Types of DA this guidance is relevant to
- Binding authority agreements
- Coverholder appointment agreements
- Service company agreements
- Line slips
- Consortia
Wording expectations for contracts of delegation
Key definitions
Contract of delegation: A contract that formalises the delegation of underwriting, the issuance of policy documentation or claims handling on behalf of Lloyd’s syndicates. It defines the roles, responsibilities, and obligations of all parties involved, ensuring clarity and alignment throughout the contractual relationship.
Why guidance is needed
To ensure consistency throughout the lifecycle of a contract of delegation of underwriting authority or the issuance of policy documentation. There is a separate guidance topic regarding oversight of contracts of delegation of underwriting authority, so for the expectations of managing agent oversight, please go to that topic.
This guidance is limited to contracts of delegation of underwriting authority or the issuance of insurance documentation and does not deal with requirements for contracts of (re)insurance.
Lloyd’s requirements
When preparing a contract of delegation, managing agents must ensure that the agreement includes all required terms and complies with applicable regulatory standards—specifically, at Lloyd’s, those set out in Paragraph 10 of the Requirements made pursuant to the Intermediaries Byelaw.
Use of LMA model wordings is recommended as they are drafted to be compliant with Lloyd’s requirements; however, their use is not mandated, apart from for Lloyd’s Insurance Company (LIC). The LMA model wordings can be located on the Lloyd’s Wordings Repository.
If bespoke wordings are being used, they must:
- Comply with the Intermediaries Byelaw, Part E, and all associated requirements
- Where the wording deviates from LIC templates, LIC review is required where LIC capacity or licensing considerations apply, and legal review should be obtained where there are material deviations. The lead managing agent should own and coordinate the review and approval process, ensuring sign-off is completed prior to execution. To obtain approval for these, please email LloydsEurope.DelegatedAuthority@lloyds.com with the tracked changes
- Be submitted to Velonetic for checking against a subset of Lloyd’s Binding Authority Quality Assurance Tool and compatibility with Velonetic processing requirements
Binding authority agreements, coverholder appointment agreements and service company agreements
LMA and LBS template wordings already cover Lloyd’s requirements, however, below is a table showing the requirements for binding authority agreements, coverholders appointment agreements and service company agreements as set out in the Requirements made pursuant to the Intermediaries Byelaw:
| Requirement | Further guidance |
| Syndicates and respective managing agents providing capacity | Contract lead Where a contract of delegation of underwriting authority or the issuance of policy documentation involves more than one entity providing capacity, a designated lead managing agent must be named in the agreement. The lead managing agent must represent the syndicates and act as the central coordination point. This is especially important when it comes to issues raised as a Third-Party Material Issue. The managing agent of the lead syndicate is responsible for ensuring the contract enables following managing agents to: • Receive sufficient and timely information • Fulfil their own obligations in accordance with Lloyd’s principles of doing business Non-Lloyd’s Capacity A contract of delegation of underwriting authority or the issuance of policy documentation may include a mix of Lloyd’s and non-Lloyd’s capacity, but this requires specific contractual adjustments. The wording must be amended to accommodate both types of capacity. This ensures full compliance with market requirements and avoids processing delays. Where Lloyd’s capacity follows a non-Lloyd’s lead, the leading entity must be: • An insurance company • Not a Managing General Agent (MGA[KW6.1][RH6.2]) A gap analysis must be conducted between: • The company market wording and • The LMA model templates This ensures all Lloyd’s or LIC specific requirements are properly reflected in the contract. If this is not completed, the contract may be rejected by Velonetic during submission. The contract must also cater for the sharing of risk, premium, claims and audit information to the follow market. The contract must designate a Lloyd’s lead who is responsible for: • Registering the contract on Lloyd’s systems • Ensuring processing through market systems • Overseeing reporting obligations • Upholding appropriate customer outcomes for the Lloyd’s portion of the risk Follow Market Delegating Authority to the Lead Where a contract of delegation of underwriting authority or the issuance of policy documentation allows the lead managing agent to agree amendments on behalf of other managing agents, this authority must be: • Clearly defined and limited • Designed to protect the interests of the follow market Unlimited or excessive delegation to the lead managing agent is unacceptable. Contracts must explicitly state the scope and limits of the lead’s authority. Market Bulletin Y4836 sets out what the lead managing agents should not be permitted to agree on behalf of the follow market. |
