Independent
Review
Guidance andTerms ofReference
February 2021

Contents
Disclaimer

3

Independent Review Guidance and Terms of Reference
BackgroundWho is an Independent Reviewer?
Good PracticeGeneralRisk Selection
Regularity
Reports & Content
Executive summary
Detailed review findings
Management response to recommendations in this report
Listing of risks reviewed for this report
Recommendations outstanding from previous reports
Terms of Reference
Objective
Reporting Lines
Review Scope and Criteria for the Independent Review Activity
ReportingAccess/ information to be supplied by the Managing Agent
Confidentiality
Timescales

444445555555566667777

Appendix 1 Independent Reviewers Terms of Reference - Example

8Independent Review Information and Guidance – February 2021

Disclaimer
This paper is intended to provide additional guidance to that contained within the Lloyd’s Minimum Standards,
available via www.lloyds.com. Whilst all care has been taken to ensure the accuracy of the information herein, Lloyd's
does not accept any responsibility for any errors or omissions. Lloyd's does not accept any responsibility or liability forany loss to any person acting or refraining from action as the result of, but not limited to, any statement, fact, figure,expression of opinion or belief contained in this paper.

Independent Review Information and Guidance – February 2021

Independent Review Guidance and Terms of Reference
Background
Lloyd’s Minimum Standards (as set out on lloyds.com) require that Managing Agents have effective systems andcontrols over each managed syndicate’s underwriting, ensuring that a representative range of risks underwritten by
the syndicate is reviewed and assessed regularly by an appropriately qualified individual who is independent of theunderwriter of those risks.
The role of the Independent Reviewer is to provide the Managing Agent’s Board and management with regular (atleast quarterly) reports to provide independent assurance as to the extent to which the syndicate’s strategies andpricing/ underwriting policies are being applied correctly and consistently based on the review of a selection of risks
written recently by the underwriters.

The Lloyd’s Minimum Standards MS2 Underwriting and Controls and MS3 Pricing and Rate Monitoring referdirectly to Independent Review as follows UWC 1.3.4 Managing Agents shall ensure that a representative range of risks underwritten by the Syndicate
is reviewed and assessed regularly by an appropriately qualified Independent Reviewer.
PRM 3.2.4 Managing Agents shall ensure that terms of reference for Independent Reviewers include arequirement to review pricing and rate monitoring to ensure consistency of approach with stated policies ofthe syndicate.

This guidance document will build on this description, providing good practice for: reviews, reporting andIndependent Reviewer Terms of Reference (TOR).

Who is an Independent Reviewer?
An Independent Reviewer, unlike a peer reviewer, is an individual who is separate from the day to day underwriting of
the specific class of business under review. Independent Reviewers therefore can be an internal employee or an
externally contracted expert. As a minimum it is expected that an Independent Reviewer will have the necessary skill
and experience to conduct a review of underwriting and pricing.
Note – there may be areas and procedures where the Managing Agent/syndicate carries out checks elsewhere within
the organization, and in such cases Independent Reviewers would not need to revisit areas already tested.

Good PracticeThe following are indicators of good practice for a robust independent review.

General•••The independent review process should be owned and directed by the Active Underwriter or Director ofUnderwriting (or another director of equivalent rank), with full engagement from the Managing Agent’sBoard.
The Independent Reviewer should have a terms of reference which specify review criteria, review scope,review frequency, access to information and reporting requirements.
The Independent Reviewer should have access to all underwriting records, the general underwriting staff
involved and the leadership of the Managing Agent, including Directors and Committees.

Independent Review Information and Guidance – February 2021

•To ensure that the background and nature of issues is understood, it is good practice for the Independent
Reviewer to meet with the Managing Agent’s Board and/or relevant board committee, periodically.

Risk Selection••••

Risks can be selected by either the Independent Reviewer or the Managing Agent.
Risks should be selected using a risk-based approach and should include a randomised element.
The selection of risks to be reviewed must include all classes and all underwriters.
An appropriate sample of recent risks must be selected.

Regularity•••

Each class of business should be regularly reviewed, ideally at least once a year.
Reports should be produced regularly, and at least quarterly.
Independent review and reporting should be completed in a timely manner in accordance with appropriate
Terms of Reference.

