Delegated Underwriting Guidance

Key definitions

Portfolio Solutions: Underwriting arrangements designed to manage a collection of diverse risks as a single portfolio, rather than assessing and pricing each risk individually.

Digital Follow: An underwriting approach where follow capacity is deployed using digital, rules based or algorithmic processes that align with a lead underwriter’s terms and pricing. Participation occurs within clearly defined parameters and is supported by appropriate controls, governance, and oversight, enabling syndicates to follow selected risks or portfolios efficiently while retaining clear underwriting accountability and disciplined risk boundaries.

Why guidance is needed

Delegated underwriting remains a core and valuable part of the Lloyd’s market. This guidance is intended to support managing agents in deploying delegation effectively, while fostering underwriting discipline, accountability and confidence across the market.

Delegated underwriting continues to evolve in both scale and sophistication as underwriting models become increasingly digital and data-enabled. As delegated underwriting matures, technology enabled monitoring, automated controls and near‑ real‑ ‑time data are increasingly important tools to assist with effective oversight. In response, Lloyd’s has developed underwriting guidance to support a shared understanding of what good delegated underwriting looks like, aligned to the principles set out in Principles Based Oversight, including sub-principle 3 (DUA business).

This guidance sits alongside market guidance and requirements for Delegated Authority and is non‑prescriptive in nature. Rather than introducing additional processes or controls it is intended to reinforce positive underwriting behaviours and support managing agents in maintaining proportionate, robust oversight as delegated arrangements grow in complexity, while reinforcing that underwriting judgement and accountability remain with the managing agent throughout the lifecycle of the arrangement.

How to read this guidance

This guidance should be read as a framework for judgement, where relevant, and not a checklist.

It does not introduce new requirements or replace existing underwriting principles or Delegated Authority operational guidance. Instead, it highlights where judgement, capability and active oversight are particularly important when underwriting is delegated.

The guidance covers delegation of underwriting to coverholders, underwriting Portfolio Solutions, and the use of Digital Follow models. Across each area, it draws out key considerations that support sustainable performance, effective oversight and continued alignment with underwriting appetite.

Coverholders

Delegating underwriting to coverholders allows managing agents to extend distribution and access specialist expertise and, when deliberately designed and well governed, can deliver sustainable performance across the cycle. Delegation does not transfer underwriting accountability, and managing agents remain responsible for underwriting outcomes and portfolio performance throughout the life of the delegated authority agreement. Oversight is therefore a core underwriting responsibility with accountability sitting with underwriting and delivered in partnership with Delegated Authority oversight teams including claims, compliance and operations. Effective coverholder arrangements combine clear upfront design, high-quality data and ongoing technical engagement, recognising that oversight is performed at distance and that performance risk increases quickly where relationships, data and discipline weakens.

Managing agents should consider the following when delegating underwriting to coverholders:

Pre-Delegation

• Select coverholders who add genuine value and complement the wider strategy and appetite of the managing agent
• Agree clear, standardised data and reporting requirements upfront that provide timely visibility of premium and claims to support forward-looking assessment of portfolio ultimate performance
• Assess coverholders data maturity early. Prioritise coverholders whose data strategy or maturity aligns with and enhances managing agent’s own data strategy, supporting data-driven oversight and a trajectory to a near-real-time view of performance
• Acquisition arrangements should demonstrate appropriate alignment of interests, remain proportionate to effort, responsibilities and risk, and be kept under regular review
• Where profit-share arrangements operate, they should be designed to align incentives with sustainable underwriting performance and portfolio quality, supported by clear contractual terms and robust accrual mechanisms
• The level of authority, pricing parameters and referral triggers should be set within contractual frameworks to reflect the delegated model and underlying risk profile, consistent with appetite
• Underwriting should reflect a clear understanding of the regional risk environment in which the relevant insurance product operates