| Period | Regarding continuous contracts there is specific guidance. |
| Scope of authority including any limitations | No further DA guidance |
| Premium income limit | No further DA guidance |
| Limits of liability | No further DA guidance |
| Risk location, location of the policyholder/insureds and territorial scope of the policies | All Lloyd’s business must comply with Lloyd’s licensing and trading rights. Therefore, each contract of delegation of underwriting authority or the issuance of policy documentation must clearly specify: • Regulatory risk location • Policyholder/insured domicile • Territorial scope of cover This applies to both insurance and reinsurance business. The managing agent must ensure these terms specify the countries, states and provinces where the third-party can and cannot write business. The language must be clear and unambiguous. “Incidental risk location” is not recognised by Lloyd’s; therefore, please list the location as defined in Crystal+ For reinsurance, Space and Cargo, the appropriate language is: “Worldwide subject to the limitations of Lloyd’s trading rights as per Lloyd’s Crystal+” |
| Financial crime provisions | Financial crime – Delegated authorities |
| Reporting requirements | Reporting Standards |
| Handling of premiums and claims monies | No further DA guidance |
| Termination, cancellation and non-renewal provisions including giving notice | No further DA guidance |
| Run-off provisions | No further DA guidance |
| Jurisdiction and governing law of the contract of delegation | No further DA guidance |
| Calculation of premiums, discounts, commissions, brokerages, fees, charges and expenses | No further DA guidance |
| Claims handling provisions | |
| Complaints handling provisions | Complaints - Lloyd's |
| Address the mandate of lead security on policy documentation issued to policyholders | Mandate of Lead Security - Lloyd's |
| UMR | Market bulletin Y4569 sets out the requirements for UMRs. Each contract must have only one UMR, this applies even when using a twin contract template. If a contract of delegation of underwriting authority or the issuance of policy documentation involves multiple coverholders, it’s important to consider how data will be shared between them. Due to Lloyd’s system ecosystem coverholders may have visibility into each other’s data. If a data sharing agreement is not in place between the coverholders involved, then the coverholders must be separated into individual contracts of delegation of underwriting authority or the issuance of insurance documentation with separate UMRs. |
| Names and addresses of the entities being delegated to | If a contract of delegation involves multiple coverholders, it’s important to consider how data will be shared between them. Due to Lloyd’s system ecosystem coverholders may have visibility into each other’s data. If a data sharing agreement is not in place between the coverholders involved, then the coverholders must be separated into individual contracts of delegation with separate UMRs. |
| Name and address of the broker | There should only be one broker named on the binding authority agreement, coverholder appointment agreement or service company agreement. Managing agents should ensure that where the contract of delegated underwriting is arranged by a broker, they are satisfied that the broker has the necessary resources to administer and service the contract effectively. The broker interventions and dispute guide can be located on this webpage As a Broker - Lloyd's If it is a direct relationship with no broker, then the entity carrying out the broker role should be named in this part. Consideration should also be given to the following: • Placing contracts of delegated underwriting with a follow market • The documentation that needs to be produced • Premium processing and handling including local taxes • Claims processing and handling • Understanding of Lloyd’s systems • Reporting risk, premium and claims to the follow market • Appropriate record keeping • Ensuring the appropriate level of errors and ommissions coverage is in place to cover direct placement of business. |
| Person with overall responsibility for the contract of delegation | Key staff Remote working |
| Wordings to be used for the policies issued to policyholders | No further DA guidance |
| Contract certainty | Managing agents must ensure that a contract certain agreement is in place with every third-party prior to inception of the arrangement. Contracts must adhere to relevant provisions in the Requirements made pursuant to the Intermediaries Byelaw. If the above cannot be achieved prior to inception, the third-party must not act on any authority until the contract is fully executed by all parties. There is also some guidance regarding retrospective endorsements which can be found on our website. Regarding registration of contracts, please refer to the oversight topic. |
| Material amendments | Where amendments to a contract of delegation of underwriting authority or the issuance of policy documentation would result in a material change to the original agreement, managing agents must consider whether: • An endorsement is appropriate • Or if the contract should be cancelled or short closed and replaced with a new UMR Material amendments may include: Scenario Recommended Action Alternatively, you could run both the Lloyd’s and LIC aspects under separate agreements with separate UMRs concurrently until renewal when they can be combined to be a twin from inception. Scenario Recommended Action Scenario Recommended Action These types of changes affect the legal structure and party obligations and therefore merit a full reset of the contract documentation. |
