Retrospective endorsement guidance

Key definitions

Retrospective endorsements are endorsements where the effective date predates the endorsement being formally agreed by all parties. By way of an example, an endorsement that is agreed and executed by the parties on 1 June but is stated to take effect from 1 January of that same year (six months earlier) is considered to be a retrospective endorsement.

Why guidance is needed

Guidance is required to highlight the potential risks associated with retrospective endorsements and ensure they are used appropriately. Lloyd’s recognises that backdating may occasionally be required but expect managing agents to have the appropriate controls in place to prevent these from occurring regularly. 

Lloyd’s requirements

Maintain Clear Records
Keep a complete and auditable record of all retrospective endorsements, including the rationale for their use. Managing agents should be able to provide any additional information requested by Lloyd’s to explain the circumstances leading to the endorsement.

Register Changes Correctly in DCOM
If an endorsement affects data held in DCOM, ensure the change is accurately captured in DCOM, with correct confirmation details and effective dates recorded.

Support Lloyd’s Oversight Activity
As part of the Delegated Oversight Manager touch points, Lloyd’s may assess the use of retrospective endorsements. Managing agents may be asked to provide further explanation or evidence where concerns arise around appropriateness, timeliness or customer outcomes.

Demonstrate No Customer Detriment
Managing agents must have processes in place to ensure that the use of retrospective endorsements does not result in customer detriment and must be able to evidence how this has been assessed and safeguarded.

Lloyd’s expectations for managing agent oversight

Managing agents are expected to maintain robust processes that ensure endorsements are agreed and bound before they take effect. Retrospective endorsements should only occur where strictly necessary, not as a result of inefficiency or poor oversight of coverholder relationships.

Failing to enter into endorsements promptly and relying on them to operate retrospectively can create legal uncertainty and may disadvantage policyholders, coverholders, or the managing agent.

In some cases, backdated changes may indicate more serious issues, such as a coverholder acting outside its authority or making amendments that alter coverage in a way that negatively affects the policyholder.

Managing agents should apply heightened scrutiny where retrospective endorsements involve material or sensitive aspects of the binding authority agreement, including (but not limited to):

• UMR changes (other than those arising from a midterm broker change)
• Agreement template changes
• Changes to participating insurers on the binding authority
• Year of Account amendments
• Inception or expiry date changes
• Parameters of the binding authority, especially where the change may alter risk acceptance or coverage, such as:
  - Class of business
  - Coverage or exclusion
  - Territorial limits
  - Limits, deductibles/excess
  - Period of insurance
  - Income or aggregate limits

Where retrospective changes affect the underlying capacity or have potential customer impact, managing agents must ensure policyholders are notified and, where appropriate, their agreement obtained before the change comes into effect.