How Lloyd's Works 

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A closer look at how the Lloyd's syndicate processes work.
The Lloyd’s of London marketplace is comprised of five key stakeholders:
Insurance buyers or policy holders, brokers, syndicates, managing agents and cover-holders.
The way these five parties interact with one another helps shape the way the Lloyd’s of London marketplace operates and how coverage is placed.
Policyholders include businesses, organizations, other insurers and individuals from around the world who seek to mitigate the impact of potential losses.
Policyholders may access the Lloyd’s market through a broker, cover-holder or service company.
As a policyholder, it’s important to understand how you fit into the Lloyd’s of London marketplace.
While it’s true you can often secure the policies you need from local insurers, you may have unique or complex exposures traditional insurers are unable or unwilling to underwrite.
In these instances, your insurance broker can help your company obtain the coverage it needs from the Lloyd’s of London marketplace.
This typically involves contacting a surplus line broker with access to the marketplace or locating a Lloyd’s of London broker who can obtain coverage on your behalf.
Insurance brokers act as the direct line of communication between insurance buyers and Lloyd’s syndicates.
These brokers have to meet a number of standards in order to conduct business in the marketplace.
Not only are they responsible for complying with any relevant national regulations, they must also be accredited by the Corporation of Lloyd's.
Many Lloyd’s of London brokers are located in London itself and may conduct their business through a subsidiary company.
It should be noted that insurance buyers won’t be able to work with a Lloyd’s of London broker directly, and will typically have to work through a local broker or agent.
In the Lloyd’s of London marketplace, syndicates function similarly to insurance companies and are comprised of one or more members. These entities group together to assume risks and pay out claims using financial capital provided by its members.
Every syndicate has insurance coverages they specialize in, such as commercial property, general liability or commercial auto. Syndicates operate on what’s known as a subscription model when assuming risk.
Under this model, syndicates typically assume a percentage of the risk.
By spreading out the risk, Lloyd’s of London syndicates are able to offer broad and diverse coverage for many different types of risk.
Syndicates are, technically, set up on an annual basis. In practice, they usually operate from year to year with members having the right, but not the obligation, to participate in syndicates the following year.
Managing agents have a number of responsibilities in the Lloyd’s of London marketplace. Above all, these parties work on behalf of syndicates, managing their day-to-day business.
Additionally, managing agents may:
* Hire and supervise underwriters, claims adjusters, accountants and other essential staff.
* Work with more than one syndicate at a time.
* Serve as a member of a syndicate, providing capital.
* Select and oversee coverholders.
While the majority of business in the Lloyd’s of London marketplace underwritten by syndicates comes from brokers, some may be generated by cover-holders.
Coverholders are companies that, on behalf of the members of a syndicate, enter into contracts of insurance or issue insurance documentation.
Coverholders operate under authority granted to them by managing agents.
While the scope of this authority can vary, coverholders may be able to issue insurance binders and certificates of insurance.
In some cases, coverholders have the authority to collect premiums or settle claims.
It should be noted that they may be referred to as service companies in certain instances.
Through the use of coverholders, managing agents are able to operate worldwide without ever having to establish a local office.
For instance, a U.K. managing agent could authorize a U.S. coverholder to bind insurance coverage for local policyholders.
There are many parties at play in the Lloyd’s of London marketplace. However, the process of securing the appropriate coverage through the marketplace is relatively straightforward.
Please contact us with questions about any insurance or risk management topic. We will see you again soon!