During the lifecycle

• Appropriate and attentive underwriting resource should be in place to actively manage delegated arrangements on an ongoing basis throughout the lifecycle
• Delegated underwriting should be supported through holistic DA oversight, with clear accountability and effective collaboration across wider DA teams 
• Undertake regular, quantitative KPI monitoring to provide early visibility of trends including accumulation and concentration exposures, with appropriate visibility and controls to support timely intervention
• Place strong emphasis on wordings, documentation quality and distribution conduct, recognising the underwriter’s distance from the end customer
• Given the long-term nature of many delegated relationships, consider use of Continuous Contracts where appropriate
• Recognise the value of structured, in-person engagement between underwriters and coverholders as part of supporting an effective review of performance, early identification of issues, and stronger underwriting outcomes
• Undertake periodic independent or peer review as a means of providing constructive challenge and mitigating familiarity or relationship bias
• Maintain regular technical dialogue with coverholders on performance, pricing trends, portfolio development and emerging risks.
• For growing, newer or innovative coverholders, consider proportionate support, or phased development, recognising staged capability and controlled growth without compromising underwriting and data standards
• Claims and complaints: ensure routing and handling support underwriting intent with appropriate feedback loops
• Use audit findings as part of ongoing oversight to inform future delegation strategies and drive continuous improvement
• Set clear termination and run-off provisions and maintain engagement throughout to mitigate the risks of poorly managed run-off

Portfolio Solutions

A Portfolio Solutions approach differs from traditional single-risk underwriting by focusing on the performance of an aggregated set of multi-class risks rather than individual placements. A Portfolio Solutions approach can take various forms, from participation on index-seeking portfolio trackers which are broker-led to more bespoke follow solutions aligned to strategy, expertise or distribution.  Any participation is expected to sit clearly within established underwriting governance and risk appetite frameworks.

These arrangements have recently grown in popularity. Bundling risks can streamline placement and enable strategic use of capacity where participation is a deliberate underwriting choice, provided it is underpinned by strong data, effective oversight and proportionate administration cost allocation. Demand is also increasing as brokers seek multi-line, flexible structures that simplify placement and support longer-term partnerships across the market cycle, placing greater emphasis on managing agents’ ability to evidence informed participation decisions.

Portfolio underwriting, however, carries distinct risks. Poor or delayed data can obscure performance issues and delay effective data-driven decision-making, while aggregated portfolios may mask concentrations or underperforming segments that would otherwise trigger underwriting action at a risk or class level. Index-seeking Portfolio Trackers with poor indexation may drift into unintended shapes and create exposure to adverse risk selection. These models therefore rely on disciplined oversight, strong data maturity and an understanding of indexation mechanics supported by defined performance metrics and intervention thresholds. Passive or ‘blind follow’ facilities carry significant risk and managing agents should exercise active oversight to ensure alignment with appetite and portfolio objectives and take timely action where performance or risk characteristics deviate from expectations.

There has been a growing adoption of a ‘Lead-follow’ model, particularly within index-seeking portfolio tracker arrangements. Lloyd’s oversight of these facilities has evolved accordingly, with a two-tier approach now in operation to support sustainable market participation and clearer performance visibility. Across both tiers, Lloyd’s actively engages with brokers, leads and followers and monitors indexation. For tier 1 facilities, where materiality is high, this is complemented by enhanced monitoring, including the requirement for distinct classes to support more granular performance oversight. This approach reinforces the expectation that all managing agents retain full accountability for underwriting outcomes, regardless of their role within a facility.

