Lloyds Document Targets Coverholder Relationships
International Editor
London
Lloyds of London is releasing a consultative document this week that outlines proposals to improve delegated underwriting relationships with all its global coverholders, according to a summary of the document obtained by National Underwriter.
A coverholder is anyone to whom Lloyds syndicates delegate underwriting authority.
In order for Lloyds to protect its franchise and create and maintain a commercial environment that maximizes the long-term return to capital providers, it must create "long-term, profitable delegated underwriting partnerships" and raise risk management standards, said the summary titled "Delegated Underwriting at Lloyds: A Commentary on the New Approach."
In part, the new approach intends to raise standards of coverholders admission by involving the Lloyds broker and lead syndicate in the process in an effort to create clarity of understanding and commitment between the key parties, according to a source in the Lloyds market.
Further, the approach intends to provide resources for coverholders by producing a "Coverholder Handbook," which will explain how Lloyds operates. Also, Lloyds is developing a "coverholder undertaking" that explains–for the first time–what Lloyds expects of coverholders and gives Lloyds reserve powers to intervene to protect its reputation when "the contract of delegation between the coverholder and the Lloyds syndicate breaks down," the summary said.
Further, the business process for new coverholders and binding authority registration will be simplified. For example, a new coverholder application form will be used by the entire Lloyds market, bringing an end to the wide array of different forms used by syndicates, it said.
Also, to simplify business processes, Lloyds created in July an Internet-based binding authority registration system, which permits "speedy registration of binding authorities," the document said.
In the area of risk management of delegated underwriting, in part, Lloyds intends to use the Internet binding authority registration system to assure that the binding authority is fully placed before contracts of insurance are entered into.
Also, a new code of practice for delegated underwriting is being introduced.
A source within the Lloyds marketplace emphasized that the intent of the exercise is to create strong coverholder relationships with well-managed companies and financially strong companies.
The proposal has been put together over the past two years with the support of Lloyds brokers and underwriters, the source said.
The entire Lloyds market will now have a month to comment on the consultative document.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, September 8, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.