New Service Company Applications

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.

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.

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, will be able to assist with facilitating any extra referrals required. The Country Manager will also be involved in these 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.

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.

Managing agent who meets the required expectations under the Principles for Doing Business

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.

Sponsoring managing agent not meeting their expected maturity ratings

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.

Service Company Underwriting Agreement

Once the Service Company application has been processed by Lloyd’s and any other Lloyd’s team, they will be able to enter into a Service Company Underwriting Agreement.

A Service Company Underwriting Agreement is a binding authority which authorises a service company 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). The Lloyd's Market Association has developed a model Service Company Underwriting Agreement which can be used.

This is one of a series of model wordings which may be used to ensure compliance with the Intermediaries Byelaw and the Requirements to this Byelaw.

The LMA has issued an updated version of the Service Company Underwriting Agreement ("SCUA"), LMA3134 dated 7 September 2015, with the aim of providing a comprehensive model binding authority contract for a Service Company Coverholder being 100% aligned to its associated Managing Agent and which binds insurance only for its managed syndicates.

A separate Code of Practice has been prepared by Lloyd's regarding Service Companies. This document provides all necessary information governing Lloyd's expectations for the approval, on-going management and reporting of service companies.

Lloyd's has created several guidance documents for Service Companies looking to establish in Asia (Singapore), Australia, Dubai and Hong Kong. Please see useful documents below for these guides.