GUIDANCE NOTES APPLYING TO MODEL SERVICE COMPANY UNDERWRITING AGREEMENT
LMA3134

Introduction
The Lloyd’s Market Association (“LMA”) has issued an updated version of the Service Company
Underwriting Agreement(“SCUA”), LMA3134 dated 7 September 2015, with the aim of providing acomprehensive model binding authority contract for a Service Company Coverholder being 100%aligned to its associated managing agent and which binds insurance only for its managed
syndicates. Service Company Coverholders are Lloyd’s approved Coverholders that have beenclassified as “Service Company Coverholders” by Lloyd’s by reason of their close connection with asingle managing agent. For the avoidance of doubt as they are Coverholders they cannot be aparticipant on a Line Slip either as the lead or follower as only a managing agent or an insurancecompany are permitted to write Line Slips.
Managing agents should therefore seek further guidance from Lloyd's where the Service Company
Coverholder will also bind insurance for other syndicates or insurance carriers as the SCUA is notsuitable for this type of arrangement.
This revised model agreement has been produced by an LMA working party and is in line withcurrent regulatory requirements and good practice (available at www.lmalloyds.com or
www.lloyds.com/coverholders).
While issued as a model agreement by the LMA, it should be recognised that this document, as withall LMA documents, is purely illustrative and is established and distributed for the guidance ofManaging Agents. Managing Agents are therefore free to use their own separate agreement subject
to the requirements of the Intermediaries Byelaw (the ‘Byelaw’) and the Service Companies Codeof Practice (the ‘Code’). In all cases Managing Agents are responsible for ensuring the terms ofevery binding authority they issue are appropriate.
The previous version of the model agreement is still available for use. However, it is recommended
that Managing Agents carefully consider the current regulatory regime when deciding which model
agreement to use on any new or renewal SCUA.
Definitions of “Service Company Coverholder” and “Service Company Underwriting Agreement” arecontained in Lloyd’s Definitions Byelaw.
These Guidance Notes are intended to assist Underwriters when using this model agreement, by
providing an overview of the model agreement and guidance on specific sections as appropriate.
Relevant requirements and guidance
All binding authority practitioners should familiarise themselves with the following key documents
which set out the key requirements necessary to consider when preparing a SCUA:•••

Lloyd’s Intermediaries Byelaw and the Requirements made under the Byelaw - availableat www.lloyds.com/coverholders
The ‘Code’ which prescribes the content of a SCUA and sets out what is regarded by
Lloyd’s to be good practice - available at www.lloyds.com/coverholders
Lloyd’s guidance on international legislative and reporting requirements for binding
authorities: - available at www.lloyds.com/crystal

In addition, since Service Company Coverholders are treated by Lloyd’s as in effect extensions of
the managing agent itself, it follows that the applicable Lloyd’s underwriting minimum standards
which apply to managing agents will also apply to the Service Company Coverholders.
Please note that nothing in these Guidance Notes is intended to, or should be construed as,
superseding, amending or derogating in any way from the terms of the SCUA itself.

Agreement Number

The Agreement Number is the number by which the SCUA can be
identified.

Unique Market Reference
NumberThe Unique Market Reference Number (‘UMR’) must be included
even if the core part of the number is identical to the Agreement
Number shown above. The UMR will be in a standard format.
When the SCUA renews, a new UMR must be given.

Section 1
Underwriters to Receive
Agreement

Notwithstanding the Inception Date of the SCUA before a Service
Company Coverholder is authorised to act on behalf of theUnderwriters of a Lloyd’s syndicate (or syndicates), whether on a
new SCUA or a renewal, the Underwriter must have received
written acceptance from the Service Company Coverholder of theterms and conditions of the SCUA. The SCUA cannot be registeredat Lloyd’s until this confirmation has been received.
The acceptance of the terms and conditions of the SCUA by theService Company Coverholder can be evidenced by one or more of
the persons named in sub-section 3.1, or by any other person duly
authorised by the Service Company Coverholder, signing and dating
the Schedule (inclusive of any attachments identified in the
Schedule).
Where the SCUA delegates authority to more than one Service
Company Coverholder then each of those Service Company
Coverholders needs to separately accept the terms of the SCUA
(through being signed by their duly authorised persons).
Sub-section 1.1 - “Signed by both Parties” – the simplest way toachieve this is to forward the Underwriter signed SCUA to theService Company Coverholder so it can sign the Schedule page.
Once the Schedule page is signed by the Service Company
Coverholder the Agreement is “Signed by both parties”; however,for the Agreement to become effective a copy of the Agreement
signed by the Service Company Coverholder must be sent to theUnderwriter. If there is more than one Service Company
Coverholder named in the SCUA then each Service Company
Coverholder must sign the Agreement.

