Skip to main content

Lloyd’s Minimum Standards (MS11 – Conduct Risk)

To protect the interests of Lloyd’s customers, Lloyd’s has issued a set of conduct risk standards. These entered into force on 1 January 2015 and respond to the increased regulatory oversight of conduct issues.

Thu 19 Mar 2015

Following the establishment of the Financial Conduct Authority (FCA) in April 2013, there has been an increased focus on conduct supervision in the insurance sector.  This change in regulatory emphasis stems from previous failures to prevent the mis-selling of consumer financial products (as demonstrated by the payment protection insurance scandal in the UK).  The FCA expects firms to put customers at the heart of how they do business and consumer protection should, therefore, take precedence over profit and remuneration.

The FCA’s overall enforcement philosophy is aimed at achieving “credible deterrence” and it has levied large fines against insurers and intermediaries in recent years.  We have also seen overseas regulators increase their oversight of consumer regulation.

Lloyd’s Standards

Against this backdrop, Lloyd’s has worked closely with the Lloyd’s Market Association (LMA) to produce a set of conduct risk standards tailored to the operation of the market.  The Minimum Standards (MS11 – Conduct Risk) (the Standards) are designed to meet FCA requirements and provide practical guidance on their implementation, having regard, for example, to the role of coverholders and Lloyd’s brokers in the distribution of products.  It is important to note that FCA requirements continue to apply and, if the Standards are effective in promoting conduct and enhancing consumer protection within the market, the FCA will take them into account when considering its supervisory approach.  In addition to responding to the increased regulatory oversight of conduct issues, Lloyd’s believes that the proper and proportionate management of conduct will result in a greater understanding of customers’ expectations, in turn leading to better products being developed and sold.

There are 18 Standards, which can be divided into five distinct segments; namely, culture and governance, product design and risk assessment, sales and distribution, product servicing and conduct management information (MI).

The first two standards apply in respect of Lloyd’s customers, wherever they are located.  They require a managing agent to pay due regard to the interests of Lloyd’s customers and as such lead a corporate culture which treats them fairly at all times.  The remaining standards apply only in respect of Lloyd’s customers domiciled in the EEA, although managing agents may wish to give consideration to the matters set out in those other standards for customers domiciled elsewhere.

Management Information

The conduct MI Standard will apply from 1 January 2016 and until then managing agents are expected to use their best endeavours  to comply with the standards.  MI should enable managing agents to make good decisions with regard to conduct risk and to this end they will be required to maintain a record of the names and addresses of the policyholders named in each of their products (including those underwritten through coverholders and service companies).

Managing agents will need to liaise with coverholders and third party adjusters to obtain relevant MI.  Under the Standards there will be specific MI that they will need to collect from coverholders who deal with EEA customers.

Work is underway with the LMA to seek to ensure the Lloyd’s market takes a consistent approach to the collation of MI from coverholders.  Further information will be provided on this.

Conduct Standards Assurance Team

The Conduct Standards Assurance Team is currently reviewing each managing agent’s compliance with the Standards and detailed reviews commenced in January 2015. The Conduct Risk webpage provides additional information about the Standards and their application, including the Standards themselves and includes presentation/training materials.

Any questions on the Standards can be sent to