Initially a Managing Agent looking to establish a Service Company must make their SUP (Syndicate Underwriting Performance) Executive, and concurrently, the Lloyd’s Representative if one is present in the applicable territory, aware of their intention. Discussions will be held in respect of the classes of business to be underwritten, the experience of underwriters and the entity’s business strategy, amongst other things.

Following discussions with the Managing Agent and general agreement by Lloyd’s over the proposal i.e. that it is realistic and achievable, the next step is for the Managing Agent to submit a business plan (SBF) via the core market return system specifically for this prospective establishment with the corresponding supporting narrative attached. No underwriting or operational set up can occur without the Capital and Planning Group’s (CPG) approval of the business plan, nor without the approval by Delegated Authority. If a Service Company intends to operate with ‘flexible use’ (i.e. an underwriter has the ability to underwrite on behalf of both the syndicate and company paper), the Managing Agent must also submit a completed flexible use form to London for approval, prior to any underwriting taking place. Lloyd’s London will check the information matches the SBF and will monitor this annually.

Managing Agents are reminded that all Lloyd’s Service Companies globally must adhere to the Best Practice within the thematic review. Underwriting Performance will check that the line sizes requested are aligned with their SBF. If it is larger than that approved for London we will need an explanation as to why this is so. We will need income estimates and loss ratio estimates both on a gross basis. The loss ratio estimates for each class should not be less than that approved for London - if they are we will need an explanation as to why. These discussions will have taken place through the initial business planning process.

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

• e.g.. 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

a) 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 Lloyd's how minimum standards will be met
• Bedding-in period; cultural issues

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 department
• 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 agent need a CSN if no broker (1 day training/assessment on abilities)

The Managing Agent must meet with Delegated Authority (DA) team to discuss the proposed Service Company application. They will also need to review the Lloyd’s referral criteria document and assess if this proposed application will require any further touch points within Lloyd’s. The Lloyd’s Delegated Authorities Team will be able to assist with facilitating any extra referrals required. The Country Manager will also be involved in these discussions.

On preliminary approval by DA to proceed, the application will be completed on ATLAS. This is required to be started by Lloyd’s DAT who will conduct this process after the closure of the introductory meeting. This is subject to a legal name being established and the main point of contact being identified for the Service Company. Prospective Service Companies must comply with Lloyd’s requirements outlined with the thematic review. The undertaking must be provided by the Service Company under the terms of paragraph 15 (b) of the Intermediaries Byelaw. Words and terms in bold type in this document have the meanings given in the Definitions Byelaw (which includes the definition of a “Service Company coverholder”) Every application requires a Service Company Coverholder Undertaking to be reviewed, signed, and uploaded onto the ATLAS application form.

Once any referrals have been reviewed and approved, the Atlas application can be formally submitted to Lloyd’s for processing. A managing agent who meets the required expectations under the Principles for Doing Business, will be able to provide a signed attestation to Lloyd’s confirming the proposed coverholder meets all the necessary requirements to become a Lloyd’s service company coverholder.

Lloyd’s will then process the application alongside the attestation.

If the sponsoring managing agent does not meet the required maturity level under the Principles for Doing Business; they are required to submit a fully completed service company decision paper, with the Atlas application and Lloyd’s will carry out an assessment of this service company coverholder

Once the Service Company application has been processed by Lloyd’s and any other Lloyd’s Teams, they be able to enter into a Service Company Underwriting Agreement. This is a binding authority which authorises a Service Company coverholder to enter into a contract or contracts of insurance only to be underwritten by members of a syndicate managed by the Service Company coverholder’s associated Managing Agent (and, where applicable, by its associated insurance company).
Any further changes to the Service Company record once the entity has been approved will need to be submitted to Lloyd’s through ATLAS e.g. if the Service Company is looking to write an additional line of business then the Managing Agent will need to submit a class of business extension and accompanying checklist.
Each managing agent is required to sign-off on the control framework phase 1. Find out more about the control framework.

Sponsoring Managing Agents who meet the relevant expectation under the Principles for Doing Business, are no longer required to submit a service company decision paper. Once the managing agent’s due diligence is completed and the application submitted to Lloyd’s on ATLAS, a completed attestation can be provided. Once the attestation is reviewed by the Delegated Authorities team, the application will be processed on ATLAS.

Open Coverholder Onboarding Attestation

Open LIC Coverholder Onboarding Attestation

Some applications will require additional conversations or be reviewed by internal Lloyd’s teams. These could be based on regulatory, underwriting, customer outcomes or delegated authority referrals.

The sponsoring managing agent will need to identity these additional referrals and contact the Delegated Authorities team, who will facilitate any further discussions. This should be completed before the managing agent completes their due diligence of the applicant and before the application is submitted to Lloyd’s.

Open referral criteria

Open Risk code mappings and descriptions July 2021

Open Underwriting referral document