Acreditation of Lloyd's brokers

28 Pages·2007·0.38 MB·English

LLOYD’S BROKER
REGISTRATION
A GUIDE FOR APPLICANTS
Lloyd’s provides this document (the “Document”) for general
Foreword 3
information purposes only. The information contained in this
Document is correct to the best of Lloyd’s knowledge at the time
1 Executive summary 4 of publishing but may change over time. The Document is
reviewed and updated from time to time.
If you have further enquiries regarding this Document, please
2 The registration process 6
contact Lloyd’s Admissions on [phone].
How do we become a
Regulatory Disclaimer
1. The communication of information and services set out in this
registered Lloyd’s broker?
Document is not intended for distribution to, or use by, any
person or entity in any jurisdiction or country where such
distribution or use would be contrary to local law or regulation. In
3 The requirements 10
particular, the contents and/or subject matter of the Document
for registration do not constitute an offer of information, products or services to
US persons or in the United States, or in any other jurisdictions
What is required and what do where such an offer may be unlawful.
2. Furthermore, the Document does not represent a prospectus
we have to think about?
or invitation in connection with any solicitation of capital. Nor
does it constitute an offer to sell securities or insurance, a
solicitation of an offer to buy securities or insurance, or a
4 How business is processed 15
distribution of securities in the United States or to a US person,
or in any other jurisdiction where it is contrary to local law. Such
at Lloyd’s
persons should inform themselves about and observe any
What are the market processes applicable legal requirement.
3. This Document provides information on Lloyd’s and the
and how do we comply?
application process in connection with Lloyd’s registration of
brokers to transact business at Lloyd’s. This communication is not,
and does not purport to be, a complete account of all matters
5 Considerations for 20
that are or may be material to a decision as to any application.
All applications will be considered on their own merits.
non-EU brokers
4. Lloyd’s provides the material contained in this Document or
communication for general information purposes only.
6 Frequently asked questions 21
5. No responsibility or liability is accepted by the Society of
Lloyd’s, the Council, the Franchise Board or any other Committee
or Board constituted by the Society of Lloyd’s or the Council or
Appendices
any of their respective members, officers or advisors for any loss
occasioned to any person acting or refraining from action as a
A Lloyd’s legal framework 22 result of any statement, fact, figure or expression of belief
contained in this Document or communication.
B The role of Xchanging 23 6. Applicants and potential applicants should take steps to
understand Lloyd’s, the Lloyd’s market and the implications of
C Market Reform Initiatives 24 placing business in it. Applicants should understand that risk is
the nature of insurance business and is inherent in the business
underwritten at Lloyd’s.
Copyright notice
© Lloyd’s 2007. All rights reserved. No part of this Document may
be copied or reproduced in any material form, including being
stored in any medium by electronic means, photocopying,
recording or otherwise, or transmitted in any form by any means,
whether electronic, mechanical or otherwise, without the written
permission of Lloyd’s.
Foreword
Lloyd’s and the global insurance industry
Lloyd’s plays a significant role in both the UK economy and the global insurance
industry. It is the largest subscription market, a recognised leader of specialist
underwriting and the world’s third largest non-life reinsurer*:
The Lloyd’s Market comprised 66 Lloyd’s syndicates with an overall market
capacity of £16.1bn of gross premiums as at 31 March 2007.
Most of the insurance business accepted by Lloyd’s is placed through a
registered Lloyd’s broker, of which there were 166 as at 31 March 2007.
Lloyd’s currently enjoys A+ (Strong, Positive Outlook) and A (Excellent,
Stable Outlook) ratings from Standard & Poor’s and AM Best, respectively
and A+ (Strong, Stable Outlook) rating from Fitch.
Lloyd’s transacts business in more than 200 countries and territories
worldwide. Details of the countries in which Lloyd’s is licensed to operate
can be found at lloyds.com/lloyds_worldwide
*Standard & Poor’s Global Reinsurance Highlights 2006.
Source of figures: – Lloyd’s, March 2007
Lloyd’s vision and priorities
The vision for Lloyd’s is to be the platform of choice for insurance and
reinsurance buyers and sellers to access and trade both specialist and large
property and casualty risks.
A key priority for Lloyd’s in achieving this vision is to work on eliminating the
actual and perceived complexity of operating in the market and make it easier
for brokers to do business at Lloyd’s. We are also determined to improve the
accessibility of Lloyd’s to brokers around the world.
Lloyd’s priorities for development may be found on our website at
www.lloyds.com/About_Us/Strategy
Lloyd’s brokers
Lloyd’s offers brokers an insurance market with diverse participants with differing
strategies and risk appetites, where policyholders benefit from Lloyd’s reputation
and service quality. Although based in London, Lloyd’s is open to specialist
insurance brokers irrespective of their physical location.
