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Claims handling

As part of the response to the challenging market situation caused by COVID-19, we are making the following changes and setting out Lloyd’s expectations as described here for:

  1. 2010 Lloyd’s Claims Scheme (Combined)
  2. A requirement for managing agents to adopt the Co-Lead Claims Agreement - LMA9186 for the selection of a leader only or reduced claims agreement parties for all Lloyd’s co-lead binding authority placements
  3. Waiver of ‘Proof of Loss’ requirements (unless required under any applicable regulation)

These changes are designed to help you and your teams respond effectively during a time of uncertainty and considerable operational challenge, whilst providing direct benefits to our policyholders, managing agents, brokers and delegated agents.

A consultation on these changes has been carried out with the LMA’s Claims Committee and LIIBA both of which have confirmed their support for the changes. These changes are effective from 3 April 2020 and will apply until 31 December 2020 (when they will be reviewed).

Lloyd’s will continue to monitor managing agent performance as we do today through our use of data and performance metrics.

2010 Lloyd’s Claims Scheme (Combined)*

As set out in Blueprint One, we had already planned to release changes to the claims scheme during Q2 2020. We have decided to make the following changes at this stage, which will also help inform any longer-term changes to the scheme.
Until 31 December 2020 we are amending the scheme requirements to empower the Lead to handle a greater volume of claims as a single agreement party by:

  1. Increasing the financial thresholds for when a ‘standard claim’ becomes a ‘complex claim’ (as those terms are defined in the Claims Scheme, see paragraph 2(d)), from GBP 250k and 500k to GBP 500k and 1m respectively**. On a financial basis only, we estimate that this equates to around 2,300 additional open market claims (and approximately 16,000 related transactions) currently triaged as complex that can now be handled by the Lead only as a standard claim.
  2. Allowing the Lead to be solely responsible for reassigning complex claims as standard claims in accordance with paragraph 4 of the Claims Scheme. The Lead is not required to obtain the prior agreement of the Second Lead.

Appropriate removal of the Second Lead agreement role removes a transactional average of approximately three days every time. 

For claims related to COVID-19, please ensure that you continue to review guidance issued from the COVID-19 Market Steering Group and Sector/CoB groups to appropriately triage claims in line with these changes.

These changes apply to all new claims and subsequent transactions on existing open claims.

The Co-Lead Claims Agreement for Binding Authorities - LMA9186

Lloyd’s, the LMA Delegated Authority Claims Group and the LMA Claims Committee have previously identified the need to streamline the agreement of claims on co-lead binding authority placements, given the benefits delivered to policyholders by the acceleration of claims agreement and payment decisions. 

An updated model clause LMA9186 (replacing LMA9157) has been issued to facilitate a single Lloyd’s lead agreement party for standard claims and a Lead and Second Lead agreement for complex claims.
With immediate effect Lloyd’s expects managing agents to take reasonable steps to include LMA9186 within all binding authority placements where these are on a co-lead basis and written on substantially the same terms and conditions. Managing agents will need to work with the relevant broker(s) for that inclusion.
Lloyd’s will continue to work with the market associations in providing support and assistance in making these changes.

Waiver of requirement for a signed Proof of Loss

It is common practice in certain classes of business and jurisdictions to require documentation that can be used to verify that the policyholder agrees with a proposed claims settlement and which releases the insurer from any further liability with respect to the claim presented. These are often referred to as ‘Proof of Loss’ (POL).

The LMA Delegated Authority Claims Group is of the view that POLs are not required where there is clear evidence that there are no claim issues with respect to coverage or quantum. A consistent approach to this has not been taken by the market, meaning there are still scenarios where policyholders with no ostensible issues must wait until their signed POL is received by the party with claims authority before claim agreement and payment is made. This is especially relevant in the US where there remains the widespread use of cheques and POLs are often sent by post and require a handwritten signature.

Next Steps

Detailed guidance from Lloyd’s and the LMA on the operation of these changes can be downloaded below:

Claims Handling Immediate Changes Operational Guidance

Stakeholder engagement and communications will be handled as follows:

  • We ask you to circulate internally to all your claims managers/handlers along with any underwriting teams, as appropriate
  • TPAs will be issued a central note by the LMA
  • Claims vendors (particularly those delivering Write-Back to managing agents) will have a central note issued via the Write-Back Steering Group/LMA
  • Lloyd’s will engage and communicate with DXC in their claims processing role
  • Lloyd’s will engage and communicate with the VCS Service Providers
  • Coverholders (with claims authority) should be engaged by managing agents/brokers as appropriate

If you have any claims outsourcing arrangements in place, please ensure that the entity is aware and you make any necessary changes to those agreements, if appropriate.

You may also wish to review any internal triage rules and processes to ensure you are able to maintain the level of oversight on claims performance as before.

Please also ensure that you continue to meet any relevant local legislative or regulatory requirements that apply to the handling of claims.

Should you have any questions, please contact:

Phil Godwin Tel: 0207 327 5841
Zoe Woods: Tel 0207 327 5046

Lee Elliston Tel: 0207 327 8340

See Schedule 5 of the 2010 Claims Scheme for the applicable thresholds. The application of the Claims Scheme is mandated for all syndicates by the Lloyd’s Franchise Board using its powers under paragraph 12 of the Underwriting Byelaw, which itself is made effective through the Council’s powers set out in the Lloyd’s Act 1982.


** Property Treaty and Energy classes have a higher standard claim financial threshold under the current claims scheme