Section 2
PeriodThe period of the SCUA should usually be for no more than 12
months from inception. However, it is possible for the period of
the SCUA to be any period up to a maximum of 18 months including
any extension(s).
In order to provide clarity on time zones when defining the SCUA
period the default is;"the period is from [date] to [date], both days inclusive, any timezone". Alternatively it is permissible to state a specific time zone
and time if desired.

Section 3
Person(s) responsible for
operation and control

The allocation of responsibility for exercising the authority grantedby the SCUA is key in controlling and managing Underwriters’
exposure.
The Schedule must identify the person(s) for the overall operationand control of the SCUA.
Unlike other model binding authority wordings the SCUA only
expressly refers to the person(s) with overall operation and control(and not others with underwriting, policy issuance and claims
authority).
However, where the Service Company Coverholder is granted
authority to handle, agree and/or settle claims, it should be notedthat Section 18 of the Schedule will need to set out the precise
procedure for claims which may include naming the individuals
with claims settling authority.
Should Underwriters also wish to name other specific individuals(e.g. those who have underwriting or policy issuance authority
then Section 6.1 of the Schedule could be used for this purpose).
The managing agent must ensure that any potential conflicts ofinterest on the part of the Service Company Coverholder areproperly managed. Please refer to Lloyd's Conflicts of Interest
guidance referred to in Section 28 of this guidance. Link:
www.lloyds.com/the-market/tools-and-resources/resources/codeof-practice-for-delegated-underwriting_new

Section 4
Grant of Authority

This Section is the key provision that delegates authority to theService Company Coverholder to act on behalf of Underwriters, towrite business and to do those things which are ancillary tounderwriting (such as receiving premium and issuingpolicies/certificates).
Sub-section 4.1.2 - Please refer to Section 23 of this guidance
document regarding holding of insurance monies and investments.
Sub-section 4.2 - If the Service Company Coverholder is to bindinsurance over the internet or via other electronic means thisshould be agreed in writing by Underwriters.
Sub-section 4.3 - Notice periods for termination of the BA are to beaddressed in accordance with Section 31.
Sub-section 4.4.2 - The requirement to pay premium promptly has
been added under sub-section 4.4.2. Details of exact premium
payment terms have not been set here as it is felt that this will notalways be necessary. If these are required they may be set in
Section 6.1 of the schedule.

Section 5
Delegation of Authority

Sub-section 5.1 - A Service Company Coverholder may sub-delegate
its authority to:• bind insurances, or• issue documents evidencing insurances bound by the
Coverholder.
to an additional entity, but only where the additional entity isitself is an Approved Coverholder as defined in the Byelaw.
Once such additional entity is an Approved Coverholder in order for
the Service Company Coverholder to appoint such additional
approved Coverholder it will need to issue a separate binding
authority agreement on its own MRC.
The additional Coverholder cannot bind any business nor issue any
documents evidencing insurances bound until they have accepted
the terms and conditions of the binding authority agreement, andsuch acceptance has been received by the Service Company
Coverholder.
Where there is a series of wholesale or retail producers in the
chain who want to bind insurances and/or issue documents, theService Company Coverholder must directly contract with eachparty in the chain to do so, unless the wholesale or retailproducers are using a proprietary system owned and controlled by
the Service Company Coverholder.

Section 6
Other Conditions,
Requirements and / orAmendments relating to theoperation of the Agreement.

Sub-section 6.1 of the Schedule SHOULD NOT be used to
identify, add, or amend terms and conditions for contract
documentation to be issued for the individual insurances boundby the Service Company Coverholder. Instead, these should be
dealt with in Section 17.
Therefore, sub-section 6.1 of the Schedule SHOULD ONLY be used
to identify any:
additional terms, conditions and/or requirements that are
additional or supplementary to the SCUA and that are nototherwise addressed elsewhere within the SCUA;OR
any amendments to the SCUA (i.e. changes or amendments to themodel agreement text). The section or sub-section numbers of the
SCUA which are the subject of amendment(s) must be shown
together with the replacement text.
The U.S. General Cover Conditions (LMA5058A) must be attached
to and form part of any binding authority agreements in respect of
U.S. business, including where the Service Company Coverholder isbased outside the U.S., and in other circumstances prescribed by
Lloyd’s (if any) and cannot be amended by Underwriters or
Coverholders.

Section 7

Sub-section 7.1 should:

Authorised Class(es) ofBusiness and Coverage(s)•contain a precise description of the nature or classification of
the contracts of insurance that the Coverholder will beauthorised to bind under the SCUA.

•

also make it clear whether the SCUA allows the Coverholder
to accept insurance business or reinsurance business or both(which is important for territorial licences and Coverholder
approval);

The phrase ‘All Risks’ should not be used without properqualification e.g. ‘All Risks of Physical Loss or Damage’.
The stated classes (including risk codes) must be consistent with
the Binding Authority Registration System, and the Service
Company Coverholder’s Approval status and the managing agents
syndicate business forecast for the appropriate year of account.