Line slips and Consortia
Below is a table showing the requirements for line slips and consortia as set out in the Requirements made pursuant to the Intermediaries Byelaw:
| Requirement | Further guidance |
| Syndicates and respective managing agents providing capacity / Security Details | Non-Lloyd’s Capacity Although the Definitions Byelaw defines a consortium as an agreement involving delegated authority between Lloyd’s managing agents, there is growing market interest in similar arrangements involving non-Lloyd’s participants acting as the Consortium Manager, with Lloyd’s managing agents following. If a non-Lloyd’s company leads, Lloyd’s does not recognise it as a Lloyd’s consortium. Where there is any non-Lloyd’s participation in a consortium: • The arrangement is not a “Lloyd’s” consortium and must not be branded as such or use “Lloyd’s”. • Lloyd’s branding, including the Lloyd’s sleeve and logo, must be removed. • If any Lloyd’s participation exists, the LMA model wording should be used, with amendments to include non-Lloyd’s participants. The LMA wordings can currently be located on the Lloyd’s Wording Repository. • If a non-Lloyd’s entity is the Consortium Manager, a Lloyd’s syndicate must be nominated as the Lloyd’s lead and confirmed within the agreement. • Claims processes need to be fair, transparent and allow for appropriate oversight of claims by the Lloyd’s follow market. LIC does not permit any sub-delegation of authority to non-Lloyd’s entities. All delegation beneath a LIC consortium must remain within LIC approved entities. A line slip may include a mix of Lloyd’s and non-Lloyd’s capacity, but this requires specific contractual adjustments. The wording must be amended to accommodate both types of capacity. This ensures full compliance with market requirements and avoids processing delays. Where Lloyd’s capacity follows a non-Lloyd’s lead, the leading entity must be: • An insurance company • Not a Managing General Agent (MGA) A gap analysis must be conducted between: • The company market wording and • The LMA model templates This ensures all Lloyd’s or LIC specific requirements are properly reflected in the contract. If this is not completed, the contract may be rejected by Velonetic during submission. The contract must also cater for the sharing of risk, premium, claims and audit information to the follow market. The contract must designate a ‘Lloyd’s Lead[KW14.1][RH14.2][RH14.3]’ who is the Lloyd’s managing agent responsible for: • Ensuring processing through market systems • Overseeing reporting obligations • Upholding appropriate customer outcomes for the Lloyd’s portion of the risk Single Syndicate Consortium Arrangements Where a managing agent wants to set up a consortium agreement, but it is written 100% by a single syndicate, it is not a consortium and is not permitted by Lloyd’s or LIC to be registered as a consortium because they lack delegation between managing agents. |
| Period | Regarding continuous contracts there is specific guidance |
| Scope of authority including any limitations | Hold Cover Authority Under a line slip, in line with longstanding market practice, Brokers may sometimes be given authority to ‘hold cover’ on behalf of managing agents. This means that: • A broker may be permitted to confirm cover to the policyholder, provided the Agreement Parties have quoted a premium and finalised all contractual terms and conditions for that risk. • The Agreement Parties may impose additional pre-conditions for the broker to resolve before cover is provided. Managing agents should remain vigilant in monitoring the use of hold covered clauses. While the practice of ‘hold covered is widely accepted, the broker must not be permitted without appropriate coverholder approval, to: • Vary the premium quoted by the Agreement Parties. • Alter contractual terms and conditions set by the Agreement Parties. • Modify any pre-conditions set by the Agreement Parties. • Issue policy documentation Master/Group policies Master policies/Group policies must not be written by line slips and this should be documented in the line slip agreement. Consortia must clearly define the types of risks the Consortium Manager is authorised to bind. Consideration should be given to: • Referral criteria to follow underwriters if the agreement is broadly scoped. • Accepted limits and risk aggregation, including referrals to follow underwriters within a set timeframe. • Potential aggregation clashes with other risks written by the syndicate. |
| Premium income limit | No further DA guidance |
| Sum insured / Limits of Liability | No further DA guidance |