Reports & Content
To ensure that messages are clearly delivered Independent Reviewers should report to a consistent standard withineach Managing Agent, using a pre-determined format (recognising that more than one person may undertake theprocess).

Executive summaryThis should provide a summary of the key findings of the specific review and highlight any issues which the Managing
Agent needs be made aware of and/or address.

Detailed review findings
This should provide detail behind the executive summary and identify specific accounts with appropriate
recommendations and/or requirements. It may be helpful within this section of the report to divide the detailed
findings into the specific key areas of the review as determined within the terms of reference of the IndependentReviewer.

Management response to recommendations in this report
Where relevant, include a summary of the Managing Agent’s response to any recommendations or requirements
made in this or previous reports. Alternatively, such a document may be provided separately to supplement
documentation being provided to the Managing Agent’s Board and/or the relevant Board committee.

Listing of risks reviewed for this report
Brief details of each risk reviewed should be included as an appendix to the report, with core underwriting data andconclusions per risk.

Recommendations outstanding from previous reports
Any outstanding recommendations within previous reports should be detailed with information as to when and how
these will be addressed.

Independent Review Information and Guidance – February 2021

Terms of Reference
Lloyd’s would expect each Independent Reviewer to produce their own Terms of Reference with due consideration of
their specialisations and work with the Managing Agent to incorporate their requirements and the scope and details of
the actual review. Lloyd’s recognises that individual Managing Agents will want to reflect their own language andpresentational style within documentation and may provide their own Terms of Reference, Letter of Appointment orConsultancy Agreement.
Lloyd’s recommends that the following be included when constructing a ‘Terms of Reference’ document for an
Independent Reviewer. This is not intended to be an exhaustive list and some suggestions will be more appropriate
depending on the particular review and the specific requirements of the Managing Agents.

Objective
This section confirms the intended purpose of the review role and provides a summary of the key activities andrequirements, within the context of the Managing Agent’s intention to deliver its agreed plans and to meet Lloyd’s
Minimum Standards regarding underwriting controls. The process will be expected to provide assurance and advice
to underwriting management and the Managing Agent’s Board regarding the achievement of syndicate strategies andpricing, and underwriting policies, while also seeking the reviewer’s own perspective based upon recent relevantexperience.

Reporting Lines
This section should provide clarity regarding the reporting lines of the Independent Reviewer. Ownership of theprocess should be explicit and good practice indicates that the independent review process be owned and directed by
the Director of Underwriting/ Active Underwriter (or another director of equivalent rank), and should involve personal
engagement with the Managing Agent’s Board and/or the Board’s committee to whom the oversight of underwriting
has been delegated. Reports are also likely to be shared with those managing the Risk/ Compliance functions andshould include who is responsible for any recommendations.

Review Scope and Criteria for the Independent Review Activity
This section should identify the review scope and criteria to be applied. It is likely to include the following:••

The extent to which the stated underwriting policies have been applied in the underwriting and recording ofeach risk reviewed, highlighting deviations.
The extent to which the stated pricing policies have been applied in the pricing and recording of each risk
reviewed, i.e. addressing benchmark price and actual price for each risk reviewed, highlighting deviations
and commenting on the validity of benchmark prices where necessary.

For renewal business ensuring the appropriate calculation and accurate recording of risk adjusted price as required
within Lloyd’s PMDr return.
••••••

Review of pricing and rate monitoring to ensure consistency of approach with stated policies of the syndicate
The appropriate recording of individual exposures and aggregations in line with the Managing Agent’s statedrequirements.
Compliance with the recorded Underwriting Authority for each underwriter reviewed.
The extent to which the Managing Agent’s requirements for contract certainty and Lloyd’s requirements
regarding tax/ regulatory issues have been applied pre-bind and post-bind (such as contract quality checks
including compliance with treaty reinsurance terms and conditions, and ensuring that facultative reinsurance
adequately reflects the underlying insurance coverage).
Taking into account of all of the above, adherence to Managing Agent’s strategies, plans, procedures andrisk appetite.
Class of Business/Risk Selection: This section should identify the classes of business to be reviewed(including their Lloyd’s risk codes) and the method, frequency and other requirements of risk selection.