Lloyd’s welcomes applications from brokers, in the UK or overseas, who wish to
become registered Lloyd’s brokers in order to place business directly in the
Lloyd’s market and who maintain high levels of professionalism, integrity and
customer service.
The remaining sections of this guide explain how you can become a registered
Lloyd’s broker. Any queries on the matters covered in this guide should be
directed to:
Lloyd’s Agents and Brokers Department
Telephone [phone]
Fax [phone]
Email
4 Lloyd’s Broker Registration
1 Executive Summary
Introduction
This guide explains the process you will need to go through to become a registered
Lloyd’s broker. It also highlights the information we will need and the key issues you
will need to consider. The information in this guide is structured as follows:
• The registration process (Section 2)
• The requirements for registration (Section 3)
• How business is processed at Lloyd’s (Section 4)
• Considerations for non-EU brokers (Section 5)
• Frequently asked questions (Section 6)
The decision whether or not to accept you as a Lloyd’s broker is made by the
Franchise Board under the Intermediaries Byelaw. A summary of the contents of this
byelaw is set out at Appendix A.
Registered Lloyd’s broker or approved
coverholder?
There are two principal ways that Lloyd’s syndicates may access risks; through a
registered Lloyd’s broker or through a Lloyd’s approved coverholder. You should
therefore consider whether your firm wants to become a registered Lloyd’s broker or
an approved Lloyd’s coverholder, or both. The main differences are as follows.
A registered Lloyd’s broker usually acts as a wholesale or retail broker,
acts at all times in the best interests of its clients and can refer any type
of business to any Lloyd’s syndicate.
An approved coverholder acts as the agent of specific Lloyd’s syndicates
under a contract called a binding authority (sometimes known as ‘agency
business’). This allows the coverholder to enter into contracts of insurance
on behalf of the relevant syndicate(s).
Therefore if you only intend to act as an agent for Lloyd’s syndicates you may only
need approval as a coverholder. For further information on Lloyd’s coverholders
please see our website at www.lloyds.com/coverholders
Registration process
The process and indicative timescales for a typical new broker application are set out
in section 2 of this guide. In summary, this involves:
Pre-application meetings with Lloyd’s, to clarify the application process
and requirements.
Formal application to Lloyd’s.
Obtaining third party confirmations:
쑺 from Xchanging that you are competent to process business at Lloyd’s
(see Appendix B for further details on Xchanging); and
쑺 from a managing agent, that it will agree to enter into a Terms of
Business Agreement with you.
Registration as a Lloyd’s broker, subject to Lloyd’s being satisfied with the
Xchanging and managing agent confirmations received.
Lloyd’s Broker Registration 5
Registration requirements
Our registration requirements are set out in section 3 of this guide. It is for you to
demonstrate to us that you meet these requirements and are eligible to be registered
as a Lloyd’s broker. In summary, we require:
Appropriate regulatory approval by the FSA or by the relevant authority in
an EU member state (or, outside the EU, by an equivalent overseas
regulatory authority).
Adequate systems and procedures to conduct business in the Lloyd’s
insurance market.
Support from at least one Lloyd’s managing agent to enter into a Terms of
Business Agreement (“TOBA”) with your firm.
Suitable procedures to safeguard insurance monies.
Professional indemnity insurance that meets our minimum requirements.
No prohibited associations with Lloyd’s managing agents.
If your firm is established outside the EU, additional requirements apply.
Lloyd’s application fee for a new Lloyd’s broker is £5,000, to be paid when you make
your application (payable to the ‘Corporation of Lloyd’s’). We will not refund this fee if
your application is unsuccessful. There is no ongoing Lloyd’s charge to brokers for
placing and processing business at Lloyd’s.
How business is processed at Lloyd’s
An overview of how business is processed at Lloyd’s is set out in section 4 of this
guide. Lloyd’s is a marketplace made up of many separate syndicates and for this
reason, various functions have traditionally been performed centrally on behalf of all
Lloyd’s syndicates:
Processing premiums
Checking or producing policies (where required)
Agreeing and settling some claims
Providing data on behalf of the market for regulatory purposes
Operating a central settlement system between syndicates and brokers,
with a single daily movement of monies between parties.
While at present, these back office functions are performed by Xchanging, there is
increasing scope for direct trading between parties.
What does Lloyd’s expect of a registered
broker?
