We expect managing agents to submit an annual Principles Board Attestation, whereby Boards formally sign-off on their view of adherence to the Principles. Conducting the attestation in an outcomes-based regime requires a different mindset to be adopted to that required under a prescriptive, rules-based oversight approach. Ticking off a list of prescriptive requirements takes a “bottom up” approach and can potentially result in the misleading conclusion that as long as all the underlying requirements are met, then the overall intention must also be met. However, this is often not the case. An assessment conducted under an outcomes-based approach takes an entirely different approach, requiring a “top down” view to be formed and a higher level of judgement needs to be applied.
Principles focus on the purpose, rather than the requirements and it is against this purpose that an assessment should be made. This requires a specific type of questioning and discussion to be had in forming an assessment. Under the Principles based oversight, Boards and senior management need to engage with the Principles and the outcomes that they set out to achieve at the highest level, and not regard them as activities that can be delegated to compliance.
Examples of the questions which should be considered when forming an assessment against the Principles are:
• How successful have we been in achieving the outcome?
• Are the times when we haven’t been successful? What should / could we have done differently?
Principles focus on the purpose, rather than the requirements and it is against this purpose that an assessment should be made. This requires a specific type of questioning and discussion to be had in forming an assessment. Under the Principles based oversight, Boards and senior management need to engage with the Principles and the outcomes that they set out to achieve at the highest level, and not regard them as activities that can be delegated to compliance.
Examples of the questions which should be considered when forming an assessment against the Principles are:
• How successful have we been in achieving the outcome?
• Are the times when we haven’t been successful? What should / could we have done differently?
There is no requirement for the attestation submission to be supported by documentary evidence. Managing agents will be expected to provide a short narrative within the attestation explaining how they arrived at their assessed position – which should focus on the outcomes they have achieved.
Where a managing agent is below the expected level of maturity, the narrative should contain a clear description of the issue(s), the actions to be taken to resolve it and the timescales.
We may also undertake Principles reviews from time to time, which may require documentary evidence to be provided. Gaps may also be addressed through additional oversight activities throughout the year.
Where a managing agent is below the expected level of maturity, the narrative should contain a clear description of the issue(s), the actions to be taken to resolve it and the timescales.
We may also undertake Principles reviews from time to time, which may require documentary evidence to be provided. Gaps may also be addressed through additional oversight activities throughout the year.
The level of oversight from the Capital and Planning Group (CPG) is dependent on a syndicate’s categorisation. Syndicates with lower syndicate categories will receive a higher level of CPG review.
In addition, a syndicate’s performance against Principles is considered in conjunction with the goals and objectives of the business. For example, if a syndicate wishes to grow, those growth ambitions will be more likely to be supported by Lloyd’s if they are achieving the level of expectation aligned with its goals.
In addition, a syndicate’s performance against Principles is considered in conjunction with the goals and objectives of the business. For example, if a syndicate wishes to grow, those growth ambitions will be more likely to be supported by Lloyd’s if they are achieving the level of expectation aligned with its goals.
In order for a syndicate to have a syndicate category of ‘Outperforming’ all dimensions must be rated as ‘Meets Expectations’ and the syndicate must deliver sustained profitability that outperforms the market. The exact metrics will be determined each year according to current market conditions or other factors.
Each syndicate is provided with an individual Syndicate Category. This is based on their performance against the Principles which is measured at managing agent or syndicate level, depending on how the risk is managed. Six dimensions are assessed at managing agent level (4. Claims Management, 5. Customer Outcomes, 10. Governance, Risk Management and Reporting, 11. Regulatory and Financial Crime, 12. Operational Resilience and 13. Culture). The remaining dimensions are all assessed at syndicate level.
In both of these scenarios Lloyd’s would have higher expectations of a syndicate. As such, both aspects can drive materiality.
Expected maturity for all Principles is shared with syndicates each year via SOAPs (Syndicate on a page) included in annual oversight letters (December) and in pre-CPG letters (May/June). Changes to expected maturity may also be communicated outside of these processes where required. Materiality metrics are shared on the Principles page on Lloyds.com.
