On Friday 3rd February 2017, around 120 market practitioners convened on the 11th floor at Lloyd’s to debate the key issues around Contract Wordings in the London Market.
Speakers from Lloyd’s, the LMA, LMG and the legal profession presented their thoughts on a variety of Wordings matters, including:
- Contract Wordings in the context of underwriting controls
- the market’s oversight of Contract Wordings
- the talent gap in Wordings specialists and
- areas where terms and conditions in Wordings are under pressure.
The LMA is the representative body for underwriting businesses at Lloyd’s and its mission is to provide professional, technical support to the Lloyd’s underwriting community. The ‘Wordings Forum’ was established to support the LMA's Non-Marine Committee in its responsibility for approving LMA wordings. Since 2008, the 'Wordings Forum' has been structured into two Groups:
- a 'Steering Group' (which meets monthly), comprising a core number of Wordings Managers representative of some of the LMA’s Member organisations; and
- a 'Principals Group' (which meets five times per annum), created from a 'database' of wordings/technical specialists who can be called on for their specific areas of expertise.
The Wordings Forum reports on a monthly basis to the Non Marine Committee (NMC) and provides a list of wordings in production. The Wordings Forum also refers policy wordings/clauses which have been drafted by, or received input from, the Forum to the NMC for approval.
Once approved by the NMC, new model wordings and clauses are released to the market via the LMA and these documents are made available for market use via publication on the Lloyd's Wordings Repository.
It should be noted that all wordings and clauses published by the LMA are purely illustrative and established and distributed for the guidance of the LMA’s Members, who are free to amend and/or agree different conditions.
A list of wordings published by the LMA during the year is available on the LMA’s website and it is possible for visitors to the website to register to receive monthly updates of new wordings which have been released.
All wordings issued by the Wordings & Contracts Forum are added to the Lloyd's Wordings Repository (LWR). All Managing Agents have access to the Lloyd's Wordings Repository, providing underwriters with access to model wordings and clauses 'in current use', in all lines of business, against which slips can be referenced. The LWR includes all wordings developed by the LMA and a selection of wordings developed by other industry organisations, as well as many wordings from individual Managing Agents, other insurers and brokers. The LWR also provides Managing Agents with access to ISO wordings and a link to the BRMA website.
If you're an underwriter, wordings technician, or broker, you know that all the terms and conditions of an insurance contract - including policy wordings - need to be certain before policy inception. To help you achieve contract certainty, the Lloyd's Wordings Repository enables you to view vetted policy wordings and clauses regularly used within the London market.
Two types of searches are available - simple and advanced. You can access the wording or the clause you wish to view or print by entering the reference number or a partial reference.
Alternatively, you can conduct selective searches by market, class of business, jurisdiction or language or by searching the text, title or effective date of the policy wording itself.
The advanced search capabilities also allow you to search within different sections: core, managing agent, broker or third party. You can choose as many sections as you wish, as well as selecting active or archive content.
The Financial Conduct Authority requires the provision of clear, comprehensive and fully-agreed policy wordings before inception to all policyholders. To help individuals and organisations meet this requirement, the CII developed the Certificate in Contract Wording. It enhances knowledge of the practical application of wordings and the issues associated with them.
To acquire the Certificate, you must pass two units from the Diploma in Insurance:
- Company and Contract Law - P05 / Insurance Law M05 - Insurance law
- Commercial insurance contract wording - P21
London Market Group (LMG) is a senior market wide body with the primary function to act as champion of the modernisation agenda in the London Market. A key feature of the modernisation programme has been the adoption of standard approaches to the method and timing of the presentation of the information required to place the risk. These standards include:
- the Contract Certainty Code of Practice
- the Market Reform Contract (MRC - the standard "slip")
- the Market Reform Contract Endorsement (MRCE)
- the electronic policy
These are statements of business conduct required by Lloyd’s. The Minimum Standards and Principles are established under relevant Lloyd’s Byelaws relating to business conduct. All managing agents are required to meet the Minimum Standards and Principles. The Requirements represent the minimum level of performance required of any organisation within the Lloyd’s market to meet the Minimum Standards.
Requirement UW 220.127.116.11 states “Managing Agents shall ensure there are appropriate procedures and resources for review and agreement of contract wordings, including requirements to achieve Contract Certainty.”