Contract Layering & Sub-delegation

Types of delegated authority this guidance is relevant to

• Binding authority agreements
• Coverholder appointment agreements
• Service company agreements
• Line slips
• Consortia

Key Definitions 

Primary Contract: The contract at the highest level of a layered and/or sub-delegated arrangement.

Secondary Contract: A contract operating beneath a primary contract within a layered and/or sub-delegated arrangement.

Sub-delegation: Where a third-party delegates the activities they have been given authority to carry out to another third-party. This includes layering of contracts of delegation.

Lloyd’s requirements

The Requirements made pursuant to the Intermediaries Byelaw sets out Lloyd’s appetite when it comes to sub-delegation.

Referral to Lloyd’s

Lloyd’s and Lloyd’s Insurance Company (LIC) permit consortia and service companies to participate in binding authority agreements, coverholder appointment agreements and line slips without prior approval, subject to the requirements and expectations set out in this guidance.

All other forms of contract layering or sub-delegation require Lloyd’s and LIC’s prior approval. Referral requests must come from a managing agent and should demonstrate how the arrangement meets the requirements and expectations set out in this guidance for both contract layering and sub-delegation, unless otherwise stated and satisfy referral criteria. Requests should be submitted to coverholders@lloyds.com.

Regulatory requirements

Managing agents must ensure that any regulatory implications arising from the opportunity are understood and appropriately managed before proceeding. This includes considering applicable requirements and restrictions in relevant jurisdictions through Crystal+ and engagement with country managers where necessary.

Tax implications

Managing agents must ensure that any tax implications arising from the opportunity are identified and appropriately addressed. To do so, where necessary advise can be sought from TaxDept@lloyds.com and/or LloydsEurope.Tax@lloyds.com.

Financial Crime Provisions

Financial crime responsibilities, including sanctions screening and other relevant controls, must be clearly allocated and documented. Where contract layering exists, responsibilities must be defined consistently across all layers and must not conflict, ensuring clear accountability and the effective operation of financial crime controls throughout the arrangement.

Aligning eligibility of secondary contracts

Managing agents must ensure that any secondary contract complies with the eligibility requirements, restrictions and conditions applicable to the capacity provided under the primary contract. Where capacity may only be deployed through specific entities or structures, only eligible participants may be included in the secondary contract. For example, capacity provided through a LIC consortium may only support contracts involving LIC-approved entities operating within the LIC framework. Compliance should be verified through the stamp decision information within Crystal+. The intended outcome is that capacity is deployed only through arrangements and entities that are permitted under the applicable capacity framework, ensuring the layered structure remains consistent with all relevant licensing, regulatory and operational requirements.

Template wording changes

Managing agents must ensure that contractual documentation accurately reflects any sub-delegation or contract layering arrangement and that any required amendments are reviewed and approved before execution. Where LIC capacity or licensing considerations apply, deviations from LIC template wording must be submitted to LIC for review. Requests should be submitted to LloydsEurope.DelegatedAuthority@lloyds.com with tracked changes.

Registration of binding authority agreements, coverholder appointment agreements or service company agreements with Lloyd’s

Unless Lloyd’s has issued dispensation to say otherwise, managing agents, whether lead or follow, must ensure that Lloyd’s systems accurately reflect capacity participation across all relevant contractual arrangements. This applies to any primary or secondary contract that is a binding authority agreement, coverholder appointment agreement or service company agreement, and to both lead and follow Managing agents. Guidance is available in the DCOM Support Centre Knowledge Base on creating registrations in DCOM.

Year of account 

In layered arrangements, the year of account is determined by the inception date of the primary contract in accordance with the inception date allocation guidelines. The applicable year of account should be specified within both the primary and secondary contracts where possible. For continuous contracts, refer to the continuous contracts guidance. Year of account transfers will need to be agreed by all of the capacity providers involved.

Lloyd’s expectations of managing agents

Managing agents, whether acting as lead or follow, are accountable for ensuring that sub-delegation and contract layering arrangements are appropriately governed, remain within their risk appetite and deliver the intended regulatory, operational and customer outcomes. Oversight must be proportionate to the nature, scale and complexity of the arrangement and enable the managing agent to identify, assess and address risks across the full distribution chain.

Managing agents should be able to demonstrate to Lloyd’s that these outcomes are being achieved.

Claims

Managing agents must ensure that claims handling remains effective throughout any sub-delegation or contract layering arrangement and that customer outcomes are not adversely affected by the distribution chain. Managing agents should consider whether the structure could affect claims oversight, decision-making, communication or service delivery and take appropriate steps to mitigate any identified risks. For further information, refer to the delegated claims guidance.

Data transparency

Managing agents must maintain sufficient transparency over sub-delegation and contract layering arrangements to understand the parties involved, the risks to which their capacity is exposed, and how those risks are managed. They must have access to sufficient information to identify and prevent duplicate participation on the same risk and to exercise effective oversight of the arrangement.

Managing agents should also seek to ensure that contractual provisions remain aligned throughout the distribution chain and that secondary contracts are reviewed before they are agreed.

Managing agents and brokers should ensure that premium and claims processing arrangements provide appropriate transparency and do not undermine the visibility, traceability or effective oversight of transactions. Where layered structures are used, consideration should be given prior to inception of any operational or systems constraints, including engagement with Velonetic where appropriate, prior to inception.

Value of the distribution chain

Managing agents should consider whether the distribution chain remains proportionate and delivers value to all parties involved, including customers. Particular consideration should be given to the impact of extended distribution chains on customer outcomes, claims handling, oversight and remuneration. Managing agents should have regard to Lloyd's fair value guidance when making this assessment.

Commission/fees

Contract layering can increase the level and complexity of remuneration across the distribution chain. Managing agents should maintain an appropriate understanding of commission and fee arrangements to ensure they remain transparent, proportionate and do not result in customer detriment, duplication or unnecessary cost.

Allowing coverholders to lead contracts such as line slips

Notwithstanding Lloyd’s prior approval, managing agents should only permit a coverholder to lead a line slip where it is satisfied that the arrangement aligns with their risk appetite and governance standards. Appropriate controls should be in place to ensure effective due diligence, oversight, auditability, risk transparency and reporting to participating markets. Wherever practicable, placements should be conducted electronically with a clear and demonstrable audit trail. Any arrangement that permits a coverholder to perform a lead role should be subject to oversight, performance monitoring and audit arrangements proportionate to the nature, scale and complexity of the activity, reflecting the managing agent's ongoing accountability for the business written.

Exit provisions

When sub-delegating or layering contracts of delegation, managing agents should ensure appropriate exit provisions are in place, including consideration of contractual interdependencies, non-renewal and termination scenarios, and alignment of notice periods and termination rights across the distribution chain.

Last reviewed 26/10/2026

Last updated 29/10/2026