Materiality is re-assessed at varying frequencies depending on the relevant metrics. For many this is quarterly following market returns. However, we expect most syndicates materiality to remain broadly stable quarter on quarter unless there have been material changes to their risk profile.
If any data driven expected maturity changes were to occur due to changes in risk profile, and this happened outside of the oversight letter/pre-CPG letter timeline, then syndicates will be advised of expected maturity changes via their Account Managers. Syndicates will be given time to demonstrate that they are meeting this higher level. The amount of time given would depend on the dimension and the judgement of the Lloyd’s oversight team. Syndicate boards should attest against the higher level of expected maturity within the annual Principles Board Attestation.
Four dimensions have additional emphasis: 1. Underwriting Profitability, 6. Reserving, 10. Governance, Risk Management and Reporting and 13. Culture. A syndicate can only ever be rated as high as the lowest of these four dimensions. The dimension ratings map to syndicate categories as follows: Marginally Below Expectations – Moderate, Below Expectations – Underperforming, Well Below Expectations – Unacceptable.
There is no additional information for each Principle. The maturity matrices provides suggested examples for how syndicates could meet the Principles, for each level of maturity.
However, guidance documents for specific processes continue to exist. For example, Solvency II Guidance for new entrants or Internal Model Guidance.
However, guidance documents for specific processes continue to exist. For example, Solvency II Guidance for new entrants or Internal Model Guidance.
No, the maturity matrices set out indicators as to how a syndicate could meet the principle at each level of maturity. However, these are only intended to be examples and should not be interpreted as prescriptive requirements.
The oversight framework allows for a dynamic approach to oversight and as new information is received the model will reassess dimension ratings and syndicate categories. Additionally, as issues evolve and/or new opinions are formed, these are reflected and inform the dimension ratings and syndicate categories. Any change in a dimension rating and/or syndicate category will be communicated to the syndicate via Account Managers.
In the majority of cases we do not expect syndicates to provide additional documentation or information to allow oversight teams to rate a syndicate - we use current data, Principles Board Attestations and oversight team knowledge to make an evaluation.
There may be instances where Lloyd’s has a materially different view to a managing agent, and in these cases a managing agent may be asked to provide further information to support their view.
There may be instances where Lloyd’s has a materially different view to a managing agent, and in these cases a managing agent may be asked to provide further information to support their view.
The Oversight Framework applies globally across Lloyd’s. As such all overseas territories, including LIC, are incorporated into the Framework. Where there are requirements which are unique to individual territories these have been included within the Maturity Matrices.
Lloyd’s does not publish syndicate categories as they are commercially sensitive.
Any syndicates going through due diligence would be expected to share their categorisation with a new acquirer.
Any syndicates going through due diligence would be expected to share their categorisation with a new acquirer.
There are some Principles and Sub-Principles where the guidance does not differentiate between four maturity levels. This is because for some cases we do not consider that there would be tangible differences in approach from the least to the most material syndicates. Where this is the case, the guidance would apply to all syndicates regardless of their materiality and would be expressed in the Maturity Matrix at only the Foundational level.
Similarly, there are some cases where there may be differences in approach across only two or three maturity levels, and in these cases the guidance reflects this by setting out less than four levels of maturity.
Similarly, there are some cases where there may be differences in approach across only two or three maturity levels, and in these cases the guidance reflects this by setting out less than four levels of maturity.
If a managing agent does not agree with their expected maturity this should be discussed with their Account Manager in the first instance. The relevant oversight team will be involved in discussions.
New entrants to Lloyd’s (with the exception of Syndicates in a box) will be subject to the Making It Happen process and as part of this there is an assessment across all of the Principles. There may be some Principles where the expected maturity is assessed as Not Applicable until the syndicate builds out its operations and its risk profile develops in line with this. New syndicates have a separate syndicate categorisation of New for the first three years, after which they would be categorised in line with the standard approach.
Syndicates in a box do not go through the Making It Happen process but will be informed of the expected maturity across most Principles shortly after they commence underwriting.