Hi, Could anybody tell me - How Lloyd's London Insurance Market works?
How Lloyd's London Market works?
Hi, Could anybody tell me - How Lloyd's London Insurance Market works?
Placing risk at Lloyd’s
The following is a brief synopsis of how risk is placed at Lloyd's.
•A customer approaches a Lloyd's broker (either directly or via an intermediary) with the details of a risk to be insured.
•The Lloyd's broker approaches an underwriter to discuss premium, terms and conditions. If both parties remain interested, a proposal will be made to accept a percentage of the total risk. A number of underwriters may accept portions of one risk (either within Lloyd’s or outside).
•The Lloyd's broker feeds back the proposal to the customer.
•If the customer wants to proceed, the Lloyd's broker prepares a 'slip' with the details of the insurance, which is signed by each of the underwriters that have agreed to accept part of the risk (“subscription”).
•The Lloyd's broker deducts its fee from the premium paid by the customer and pays the net amount to Lloyd's which then allocates it to the syndicates.
Rules/Guidelines at PolicyWala | Help Old People |
I am speaking from experience and my own personal views above - I am not an advisor, nor an expert.
There are two classes of people and firms active at Lloyd's. The first are members or providers of capital, the second are agents, brokers, and other professionals who support the members, underwrite the risks, and represent outside customers (for example, individuals and companies seeking insurance, or insurance companies seeking reinsurance).
Managing agents
Managing agents sponsor and manage syndicates. They canvas members for commitments of capacity, create the syndicate, hire underwriters, and oversee all of the syndicate's activities. Managing agents may run more than one syndicate.
Members' agents
Members' agents coordinate the members' underwriting, and act as a buffer between Lloyd's, the managing agents and the members. They were introduced in the mid 1970s and grew in number until many went bust; many of the businesses merged, and there are now only four left (Argenta, Hampden, Alpha and LMAS (which has no active names). It is mandatory that unlimited Names write through a members' agent, and many limited liability members choose to do so.
Lloyd's brokers
Outsiders, whether individuals or other insurance companies, cannot do business directly with Lloyd's syndicates. They must hire Lloyd's brokers, who are the only customer-facing companies at Lloyd's. They are therefore often referred to as 'intermediaries'. Lloyd's brokers shop customers' policies among the syndicates, trying to obtain the best prices and terms.
The Lloyd's marketOriginally Posted by Dhruv
Lloyd's is the world's leading specialist insurance market, home to over 50 managing agents and over 80 syndicates. Lloyd's is the world's best known - but probably least understood - insurance brand. This is because Lloyd's is not an insurance company but a society of members, both corporate and individual, who underwrite in syndicates on whose behalf professional underwriters accept risk. Supporting capital is provided by investment institutions, specialist investors, international insurance companies and individuals.
Lloyd's brokers bring business to the market. The risks placed with underwriters originate from clients and other brokers and intermediaries all over the world. Together, the syndicates underwriting at Lloyd's form one of the world's largest commercial insurers and a leading reinsurer.
This diagram is a basic representation of the structure of the market and its participants. A detailed description of the participants can be found below.
Members of Lloyd's
Members of Lloyd's, or 'capital providers' as they are often known, accept insurance business through syndicates on a separate basis for their own profit and loss (in other words, members of Lloyd's are not jointly responsible for each other's losses). The membership of Lloyd's comprises a mix of corporate (limited liability) members and individuals. Private members tend to support a number of syndicates, whereas some corporate members only underwrite through a single syndicate.
Syndicates
Lloyd's members conduct their insurance business in syndicates, each of which is run by a managing agent.
The syndicates operating within the market cover many speciality areas including:
- Marine
- Aviation
- Catastrophe
- Professional indemnity
- Motor
Syndicates tailor solutions to respond to the specific risks of the client base.
Syndicates compete for business, thus offering choice, flexibility and continuing innovation. Syndicates cover either all or a portion of the risk and are staffed by underwriters, the insurance professionals on whose expertise and judgement the market depends.
Managing agents
It is the responsibility of the managing agent to employ the underwriting staff and manage the syndicate on the members' behalf. The managing agent must be a company specifically established for the purpose of managing a syndicate, and it may not carry out any other function. A managing agent may manage more than one syndicate.
Lloyd's brokers
Accredited Lloyd's brokers place risks in the Lloyd's market on behalf of clients. These brokers use their specialist knowledge to negotiate competitive terms and conditions for clients.
Local brokers
Any insurance broker can access the expertise and resources of Lloyd's by making contact with an accredited Lloyd's broker.
Source - LLOYDS.COM
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