Skip to main content

Reserving guidance

Lloyd’s has set out guidance and key principles surrounding the setting of reserves for syndicates. The document “Lloyd’s Reserving Guidance - Summary” sets out in summarised form the key principles and minimum standards, together with what oversight Lloyd’s will carry out. This document expands on these.

The minimum standards are:

  1. The board of the managing agent shall be responsible for setting reserves.
  2. The managing agent shall ensure that a Statement of Actuarial Opinion (SAO) is obtained.
  3. Managing agents shall ensure that an actuarial function is in place.
  4. The managing agent shall ensure that sufficient information is supplied to the board on reserves..
  5. The managing agent shall ensure they have a robust reserving procedure.
  6. The managing agent shall have an appropriately documented reserving process.
  7. The managing agent shall ensure that reserving data submissions to Lloyd's are appropriate.

  • The board of the managing agent shall be responsible for setting reserves.

Requirements:

The board of the managing agent shall:

  • be responsible for setting reserves for both financial accounting and solvency
  • provide objective challenge to the recommendations made by the reserving function
  • ensure there is consistency and links between reserving, pricing, capital modelling and financial reporting

Lloyd’s oversight:

  • Lloyd’s may require sight of relevant board minutes or papers
  • Lloyd’s may wish to speak to Non-Executive Directors (NEDs), audit committee or internal audit

  • The managing agent shall ensure that a Statement of Actuarial Opinion (SAO) is obtained.

 Requirements:

The managing agent shall ensure that:

  • the Statement of Actuarial Opinion (SAO) complies with Lloyd’s Valuation of Liabilities Rules
  • an SAO is provided annually in respect of each open year of account
  • the SAO results are considered by the board
  • there is an appropriate relationship between reserve margins signed off in the SAO and those reported to Lloyd’s in the QMC.

Lloyd’s oversight:

  • Lloyd’s will review SAO reports and provide feedback
  • SAO reports will be used to validate reserve margins reported in the QMC

  • Managing agents shall ensure that an actuarial function is in place.

Requirements:

The managing agent shall ensure, in respect of coordination of the calculation of technical provisions, the actuarial function carries out the duties required to meet all Solvency II tests and standards. In particular:

  • ensuring the use of appropriate methods and assumptions
  • ensuring the accuracy, completeness and appropriateness of data for use
  • undertaking an analysis of actual versus expected experience as well as other appropriate validations
  • producing a report at least annually to the board (‘The Actuarial Function Report’) documenting all tasks undertaken, identifying deficiencies and making recommendations to remedy these deficiencies

Lloyd’s oversight:

  • Lloyd’s will collect Syndicate Actuarial Function reports for review annually

  • The managing agent shall ensure that sufficient information is supplied to the board on reserves.

 Requirements:

The managing agent shall ensure that information provided to the board:

  • is accurate
  • is sufficient for challenge to be made
  • is accompanied by analysis from the reserving function
  • includes escalation of relevant information provided by Lloyd's
  • includes discussion of key issues, uncertainties and market conditions

Lloyd’s oversight:

  • Lloyd’s may require copies of MI and exceptionally may ask for additional MI
  • Lloyd’s will provide regular reserve feedback including reserve benchmark packs
  • Lloyd’s will set reserving standards including the Valuation of Liabilities rules
  • Lloyd’s will actively engage and learn from the market on thematic reserving issues and provide feedback where possible
  • Lloyd’s will provide specific market communication on wider reserving issues

  • The managing agent shall ensure they have a robust reserving procedure.

Requirements:

The managing agent shall ensure that:

  • those conducting the reserving analysis have appropriate skills and knowledge
  • internal audit periodically review reserving processes including validation of methods and results

Lloyd’s oversight:

  • Lloyd’s may require the opportunity to review potential senior appointments in advance
  • Lloyd’s may require sight of reserving validation and emerging experience analyses
  • Lloyd’s will analyse market reserves and identify outliers or anomalous results
  • Lloyd’s may challenge syndicates on results or processes
  • Lloyd’s will seek to minimise additional work for agents

  • The managing agent shall have an appropriately documented reserving process.

Requirements:

  • The managing agent shall ensure that the documentation of the reserving process is completed in accordance with the Technical Actuarial Standards (TAS)

Lloyd’s oversight:

  • Lloyd’s will review SAO and SAF reports and may review supplemental internal documentation

  • The managing agent shall ensure that reserving data submissions to Lloyd's are appropriate.

Requirements:

Managing agents shall ensure that reserving data is:

  • reported through the Technical Provisions Data (TPD) and Gross Quarterly Data (GQD) in accordance with current instructions
  • reconciles to the syndicate accounts (where required)
  • is reported at the required level of granularity

Lloyd’s oversight:

  • Lloyd’s will review the TPD and GQD submissions and will challenge apparent anomalies. This may sometimes lead to the need for resubmissions of current or historical returns.

Emma Stewart (nee Potter)

Chief Actuary and Head of reserving

+44 (0)20 7327 5654