Independent Review Information and Guidance – February 2021

Reporting
This section should identify the frequency and scope of required reporting as well as identifying the Board, Committeeand individuals involved in the review. For each risk reviewed the findings should be recorded to a consistent
standard and any outstanding issues followed up to reach a satisfactory conclusion. Good practice indicates that awritten report should be provided in a predetermined format at least quarterly and used by the Director ofUnderwriting/ Active Underwriter (or another director of equivalent rank) to assess the extent to which underwriting
and pricing is in line with the Managing Agent’s strategies and plans. The reported findings should also be sharedwith the Managing Agent’s Board and/or relevant Board committee, with issues recorded in minutes and actions
taken as necessary.

Access/ information to be supplied by the Managing AgentThis section should identify the information and access to be provided to the Independent Reviewer in order that therole can be completed effectively. It is likely to include, but not be limited to, the following:
••
•
•
•
•
•
••

Current syndicate business plans/ strategies and performance reports vs. plan (including Lloyd’s PMDr
feedback and Quarterly Performance Information for the syndicate) to provide context for review regarding
expected targets and the syndicate’s relative performance to date.
Underwriting & Pricing policies and procedures.
Underwriting Authorities.
Access to all relevant underwriting records and systems.
Access to underwriting staff and the leadership of the Managing Agent.
Requirements regarding exposure data capture and aggregations.
Syndicate risk appetite statement, RDS & other limits as set out in the business plan approval letter.
Current reinsurance programme details relevant to the portfolio under review.
Copies of any previous review reports.

Confidentiality
This section should state that all information acquired is confidential and will not be released without prior clearance
from the Managing Agent.

Timescales
It is important that Managing Agents ensure that Independent Reviewers have adequate time and access to complete
the required process. This should include the start date, duration and an estimation of the time needed to carry out
the review.

Independent Review Information and Guidance – February 2021

Appendix 1 Independent Reviewers Terms of Reference - Example(Synopsis only - see full details in the Guidance above)

ObjectiveSummary of•••

Reporting Lines

Clarity regarding•••

Review Scope &Criteria for IR Activity

Intended purpose / reason for review
Key activities and requirements
Parameters on what is not included in the review, if necessary

Who owns and directs the process
Who does Independent Reviewer report to during the review – if different
For whom or for what Committee is the report ultimately being preparedThis section is likely to include the following••••

Application of underwriting policies
Application of stated pricing policies in the pricing and recording of eachrisk reviewed
Review of pricing and rate monitoring to ensure consistency of approachwith stated policies of the syndicate
Appropriate recording of individual exposures and aggregations
Compliance with the recorded Underwriting Authority
Process around application of contract certainty and Lloyd’s
requirements regarding tax/regulatory issues have been applied
pre-bind and post-bind
Adherence to strategies, plans, procedures and risk appetite

Class ofBusiness/RiskSelection••

Class of business including risk codes
Method, frequency and other requirements of risk selection

Reporting•••••

Frequency and scope of required reporting
Identify the Board, Committees and individuals involved in the review
Findings should be recorded to a consistent standard
Any outstanding issues followed up to conclusion
Written report should be provided in a predetermined format••••Access/ Information
to be supplied by
the Managing Agent

In order that the role can be completed effectively, the Independent Reviewer,should have access to:••••

all underwriting records
the underwriting staff involved
current syndicate business plans/ strategies and performance reports
vs. plan (including Lloyd’s PMDr feedback and Quarterly PerformanceInformation)
Underwriting & Pricing policies and procedures

Independent Review Information and Guidance – February 2021

••••

Underwriting Authorities
all relevant underwriting records and systems
requirements regarding exposure data capture and aggregations
Syndicate risk appetite statement, RDS & other limits as set but in thebusiness plan approval letter
current reinsurance programme details relevant to the portfolio underreview.

•Confidentiality

Timescales

All information acquired is confidential and will not be released without priorclearance from the Managing Agent.
•••

Start DateDuration
Hours Allotted

Independent Review Information and Guidance – February 2021