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Audit

Lloyd's is keen to promote both high standards and consistency in the audit of its coverholders.

Lloyd’s Coordinated Audits

Lloyd's is dedicated to promoting both high standards and consistency in the audit of its Coverholders and DCAs. To ensure consistency of approach, Lloyd’s has worked with the Market and the LMA to produce a common LMA Coverholder and DCA Audit Scope. Furthermore, Lloyd’s facilitates the coordination of audits on behalf of Managing Agents when there are two or more Managing Agents with a lead binding authority agreement, this minimises the regulatory burden of multiple annual audits for those Coverholders and DCAs with multiple Lloyd's leads. Since 2018, the Lloyd’s coordinated process has been automated via an online platform called Delegated Audit Manager (DAM). The Lloyd’s Audit team oversees on average 800 Coverholder and DCA coordinated audits annually.


Why is a Coverholder / DCA audited and what does it involve? 

A risk based approach to auditing helps the Managing Agent ensure that the Coverholder is entering into contracts of insurance in accordance with the binding authority agreement and that the DCA is adjusting claims on behalf of the Managing Agent in accordance with their Service Agreement. An onsite visit by an audit specialist will help to ensure that company policies and procedures provided by the Coverholder / DCA are being adhered to and that the terms of the binding authority agreement are being complied with. Audits will also identify areas where the Coverholder / DCA can reduce risk or improve efficiency.


DAM Workflow - Annual scheduling process:

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DAM Workflow – End to End process:

The Lloyd’s annual coordination process and its SLAs were agreed by Managing Agents and set to ensure that the end to end audit assignment process (as presented on the diagram below) is delivered within a maximum of 6 months, starting with the scoping and ending with post audit actions issuance. Timely delivery of the annual plan allows effective planning of future audits and provides enough time to adequately close one assignment before the next one is arranged.

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The LMA Audit Scope and frequency of the audit

The LMA Audit Scope is embedded in DAM which provides a template for audit requirements for Managing Agents to pick and choose which sections of the scope they would like to use for each audit. Managing Agents may also have their own specific requirements and these can be selected under the be-spoke scope function in DAM. The LMA Audit Scope facilitates the coordination of audits, enabling multiple Managing Agents to audit the same Coverholder/DCA at the same time, avoiding duplication and multiple audits.

The LMA Audit Scope is provided by the Managing Agent’s to the auditor via DAM at specific times throughout the year as per the timeline presented below. It is recommended that a new Coverholder is audited in the first year and Managing Agent’s should join the scheduled Lloyd’s coordinated audit to do this. Thereafter, the frequency will depend on a number of factors, including class of business, type of insurance product, customer type, premium income, level of authority delegated, ongoing compliance of the Coverholder with the terms of the binding authority agreement including the provision of risk, premium and claims bordereaux. Similar rules can be applied to DCA audits.


DAM Workflow - Pre – Audit:

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DAM Workflow – Audit Scopes submission timelines:

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What happens when the audit is completed?

  • The auditor will have a wrap up meeting with the Coverholder/DCA to discuss their initial findings and provide an opportunity to see if there are any immediate solutions.
  • The auditor will provide a report to the Managing Agent detailing their findings and audit recommendations will be entered in DAM under the audit assignment.
  • The Managing Agents will provide feedback, any recommendations and timescales for completion via the DAM task. If the audit was coordinated on behalf of several Managing Agents, Lloyd’s Audit team will consolidate the general recommendations to minimise duplication and will issue final Coverholder / DCA Audit Actions via DAM. Please see the workflow below for a detailed timeline including SLA’s for each task.
  • The Coverholder / DCA will then be expected to provide a response and any supporting evidence to the Managing Agent/s via their DAM portals to enable them to close the recommendations. 


DAM Workflow – Post Audit:

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For further information please contact the Lloyd’s Audit Team

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