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LM1 > Chapter 5: Structure of the London Market > Flashcards

Chapter 5: Structure of the London Market Flashcards

1
Q

What is Lloyd’s

A
  • Marketplace
  • Society of members
  • Regulate by both FCA and PRA (Member agents and brokers are regulated by FCA only)
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2
Q

Lloyd’s Act 1982

A
  • Council of lloyds create
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3
Q

Functions and makeup of the Council of Lloyd’s

A

3 working, 3 external and 9 nominated members

  • Resolve issues
  • Make decisions
  • Requirements
  • Create and manage rules and byelaws
  • Responsible for management and supervision of the market
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4
Q

Lloyd’s Syndicate

A
  • Groups of individuals/investors who carry lloyd’s risks (provide financial banking)
  • Also referred to as members or Names
  • No separate legal existence
  • Annual ventures (identified by name, number AND YOA)
  • Membership must be renewed each year
  • Require another entity to perform day-to-day operations of an insurer (Managing Agent)
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5
Q

Managing agent

A

Responsible for day to day insurance operations for a syndicate

  • Appoints underwriters to accept risks on behalf of the syndicate
  • Manage underwriting of one or more syndicates
  • Authorised person, regulated by the PRA for prudential requirements and FCA for conduct of business issues
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6
Q

Capital

A
  • Investment put into the market by investors
  • Provided by corporate names rather than individuals
  • Lloyd’s must be satisfied that the means are adequate before accepted prospective members investment
  • Lloyd’s need to feel comfortable prospective investors can afford to pay out claims
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7
Q

Function of Members’ agents

A

Advise clients on the positives and negatives of investing in the London market

Investment can be spread across several syndicates not necessarily managed by the same managing agent

Communication channel between the member and managing agencies

Advises member as to any changes in investment portfolio for new yoa

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8
Q

Company market vs Lloyd’s

A

There is no equivalent for lloyd’s as a provider of a physical marketplace

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9
Q

Regulation of london

A

PRA - regulates insurers operating in London for prudential requirements (solvency and capital)

FCA - Regulates conduct business issues

EU companies are regulated by their own home regulator

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10
Q

International Underwriting Association of London (IUA)

A

Trade body for company market

No regulatory power

Worlds largest representative org for re/insurance companies

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11
Q

Brexit impact on london market

A
  • UK companies have had to set up EU based operations to continue to write and service EU business
  • EU based insurer can benefit from Home State rules

UK regulated insurer would have to obtain regulatory approval in each country

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12
Q

Lloyds international Liaison

A

Engage with overseas regulators on behalf of whole Lloyd’s market

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13
Q

Types of non-lloyd’s insurers

A
  • Limited Liability Companies (LLC)
  • Mutual Indemnity Associations
  • Mutual Companies
  • Captive insurers
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14
Q

Source of capital for LLC and Mutuals

A
  • Shareholders (investors) provide capital and therefore the capacity for the insurance company to accept/write risks
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15
Q

Fundamentals of a Lloyd’s broker

A
  • Intermediaries that act as the agent of the re/insured for both placing and claims
  • Must be authorised by the regulator (FCA)
  • Brokers can apply to lloyds to get second accreditation as a Lloyd’s broker (non-lloyds can still place business in london market)
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16
Q

Managing General Agents

A

Given authority on behalf of an insurer to undertake different tasks:

  • Accepting risks
  • Issuing documents
  • handling claims

Authority held dictated by binding authorities

17
Q

International aspects of the London Market

A

US insurers operate in the London Market (either as a company or syndicate)

Only a small portion of business placed in Lloyd’s originates in the UK

18
Q

Lloyd’s Market Association

A
  • Provides representation
  • Provides information
  • Provides technical services to managing agents
  • Purpose is to identify and resolve issues of interest to the Lloyd’s community
  • Works with the Corporation of Lloyd’s to influence course of future market initiatives
19
Q

Lloyds v IUA

A
  • IUA cannot exercise control over activities of the members
  • Lloyd’s does have the ability to control and influence activities of both insurers and brokers within the market
20
Q

Association of British Insurers

A
  • London market operators can be members
21
Q

British Insurance Brokers’ Association

A
  • Major trade association for insurance intermediaries (2000 members)
  • Seek to maintain and improve standards of business behaviour
  • Protect and enchance interest of its members
  • “To present and protect the best interests of our insurance broker and intermediary members”
22
Q

London Market Regional Committee

A
  • Integrated within BIBA to represent the interest of brokers operating in the London and Worldwide re/insurance markets
23
Q

London and International Insurance Brokers Association (LIIBA)

A
  • Independent trade body
  • Represent interests of Re/insurance brokers operating in the london and internal markets
23
Q

Reasons London is leading world insurance market

A
  • Capacity
  • Entrepreneurial spirit
  • Good claims service with knowledgeable personnel
  • History and experience
23
Q

Placing a risk process

A
  1. Broker summarises risk in MRC
  2. All parties aware of T+Cs of policy
  3. Full wording must be agreed before formal commitment
  4. Appropriate evidence of cover must be issues within 30 days of inception (slip/MRC/BID)
24
Q

How is Contract Certainty achieved

A
  • Complete and final agreement of all terms between insured and insurer by the time they enter
25
Q

Broker process for transactions

A
  1. Obtain quote from Lead UW
  2. Leader indicates share of risk they will accept
  3. Broker may seek several quotes
  4. Once quote to accept decided, broker has firm order for business
  5. Broker fills out rest of MRC with follow market
  6. Risk submitted centrally and premium paid to insurers
  7. UWs agree brokerage
  8. XIS records risk and premium details centrally for lloyds and company markets
  9. Formal policy not always required but UW may produce it themselves or ask XIS to
  10. XIS messages UW and broker once data is recorded and premium paid
26
Q

Presenting a claim

A
  • Broker receives claim notification and identify which insurers to contact
  • london market has set claims-handling agreements (1 for IUA and 1 for Lloyd’s)
  • Broker decides how claim is presented (ECF or paper)
  • Xchanging used to share claim and data to all participating LM insurers (even non claims handling)
  • If experts involved, handled by broker
27
Q

Settlement of claims

A
  • Money moves from Insurer to broker (or third party expert)
  • Messages via Xchanging
  • Broker forwards claims monies to Client to finalise claim

LM1 (9 decks)

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