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Delegated authority guidance

Delegated authority operational guidance

Lloyd’s recognises that the current COVID-19 situation is presenting unique challenges to many of our consumer and SME customers. In addition, the current working restrictions may impact upon the operational arrangements for underwriters, brokers and coverholders. Accordingly, Lloyd’s has decided to provide the following market guidance in order to ensure fair outcomes for our customers during these unprecedented times.

However, please note that local regulatory and legal requirements should always be met and nothing in the following is intended to supersede or vary those requirements. For example, many US states have issued guidance on cancellation/nonrenewal and/or premium grace periods as a result of COVID-19.

1. Premium non payment:

Lloyd’s expects underwriters to ensure that they do not automatically cancel policies for consumer and SME customers by reason solely of the application of a non-payment of premium clause for a period of non-payment for up to 60 days. Therefore, underwriters should discuss the operation of this clause with their coverholders to ensure that this provision is not being automatically applied regardless of the policyholder’s circumstances. Cancellation may still be made for any other valid reason whether in-line with contractual or other legal basis.

In respect of policies for other customers, Lloyd’s expects underwriters to have regard to the suitability and fairness of applying such a provision. 

2. Extensions of binding authority contracts:

We are aware that there are currently challenges in completing the renewal of binding authority arrangements. It is preferable that binding authorities are renewed rather than extended (even if arranged as a short period renewal pending a full renewal).

However, where an existing binding authority contract is due for renewal, but current operational restrictions impede the ability to effect a timely renewal or where tacit renewal provisions mean an extension of the binding authority is necessary, then underwriters should consider an extension to the binding authority. Underwriters may give such an extension even if this extends the overall binder period to more than the current limit of 18 months (or 36 months for a three year binding authority). In this case please email coverholders@lloyds.com so that we may keep a record and to obtain an email that may be used for Bureau processing.

Where the effect of the extension would have the effect of overwriting the syndicate’s agreed business plan then we expect underwriters to take a pragmatic approach having regard to both the interests of customers as well as wider prudential considerations. However, Lloyd’s would not expect an extension to be refused solely because it would lead to overwriting a business plan.

3. Reducing administrative requirements for renewals:

We are also notifying the following changes intended to reduce the current administrative burden on effecting renewals. These apply with immediate effect until otherwise notified: 

  1. We expect the lead managing agent on a binding authority to be responsible for the binding authority renewal compliance due diligence in accordance with the DA Code of Conduct. Key compliance information should be uploaded to ATLAS so that followers have access to that information and all reasonable efforts should be made to avoid duplication of compliance due diligence
  2. Currently, binding authority contracts need to name each individual who has authority in the coverholder to bind risks, issue insurance documents or settle claims (and binders need to be endorsed with any changes to these named persons). This would include 'remote workers' carrying out the above functions who would also be named on the binding authority.

With immediate effect, only the individual(s) with overall responsibility for the binding authority (i.e. those who would be named in section 3.1 of the model binder wording) must be named. A list of the persons who would otherwise be named in sections 3.2, 3,3 and 3.4 and any remote workers should be separately maintained on ATLAS.

In addition, 'remote worker application forms' do not need to be completed in respect of coverholder staff who are now working from home (unless that location is now a new trading location for the coverholder). Please visit our key staff page further information.

4. Delegated Claims Resilience:

Service continuity of DA service providers, particularly TPAs, is being assisted through the LMA’s DA Claims and COVID-19 Claims Steering Group. To help enable TPAs to focus on their resources and the ability to service customers we would encourage managing agents to utilise the LMA’s centralised delegated claims database which can assist with operational, service resilience and claims performance questions and data.

Delegated authority audits

Lloyd’s continues to support the remote auditing process and is closely overseeing the completion of the market’s 2020 coordinated audit plan. The majority of large and complex coverholder and DCA coordinated audits have been delivered remotely, as scheduled. Lloyd’s does recognise, that some auditors and coverholders / DCAs continue to experience challenges in achieving remote audits. We recommend that the following guidance continues to be considered by coverholders, DCAs and auditors:

  • We request that you follow closely the recommendations of each national government as well as your individual organisation’s internal procedures to ensure the safety and security of all parties involved in the auditing process.
  • The use of technology should be fully utilised, where possible, and remote reviews offered in place of traditional onsite visits. This includes allowing remote file reviews, remote access document repositories and interviews conducted by telephone or video conferencing facilities. If remote access is not feasible or remote audit will take a considerable amount of time to deliver, this should be referred to Lloyd’s audit team and participating managing agents for review and to agree best course of action.
  • Without compromising the risk-based approach to audit scoping, where feasible, managing agents should consider targeting their audit scopes and adjust their instructions accordingly to allow remote reviews.

