Chapter 1 - Business nature of the London Market Flashcards
Why would an insurer not take 100% of the risk?
- capacity
- branch office controls
- aggregates
- broker influence
- licensing
- client influence
- availability of reinsurance
- geographical limitations
Why may a risk be placed partly outside the London Market?
- location of the insured
- culture, local knowledge and relationships
- experienced insurers
- claims service
Describe proprietary companies
- registered under Companies Act 1985
- owned by shareholders
- profits belong to shareholders therefore
- limited liability companies, so shareholders liability for companies debts limited to nominal value of shares they own when bought
- public owned have plc
- private companies have ltd
Describe mutual companies
- owned by their policyholders
- policyholders share in profits by lower premiums
- usually limited by guarantee, so policyholders maximum liability for losses limited to their premium
Define a captive insurer
- authorized insurance company owned by a non-insurance company
- tax efficient risk transfer mechanism
What are the pros and cons of a captive?
+ no exposed to general premium increases
+ able to invest and benefit from premium related funds
- no access to insurer knowledge
- not having external funds if large loss occurs
Define mutual indemnity associations
- owned by policyholders
- members group together to essentially self-insure
Define a managing general agent
- organisation that holds delegated authority from an insurer to undertake tasks on their behalf (underwriting and handling of risks)
Which act created the Council of Lloyds?
Lloyd’s Act 1982
Describe structure of Council of Lloyds
- three working members
- three external members
- nine nominated members
Define working member
Someone actively working in the London Market for a managing agent or broker
Define external member
One who is a member of the Society of Lloyds (provide captial) but does not fill criteria for working member
Define nominated member
Member who comes from outside the market
Why might insurers set up an office in London?
Close to brokers and intermediaries, increased likelihood of “passing traffic”
Where do the risks written in the London Market come from vs IUA company market?
14% UK, 86% ROW vs 57% UK, 43% ROW