Section 8
Territorial Limitations

Sub-section 8.1 identifies the geographical location of risks (asapplicable) which are acceptable under the SCUA.
Terms such as ‘and contiguous…’ should be avoided but where thisterm is used such contiguous areas should be listed for clarity.
Sub-section 8.2 of the Schedule is used to identify where insureds
are domiciled. The location of an insured's domicile is the locationin which the insured lives, if the insured is a private individual or,if the insured is a company or other corporate body, in which it isestablished.
Only the territories from which risks or insureds may be accepted
under the SCUA should be listed in sub-section(s) 8.1 and 8.2
respectively.
The stated territories under sub-sections 8.1 and 8.2 must be
consistent with the territories listed in the Binding Authority
Registration System (‘BAR’), and must be in accordance with theService Company Coverholder’s Approval status.
For further guidance refer to the ‘Risk Locator Tool’ and ‘Crystal’for location of risk definitions at the following links:
www.lloyds.com/crystal
www.lloyds.com/the-market/tools-and-resources/tools-eservices/risk-locator/how-to-establish-the-risk-location
Sub-section 8.3 deals with the geographical scope of the insurance
coverage which may be granted under the individual insurances
bound under the SCUA. This may be wider than the territories
shown under sub-sections 8.1 and 8.2.

Section 9
Premiums, Deductibles andExcesses

Sub-section 9.1 states how premiums are to be calculated for eachindividual insurance. If a rating schedule is to apply, it can either
be set out here or referenced here and attached to the SCUA.
Sub-section 9.2 states any deductibles/excesses to apply to eachindividual insurance. If this information forms part of the ratingschedule under 9.1, then it is acceptable to refer back to subsection 9.1.
In the event that the rating and/or any applicable deductibles
and/or excesses are contained within a separate guide or manualor other document (including any electronic data), reference tosuch guide, manual or other document should be made within subsections 9.1 and/or 9.2 of the Schedule
If the SCUA or part of the SCUA is to operate as a “prior submit”
arrangement sub-sections 9.1 and/or 9.2 of the Schedule should
show the manner in which individual insurances should besubmitted to the Underwriters for rating.

Section 10
Maximum Limits ofLiability/Sums Insured

The maximum limits of liability or sums insured in respect of
insurances bound by the Service Company Coverholder must be
shown in sub-section 10.1 of the Schedule.
If there is more than one class and coverage under sub-section 7.1
the maximum limits must be clearly stated for each class andcoverage.

Section 11
Gross Premium Income Limit

The SCUA must contain a gross premium income limit as per subsection 11.1 of the Schedule and the Service Company Coverholder
is required to notify the Underwriters if the premium income
reaches the percentage of the overall limit which is to be shown in
sub-section 11.2 of the Schedule.
The Service Company Coverholder must not bind any insurance(s)that would mean it exceeds the limit shown in sub-section 11.1.
The GPI limit for the SCUA is the maximum permitted for business
whether accepted directly by the Service Company Coverholder or
through any sub-Coverholders appointed. Therefore, any subCoverholder agreement should have regard to this in its GPI limit
and its monitoring arrangements.

Section 12
Period of Insurances Bound

Sub-section 12.1 of the Schedule allows for the standard and the
maximum period(s) for insurances bound allowed by Underwriters
for the relevant classes of business.
Sub-section 12.3 of the Schedule must state the maximum numberof days an insurance is allowed to be bound in advance of its
inception date. This should not exceed the SCUA’s termination
notice period under Section 31.

Section 13
Automatic Renewal of
Insurances Bound

Section 14
Premium Finance
Arrangements

This Section makes it clear that no insurance shall be bound which
provides for automatic/tacit renewal unless the Underwriters haveagreed that the Service Company Coverholder may bind such risks
or it is mandatory by law or regulation. If automatic / tacit
renewal is NOT mandatory then express written permission fromthe Underwriters should be obtained and shown in sub-section 6.1of the Schedule. If permission is granted by Underwriters or it ismandatory by law or regulation the Service Company Coverholder
must comply with any applicable laws or regulation which relate to
the review of each insurance bound prior to its individual renewal
date in order to lapse the insurance or offer renewal terms.

Premium finance transactions do not form part of this SCUA andmust not be entered into by the Service Company Coverholder orother entity on behalf of Underwriters or in Underwriters’ name.
If a Service Company Coverholder proposes to enter into apremium finance arrangement:a) prior advice should be sought from the Managing Agent’s
compliance department
andb) this should form a separate contractual relationship between
the applicable parties involved.