If you become a registered Lloyd’s broker you will be required to maintain and
uphold high standards of service and professionalism. In particular, we will expect
you to:
Have signed TOBAs with each managing agent you do business with.
Place business into the Lloyd’s market.
Take all reasonable steps to protect our reputation and brand.
Conduct your business in a professional manner at all times.
Comply with any relevant UK or foreign insurance legislation or
regulatory requirements.
A number of frequently asked questions are set out in section 6 of this guide.
6 Lloyd’s Broker Registration
2 The Registration Process
Overview of the registration process
An overview of the application process to become a registered Lloyd’s broker is
summarised in the flow chart below. An explanation of each step in the process is
set out in the following pages.
Broker pre-application meetings with Lloyd’s and Xchanging to clarify the
1 application process and requirements and understanding of how to process
business at Lloyd’s
쑽
Broker submits application form and application fee to Lloyd’s
2
쑽
Lloyd’s reviews the application for appropriate regulatory authorisation, PI cover
3 and client money protection and may give conditional approval of registration,
subject to confirmation of a suitable TOBA and demonstration of business
processing ability
Lloyd’s service level – 1 week (UK/EU) (4 weeks for non EU territories)
쑽
(a) Broker prepares and submits Xchanging process manual, business scenarios
4 and banking mandates to Xchanging & Lloyd’s
– At the same time –
(b) Broker seeks and obtains confirmation of a suitable TOBA from a
managing agent
쑽
Xchanging reviews suitability of broker systems to process business, procedure
5 document, business scenarios and mandates
Xchanging indicates if substantially complete OR identifies significant
weaknesses with indicative remedial action
Xchanging service level 1 week (plus 2 weeks to set up mandates)
쑽
Lloyd’s, on receipt of a TOBA confirmation and suitable Xchanging sign off:
6 a) confirms that registration conditions have been met; and
b) adds the broker to the public register of Lloyd’s brokers available on
www.lloyds.com
Lloyd’s Broker Registration 7
Pre-application meetings
Before you apply, please contact Lloyd’s Admissions to explain that you are
interested in becoming a registered Lloyd’s broker. You will then be invited to attend
an initial meeting at Lloyd’s.
Initial meeting
The initial meeting allows us to discuss with you at an early stage whether becoming
a Lloyd’s broker is right for your firm and gives you the chance to find out more
about what you need to do to become a registered Lloyd’s broker.
At the meeting we will explain the registration process and requirements in more
detail and will ask you to explain the status of your firm against the registration
requirements. As a result of this meeting:
We may decide that you have the potential to become a registered Lloyd’s
broker and invite you to proceed to the next stage and attend a pre-
application meeting.
Alternatively, there may be some areas which you would need to work on
before you proceed or you may not be eligible to become a registered
Lloyd’s broker. We will explain why this is the case.
Pre-application meeting
At the pre-application meeting we will look more closely at whether your firm
satisfies our registration requirements. In preparation for this meeting, you will be
invited to complete the application form in draft and start work to obtain the
necessary confirmations to support your application, including:
• Evidence of appropriate regulatory approval from your regulator
• Confirmation from your bank that client money is held in strictly
segregated client money accounts
• PI insurance certificates (or quotes at this stage) evidencing compliance
with our minimum PI cover requirements
• Confirmation from your external professional legal advisors that there are
no divestment issues (where necessary)
• Confirmation from at least one Lloyd’s managing agent that it would enter
into a TOBA with your firm (see below)
• Confirmation from Xchanging that you have sufficient knowledge and
ability to transact and process Lloyd’s market business (see below)
We expect the first 4 of these confirmations to be in place and that work will be
underway on the latter 2 at the time of the pre-application meeting.
Representatives of your senior management team should come to this meeting. We
will be represented by staff from Lloyd’s Admissions and from Xchanging.
At the meeting, we will use your draft application form and supporting
documentation as an agenda. We will ask you to talk us through each area of the
form and, in particular, update us on the status of each of the areas requiring
external confirmation. As a result of this meeting:
We may decide that you are ready to proceed to the next stage and invite
you to make a formal application.
Alternatively, there may be some areas which you would need to work
on before you proceed to formal application. We will explain why this is
the case.
8 Lloyd’s Broker Registration
Xchanging and managing agent
confirmations
The ability to transact and process business in the Lloyd’s market is a key factor in
deciding whether your firm should be registered.
Only applicants who can properly connect to the necessary systems and
competently transact Lloyd’s business (using their own systems or those
of an outsource provider) will be eligible to be Lloyd’s brokers.
In practice this will be assessed by asking Xchanging (or other appropriate
third party) to work with you to assess whether your firm (or its outsource
provider) can operate the necessary accounting and settlement and claims
advice and settlement processes to transact at Lloyd’s (see section 4 of
this guide for further details).