| Situation / Regulatory Risk location, location of the policyholder/insureds and territorial scope of the policies | All Lloyd’s business must comply with Lloyd’s licensing and trading rights. Therefore, each contract of delegation of underwriting authority or the issuance of policy documentation must clearly specify: • Regulatory risk location • Policyholder/insured domicile • Territorial scope of cover This applies to both insurance and reinsurance business. The managing agent must ensure these terms specify the countries, states and provinces where the third-party can and cannot write business. The language used should be clear and unambiguous “Incidental risk location” is not recognised by Lloyd’s, therefore, please list the location as defined in Crystal+ For reinsurance, Space and Cargo, the appropriate language is: “Worldwide in line with Lloyd’s trading rights as per Lloyd’s Crystal+” |
| Financial crime provisions | Financial crime – Delegated authorities |
| Reporting requirements | Reporting Standards |
| Handling of premiums and claims monies | No further DA guidance |
| Termination, cancellation and non-renewal provisions including giving notice | No further DA guidance |
| Run-off provisions | No further DA guidance |
| Jurisdiction and governing law of the contract of delegation | No further DA guidance |
| Calculation of premiums, discounts, commissions, brokerages, fees, charges and expenses | Rating Transparency Consortia must specify the basis for calculating premiums, discounts, commissions, brokerages, fees, and expenses. Any changes thereto must also be communicated to follow underwriters in advance for their agreement to the same. Preferential terms (e.g., Consortium Manager fees, differential premiums, or commissions) must be fully transparent to all managing agents involved in the consortium. |
| Claims administration | |
| Complaints handling provisions | Complaints - Lloyd's |
| Address the mandate of lead security on policy documentation issued to policyholders where applicable | To understand whether this is applicable to the policy, please visit the FAQs. |
| Name and address of the broker | There should only be one broker named on the line slip.Managing agents should ensure that where the contract of delegated underwriting is arranged by a broker, they are satisfied that the broker has the necessary resources to administer and service the contract effectively. The broker interventions and dispute guide can be located on this webpage: As a Broker - Lloyd's. |
| Reference number to identify the contract of delegation | No further DA guidance |
| Contract leader / Slip Leader | Drop-Down Leaders and Alternative Leaders Arrangements A drop-down arrangement is a provision in a line slip that allows another insuring party, other than the original named lead (i.e. a follower on the line slip), to underwrite a risk or group of risks in place of the specified claims lead. Lloyd’s expects this provision to be triggered only when the named lead is unable to write the risk, such as when the maximum line has already been committed through another placement. In contrast, an alternative leaders arrangement allows for multiple named leaders on the line slip. In this scenario, the broker may approach any of the named leaders at the outset, while those not chosen to lead a particular risk would still be bound as part of the follow market. Managing agents should be aware that increasing the number of potential leaders can make due diligence more complex and may reduce visibility for the follow market regarding risks written under such arrangements. Lloyd’s encourages managing agents to exercise caution and maintain effective communication throughout the lifecycle of the line slip to ensure sufficient underwriting and claims information is available to all parties. Where drop-down leaders or alternative leaders are utilised, their operation must be carefully considered. These arrangements should be clearly documented, ensuring transparency for all participating managing agents, and must be legally certain. Their use should be suitably limited to acceptable circumstances. Under both arrangements, following managing agents should assess: • Their comfort level with the number of drop-down or alternative leaders and their capabilities. • The potential for adverse selection before entering into the agreement. • The variation in line sizes depending on which leaders decline a risk. |
| Contract certainty | Managing agents must ensure that a contract certain agreement is in place with every third-party prior to inception of the arrangement. Contracts must adhere to relevant provisions in the Requirements made pursuant to the Intermediaries Byelaw. If the above cannot be achieved prior to inception, the third-party must not act on any authority until the contract is fully executed by all parties. There is also some guidance regarding retrospective endorsements which can be found on our website. |
| Material amendments | Where amendments to a contract of delegation of underwriting authority or the issuance of policy documentation would result in a material change to the original agreement, managing agents must consider whether: • An endorsement is appropriate • Or if the contract should be cancelled or short closed and replaced with a new UMR Material amendments may include: Scenario Recommended Action Alternatively, you could run both the Lloyd’s and LIC aspects under separate agreements with separate UMRs concurrently until renewal when they can be combined from inception. Scenario Recommended Action These types of changes affect the legal structure and party obligations and therefore merit a full reset of the contract documentation. |
Last reviewed 03/09/2026
Last updated 10/09/2026