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Premium & Claims Handling

Information around the handling of premiums and the fair handling of claims for Coverholder business.

Please see the relevant sections below:

When Coverholders are given authority to write risks on behalf of one, or more, Lloyd’s Syndicates, the Coverholder will usually be given responsibility for collecting and reporting the premiums for these risks.

Where the Coverholder is responsible for collecting and reporting premiums, their role will include:

  • Reporting details of the risk when it is written to the Lloyd’s Syndicate via their Broker in London;
  • Collecting the premium payments;
  • Paying the premiums collected, net of their commission, and any taxes and fees that they are required to pay locally; to their Broker in London;
  • Reporting details of the risk when it is written to the Lloyd's Syndicate via their Broker in London;
  • In some territories, Coverholders also need to report details of the premium written, and/or paid, to the local Lloyd's office.

The London Broker will send the premium with the appropriate documentation to the central service provider Xchanging Ins-sure Services (XIS).  XIS will perform various checks and controls.

Lloyd's central Settlement and Trust Fund Office (STFO) will ensure that the correct premiums are paid to the Lloyd’s Syndicates and Brokers.

Coverholders should consider Lloyd’s Coverholder Reporting Standards and Lloyd’s guidance for reporting to local Lloyd’s offices to ensure they are reporting the correct information required.

Lloyd's has an online business tool called Crystal to provide Coverholders with quick and easy access to international regulatory and taxation requirements.

In Canada, Lloyd’s provides a system called Lineage which assists with premium handling, claims handling and regulatory reporting.

Lloyd's seeks to strengthen its reputation for the fast and fair handling of claims by providing excellent customer service in responding promptly and professionally to all claims made against any Lloyd’s policy.

In order to achieve this, Lloyd’s has established a framework of requirements that need to be met by any entity handling Lloyd’s claims and also works with the market to improve the applicable claims handling processes.

Who handles the claims?

When delegating underwriting under a binding authority, a Managing Agent will decide whether to give any claims handling authority to the Coverholder or to another third party (often referred to as a Third Party Administrator or ’TPA’).

Depending on this decision, claims notified to contracts written on behalf of Lloyd’s by a Coverholder, are handled either by:

i) The Coverholder - see the standard binding authority wording which contains the limit of the Coverholder’s claims handling authority, as well as reporting and other claims handling obligations;

ii) A TPA - see the Lloyd’s requirements for the terms that Lloyd’s expects to be included in a service agreement with the TPA;

iii) The Lloyd’s Managing Agent.

LMA 9008 - Third Party Administrator Agreement

Sometimes the Managing Agent will handle all of the claims notified because it has decided not to grant any claims handling authority to the Coverholder or to a TPA, and sometimes the Managing Agent will only handle claims that fall outside the authority of the Coverholder TPA.

Typically claims of a high value, or contentious claims will fall outside a Coverholder or TPA’s authority.

What does Lloyd's expect from Coverholders and TPAs?

Any Coverholder or TPA needs to have the skills, resources and processes to service a claims function to the Lloyd’s required standards.

These standards will be a combination of:

i) Lloyd’s Claims Management Principles and Minimum Standards, which relate, amongst other things, to timely customer service, timely and accurate reserving, the effective management of third party service providers and the capture and use of claims information;

ii) Lloyd’s claims reporting standards, which set out the claims data which Lloyd’s expects Coverholders or TPAs to include in its regular claims reports to the Managing Agent;

iii) Any additional contractual standards contained  in the binding authority or TPA agreement.

In some jurisdictions there are very strict regulatory timeframes imposed for responding to and handling claims.

There is an expectation that Coverholders or TPAs will know  what is required under local regulations and imposed on insurers when handling claims and it is important these requirements are met and appropriate service levels are in place with any third parties that will impact on the ability to meet the requirements.

The risk of failing to meet regulatory requirements includes damage to the reputation of Lloyd’s, loss of Lloyd’s trading license, involvement in protracted and costly court proceedings, and exposure to substantial fines or claims for extra contractual damages.

How do Coverholder or TPAs demonstrate ability to meet Lloyd's standards?

Coverholders will be required to demonstrate their ability to meet Lloyd’s claims standards as part of the application process.

TPAs will need to demonstrate to a Managing Agent that they meet the suitability criteria set out in paragraph 17A of the Requirements made under the Lloyd’s Intermediaries Byelaw.

Lloyd’s expects Managing Agents to assess regularly the ability of Coverholders and TPAs to meet the required standards.

How does the claims process work?

Where a Coverholder or TPA has claims handling authority they will receive notification of a claim, investigate the claim and pay all valid claims. 

If a claim does not fall within the claims handling authority of the Coverholder or TPA it will be transmitted, usually via the Lloyd’s Broker, to the Managing Agent for a decision on what investigation needs to be carried out and whether the claim is to be paid.

Frequently a binding authority is written by more than one Managing Agent.  

In this situation, the claims that do not fall within the authority of the Coverholder or a TPA will be agreed by the lead Managing Agent on behalf of itself and the other Managing Agents, or if it is a complex claim, the lead and second lead Managing Agent, in accordance with the Lloyd’s Claims Scheme.

The payment of the claims by a Managing Agent, including the top up of any funds held by the Coverholder or TPA to pay claims within their authority, is usually made to the Lloyd’s Broker via a central system managed by Xchanging Ins-sure Services Limited.