You will need to make contact with Xchanging and provide all necessary
information and documentation to enable an assessment to be made of
your ability to place, process and service business. Such enquiries should
be directed to:
Kerry Rainer, Customer Services, Xchanging
[phone]
Lloyd’s Broker Registration 9
Subject to your application being complete, we will give you this confirmation within
1 working week if your firm is based in the UK or a member state of the EU. If your
firm is established outside the EU, we will normally need to undertake additional
work (see Section 6, Issues for overseas brokers to consider) and will give you this
confirmation within 4 working weeks.
Applications which do not contain all the relevant documents and information will be
treated as incomplete and returned to you to complete before we can start work on
your application.
Registration as a Lloyd’s broker
On receipt of suitable written confirmation from Xchanging (confirming your ability to
place, process and service business, the allocation of a broker number and
pseudonym and receipt of all necessary bank mandates) and confirmation from a
managing agent (that it will enter into a TOBA with your firm), we will:
• Advise you and the Lloyd’s market of your registration as a Lloyd’s broker.
• Add your name to the public register of Lloyd’s brokers.
We have an expectation that as a new Lloyd’s broker, you will place business at
Lloyd’s, although you may of course place business with other carriers.
Permitted use of the Lloyd’s Brand
Use of the Lloyd’s name and logo is only permitted under certain circumstances. Full
details on how and when you can use the Lloyd’s name are contained within a
separate guide provided to all successful applicants once registered. In summary: –
Registered Lloyd’s brokers may use the Lloyd’s brand on their business
documents, stationery and web site to market their firm, subject to the
continued placing of business at Lloyd’s and compliance with Lloyd’s
Broker Brand Guidelines.
If you are not placing business at Lloyd’s within a 6 month timeframe, we
will consider whether it is appropriate for you to continue to use the
Lloyd’s brand to market your firm (you may nevertheless continue to brand
Lloyd’s specific products).
In the event that you place no business at Lloyd’s within a 12 month
timeframe, we will consider whether it is appropriate for you to continue
to be registered as a Lloyd’s broker.
Further review of business processing ability
In the second year of your registration, we will ask Xchanging to carry out a review to
assess your continuing ability to process business effectively within the Lloyd’s
market. This will include your performance in the areas of late premium payment,
document quality, and meeting London Market Reform Standards.
10 Lloyd’s Broker Registration
3 The Requirements for Registration
Intermediaries Byelaw
All Lloyd’s brokers are required to comply with the Lloyd’s Intermediaries Byelaw.
A summary of the contents of this byelaw is set out at Appendix A.
Under the Intermediaries Byelaw, Lloyd’s new broker applicants must demonstrate
that they meet the following requirements:
Appropriate regulatory approval by the FSA or by the relevant authority in
an EU member state (or, outside the EU, by an equivalent overseas
regulatory authority).
Adequate systems and procedures to conduct business in the Lloyd’s
insurance market.
Support from at least one Lloyd’s managing agent to enter into a Terms of
Business Agreement (“TOBA”) with your firm.
Suitable procedures to safeguard insurance monies.
Professional indemnity insurance that meets our minimum requirements.
No prohibited associations with Lloyd’s managing agents.
Each of these areas is considered in turn below, with a number of additional
considerations.
Appropriate regulatory approval
UK applicants
If your firm is established within the United Kingdom, you must be authorised as a
general insurance intermediary to conduct the applicable regulated activities by the
Financial Services Authority (FSA).
You can obtain a copy of the relevant FSA handbook and application forms for
authorisation from the FSA website www.fsa.gov.uk
As part of your application we will ask you to provide a copy of your written
authorisation from the FSA and details of any subsequent regulatory issues which
may have arisen in respect of your firm as part of your application.
Applicants from other European Union (“EU”) States
If your firm is established outside the UK but within a member State of the EU you
must be registered with the appropriate body responsible for implementing the
provisions of the European Parliament and Council Directive of 9th December 2002
on insurance mediation (No 2002/92/EC) in that country.
The conduct of insurance intermediation by a branch office, or subsidiary of an EU
broker which is located in the UK, is permissible by virtue of the “cross border
services passport” option enabling brokers to trade within other EU member states if
authorised within their own country. Any application from non UK EU brokers must
provide evidence of registration by the home state authorities and notification to the
FSA of their intention to conduct business in the UK under the passport option.
Applicants from outside the EU
If your firm is established in a country outside the EU, you must be registered with
the appropriate regulatory authority in that country (where required to do so by
that country).