides with the managing agent and responsibility should not be delegated to the broker.
Insurance underwritten to US Risk Purchasing Groups (RPG) is permitted and these arrangements are governed by the US Federal Liability Risk Retention Act (1986). Guidance should be sought from a law firm with appropriate expertise where an RPG is being established. Insurance underwritten to an RPG does not have to be referred to Lloyd’s where it does not meet all the requirements in this Guidance. However, managing agents should still be mindful of the principles in this guidance and ensure that Customers are treated fairly and receive good outcomes. It is the managing agent’s responsibility to ensure all federal and local rules are satisfied.
Further information regarding master/group policies in the US can be found on Crystal.
2. Australia - Australia has its own definitions of group and master policies. Both are subject to Lloyd’s master/group policy requirements.
In addition, master policies, by the local Australian definition, cannot be written in Australia without approval from Lloyd’s Australia. This is to ensure that Australian master policies are constructed and issued in compliance with all Australian regulatory obligations. Underwriters should ensure that when placing their lines on such contracts that they have had sight of the approval from Lloyd’s Australia confirming that the contract of insurance is in order. Managing agents should ensure that sufficient lead in time (at least two weeks prior to inception) is factored into their processes in order to allow for Lloyd’s Australia to consider and provide its approval to the proposed arrangement. It is not necessary for policies, once approved by Lloyd’s Australia, to be referred to Lloyd’s Australia again at renewal provided that the arrangement remains unchanged.
Conversely, group policies, by the local Australian definition, are not subject to approval by Lloyd’s Australia. However, they must still meet Australian regulations in relation to group purchasing bodies and, as above, they are subject to Lloyd’s master/group policy requirements.
Further information on the Australian definitions and details of the information required by Lloyd’s Australia can be found on Crystal.