Managing agents should consider the following when underwriting Portfolio Solutions arrangements: 

• Define the operating model clearly (e.g. index-seeking broker-led portfolio trackers, or bespoke multi-class follow) with transparent pipeline and entry criteria aligned with overall strategy
• Define target portfolio shape and clarify scope of business in appetite
• Allocate appropriate resource with portfolio-level expertise
• Apply structured monitoring of business mix, rate, attachment points, geography, with clear triggers for variance to maintain target shape and performance
• Robust leader vetting and dependency assessment at onboarding, with ongoing review to ensure continued suitability and resilience
• Ensure contracts allow mid-term adjustments where mix or performance diverges from expectations
• Seek to maintain a rolling, and where appropriate near real-time view of performance on an ultimate basis
• Set clear exit or re-underwriting criteria for when the portfolio no longer aligns with appetite or performance expectations

Additionally, for index-seeking Portfolio Tracker arrangements:

• Ensure carved-out resource has appropriate underwriting and analytical skill set supported by suitable systems capability needed to support these high data-ingestion models
• Define indexation methodology, inclusion/exclusion rules, measurement intervals, thresholds, and guardrails upfront
• Ensure the partner providing indexation metrics has demonstrable data maturity and transparency
• When leading, define in-scope portfolio and terms via clear underwriting parameters
• When following, review leaders’ methodology and constructively challenge as appropriate to maintain alignment with appetite
• Monitor indexation at appropriate level and frequency to ensure portfolio shape aligns with expectations
• For off-ramping, set clear exit or re-underwriting criteria with triggers linked to indexation, performance, data quality, and business mix, enabling early action if portfolio shifts materially
• Review underwriting parameters periodically and introduce mid-term adjustments where appropriate to maintain discipline   
• Monitor performance to identify emerging trends; consider appropriate qualitative and quantitative indicators to inform insights and decision-making

A useful resource on indexation and portfolio trackers is available on the LMA website.

Digital Follow

Digital Follow underwriting can deliver speed, consistency and efficiency, but only where there is clarity around the parameters, limits and rules driving automated decisions. Transparency and control are critical. Managing agents should have a clear strategy for how Digital Follow aligns with their appetite, rather than relying passively on the lead. Follow models range from simple rules-based engines through to data-enhanced structures and advanced algorithmic approaches, making it essential to understand the construct in use, the data and assumptions underpinning it, and how limits and triggers operate. This supports effective challenge, prevents blind follow and keeps decisions aligned with strategy.

Where third-party technology or operational support is used, it should meet appropriate outsourcing expectations, recognising that Digital Follow involves dual delegation—to the lead and to the entity operating the model. These arrangements can add real value, but costs and structure should reflect the role performed and the reliance placed on them.

As automation accelerates decision-making, followers must have the structure and tools to continually assess alignment with appetite, rather than defaulting to passive acceptance.  The use of Digital Follow does not dilute underwriting accountability, and managing agents remain responsible for underwriting outcomes regardless of the level of automation applied.

Managing agents should consider the following when underwriting in this evolving space:

• Define whether the Digital Follow model is built in-house, provided by a third party, or delivered through a hybrid approach so roles, accountability and oversight expectations are clear
• Set out the model type and parameters, including the rules, limits, triggers and assumptions it relies on, ensuring they are transparent, understood and aligned with appetite and broader strategy
• Allocate appropriate underwriting, pricing, analytics and data-governance expertise, supported by a reliable lead with strong data maturity
• Maintain governance over automated decisions, including ownership of model updates, version control and supporting documentation
• Ensure systems provide appropriate and timely visibility of automated decisions and participation to enable monitoring of emerging trends and informed performance oversight
• Build in flexibility to recalibrate or off-ramp mid-term where performance or portfolio shape diverges materially from expectations
• Use manual controls for exceptions through referral triggers, overrides and pause functions to manage unexpected outcomes or signs of drift
• Maintain transparency and auditability by keeping a clear record of data inputs, rules, assumptions and decisions
• Set pragmatic performance expectations, such as participation rate or loss ratio indicators, and review them regularly
• Where third-party technology or operational support is used, apply proportionate oversight, recognising the dual delegation to both the lead and the model operator, and ensure administration costs reflect the value delivered
• Set clear termination and run‑off provisions, including consideration of third-part involvement and maintain engagement throughout to mitigate the risks of poorly managed run‑off