Coordinated coverholder and DCA audits that cannot take place in Q4 2020 should be referred immediately to both the Lloyd’s audit team and managing agents for review and to agree how these can be best align with the 2021 audit plan.

Should you require any further assistance contact

Lloyd’s Europe

Lloyd’s Insurance Company recognises that the current COVID-19 situation is presenting unique challenges to many of our consumer and SME customers. In addition, the current working restrictions may have an impact upon the operational arrangements for underwriters, brokers and coverholders. Accordingly, Lloyd’s Insurance Company has decided to provide the following delegated authorities guidance in order to ensure fair outcomes for our customers during these unprecedented times.

However, local regulatory and legal requirements should always be met and nothing in the following is intended to supersede or vary those requirements. (For example, many European states have issued guidance on cancellation/nonrenewal and/or premium grace periods as a result of the COVID-19 crisis).

1. Premium non-payment:

Lloyd’s Insurance Company expects underwriters to ensure that they do not automatically cancel policies for consumer and SME customers by reason solely of the application of a non-payment of premium clause for a period of non-payment for up to 60 days. Therefore, underwriters should discuss the operation of this clause with their coverholders to ensure that this provision is not being automatically applied regardless of the policyholder’s circumstances. Cancellation may still be made for any other valid reason whether in-line with contractual or other legal basis.

For EEA business we want to emphasise that in several EEA jurisdictions, non-payment or late payment of premium is legally not a sufficient reason to automatically cancel an insurance policy, so this needs attention and to be discussed before a cancellation decision is made.

In respect of policies for other customers, Lloyd’s Insurance Company expects underwriters to have regard to the suitability and fairness of applying such a provision.

2. Extensions of CAA contracts:

We are aware that there are currently challenges in completing the renewal of CAA arrangements. It is preferable that CAA are renewed rather than extended (even if arranged as a short period renewal pending a full renewal).

However, where an existing CAA contract is due for renewal, but current operational restrictions impede the ability to affect a timely renewal or where tacit renewal provisions mean an extension of the CAA authority is necessary, then Underwriters should consider an extension to the CAA. Underwriters may give such an extension even if this extends the overall CAA period to more than the current limit for Lloyd’s Insurance Company of 18 months. In this case please email coverholder@lloyds.com so that we may keep a record and to obtain an email that may be used for Xchanging processing. 

Where the effect of the extension would lead to writing beyond the amounts agreed with LIC, the company expects underwriters to take a pragmatic approach having regard to both the interests of customers as well as wider prudential considerations. However, Lloyd’s Insurance Company would not expect an extension to be refused solely because it would lead to overwriting a business plan.

3. Reducing the administrative burden:

We are also notifying the following changes intended to reduce the current administrative burden on effecting renewals. These apply with immediate effect until otherwise notified:

  1. We expect managing agents acting as Lloyd’s Insurance Company agents on a CAA to be responsible for the CAA renewal compliance due diligence in accordance with the DA Code of Conduct. Key compliance information should be uploaded to ATLAS so that followers have access to that information and all reasonable efforts should be made to avoid duplication of compliance due diligence.
  2. Currently, CAA contracts need to name each individual who has authority in the coverholder to bind risks, issue insurance documents or settle claims (and CAAs need to be endorsed with any changes to these named persons). Also, all ‘remote workers’ should be named on the CAA.  With immediate effect, only the individual with overall responsibility for the CAA authority (section 3.1 of the model wording) must be named. A list of the persons who would otherwise be named in sections 3.2, 3,3 and 3.4 and any remote workers should be separately maintained on ATLAS.  Please note that ‘remote party application forms’ do not need to be completed in respect of coverholder staff who are working from home (unless that location is now a new trading address).

4. Operational and regulatory countries requirements: 

Managing agents acting as Lloyd’s Insurance Company agents must consider the regulatory and operational ramifications, within the country they intend to apply endorsements or exclusions on, as well as the impact on their coverholders. For instance, in Italy, tacit renewals provisions require that minimum notice periods must be respected and anticipated to address operational issues.  Further guidance on international conduct requirements is available on Crystal.

Any changes to current policies via endorsements, particularly with consumers, shall follow the usual POG process and Lloyd’s Insurance Company expects managing agents to discuss with it in advance any proposed material amendment to an existing consumer or SME facing product where that amendment could raise regulatory, conduct risk or operational issues.