General guidance on delegated authority methods of placement

Where a binding authority is not arranged through a Lloyd's Broker then managing agents require prior Lloyd's approval to ‘deal direct’. Managing agents should ensure that they have the necessary controls and resources to carry out all aspects of administering a binding authority that would normally be handled by the Lloyd's Broker, including but not limited to;

• Document production
• Premium and claims handling (including payment of local taxes).

A direct deal managing agent (DDMA) relationship is requested when a managing agent intends to deal with a Coverholder without a broker. This relationship allows them to act as broker and amend the Coverholder details on ATLAS and register binding authorities on DCOM.

If a managing agent deals directly with a Coverholder without involving a Lloyd’s Broker, it is important that the managing agent considers the following;

• Placing binding authorities with a following market
• The documents that need to be produced
• Understanding of Lloyd’s Systems
• Who will be responsible for premiums and handling claims
• How adequate their written procedures are.

If the members of a syndicate or syndicates the managing agent manages do not write all of the binding authority, the managing agent will be responsible for placing the remainder of the contract with a following market. In these circumstances, the managing agent will perform the role of a broker.

Managing agents will need to able to demonstrate that they are capable of addressing the following:

• Making sure all relevant information is provided to the following market
• Keeping a record of the information given to the following market when the binding authority was placed (and keeping evidence of its agreement, where necessary)
• Keeping records about the operation of the binding authority (for example, changes to the terms of cover)
•  Ensuring any outstanding issues are fully resolved before the binding authority comes into force
• The processing responsibility will be with the entity acting as the broker

Managing agents should also be aware that if a Lloyd’s Broker is not involved, disputes or litigation could arise with the following market (for example, as a result of a mistake made by one of the managing agent’s staff or due to a potential misrepresentation). Managing agents may consider it appropriate to buy errors and omissions insurance to cover these risks.

Managing agents are responsible for producing binding authority agreements. If using Velonetic, they must submit these agreements to Velonetic for review.

• They will be responsible for making sure that premiums and claims are processed to the following market.
• If the following market includes insurers who are not Lloyd’s syndicates, the managing agent will need to have set up appropriate procedures for processing and settling premiums and claims directly with those insurers.
• If the following market includes Lloyd’s syndicates, the managing agent will be responsible for providing claims details to Velonetic, if Velonetic is being used.
• For business placed through Velonetic,  regular and timely Premium and claim bordereaux (that is, reports on all premiums, paid claims, outstanding claims and expenses) must be provided to Velonetic.
• Premium and claims bordereaux must contain sufficient information to be reported to regulatory and tax authorities.

Managing agents will require a Central Settlement Number (CSN) – to process premiums and claims written directly. Please reach out to Velonetic directly to acquire a CSN below.