Section 15

Sub-section 15.1

Remuneration

The Service Company Coverholder’s remuneration including any
commission should be specified in sub-section 15.1 of the
Schedule. This sub-section is for the total remuneration allowed
by Underwriters to the Service Company Coverholder, and will
include fees or commissions paid by the Service Company
Coverholder to others in connection with the acquisition ofbusiness.
Any remuneration or commission payable to the Service Company
Coverholder will need to be disclosed to Lloyd’s as part of theRelated Party Declaration and Disclosure return.

Section 16
Applications or Proposal
Forms

Where the application or proposal form carries a standard
reference recognised by the parties to the SCUA, this should bestated in sub-section 16.1 of the Schedule. Where the form is
bespoke, it should be agreed by the Underwriters and identified in
sub-section 16.1 of the Schedule as being attached to the SCUA.
In the event that the class(es) of business and coverage(s) does/do
not require an application or proposal form then “Not Applicable”
should be shown in sub-section 16.1 of the Schedule.

Section 17

Sub-section 17.1

Contract Documentation

Sub-section 17.1 relates to the information and documentationthat should be included in and/or attached to thepolicy/certificate documentation issued by the Service Company
Coverholder and should not be confused with the format(s) of thewrapper/jacket as per sub-section 17.5 below.
Sub-section 17.1 of the Schedule SHOULD ONLY be used to identify
Wordings, Conditions, Clauses, Endorsements, Warranties andExclusions applicable to insurances bound and SHOULD NOT be
used to identify, add, or amend terms and conditions of the SCUA
itself, as these should be specified under sub-section 6.1 of the
Schedule.
The identification of the Wordings, Conditions, Clauses,
Endorsements, Warranties and Exclusions should be made byunique reference number, but if ‘bespoke’ they should be attachedto the SCUA.
The Byelaw prescribe certain minimum requirements applicable toall documents evidencing insurances bound issued by the Service
Company Coverholder on behalf of the Underwriters, and eachpolicy/certificate issued by the Service Company Coverholder must
contain these minimum requirements as per sub-section 17.6 of
the SCUA, which would include a suitable complaints notice as per
sub-section 17.6.11.
Sub-sections 17.2 to 17.4
Sub-section 17.2 defines the term ‘contract documentation’ andsub-sections 17.3 and 17.4 relate to Lloyd’s requirements for thetimely issuance of the documentation, and the timescales within
which Lloyd’s expect such documentation to be issued. These
timescales can be shortened with Underwriters’ agreement but
cannot be lengthened unless in accordance with the London Market
Contract Certainty guidelines.
Sub-section 17.5
Sub-section 17.5 relates to the format(s) of the policy(ies) or
certificate(s) to be issued by the Service Company Coverholder.
This sub-section should not be confused with sub-sections 17.1
above and 17.6 below which deal with what should be included in
and/or attached to the policy/certificate documentation issued by
the Service Company Coverholder.

The format(s) of the policy/certificate under sub-section 17.5 is, inmany cases, the form of the wrapper/jacket of the policy/
certificate (including the Schedule or Declaration page) which will
be prescribed by Lloyd's, or by the relevant regulator. Where thedocument carries a standard reference recognised by the parties to
the SCUA, this should be stated in sub-section 17.5 of the SCUA
Schedule.
Where the document is bespoke, it should follow the format of any
appropriate Model/Standard Outline Policy/Certificate
documentation for the territory concerned and should be agreed
by Underwriters and attached to the SCUA.
Where there is a multi-territory SCUA and the format of thepolicies/certificates could be varied then it is acceptable to refer
to policies/certificates being "based on NMA/LMA approved forms”
and such forms do not need to be attached to the SCUA.
The Service Company Coverholder should also be made aware of
the Lloyd’s Branding rules. Please see the link below:
www.lloyds.com/the-market/tools-and-resources/brand-andmarketing/lloyds-brand/brand-guidelines
Sub-section17.6.2
Sub-section 17.6.2 requires that the policy/certificate contains the
UMR of the SCUA under which the policy/certificate is issued.
Sub-section 17.6.9
A Several Liability Notice must be identified in 17.6.9 of the
Schedule, even if the individual insurances are issued as 100%
Lloyd’s placements.
Sub-section 17.6.13
The requirement to add a statement in the policy/certificate toexpress that a “Service Company Coverholder acts as agent of theUnderwriters in performing its duties under the Agreement” can be
met in many different ways, but words to this effect must be
included in the policy/certificate. Where language to this effect is
not included in the policy/certificate jacket one way toaccommodate this requirement would be to add the words “TheCoverholder acts as agent for Lloyd’s Underwriters in respect of
this insurance.”
Sub-sections 17.7
The issuance of combined certificates is not permitted. If however
Lloyd’s has permitted combined certificates to be issued, then therequirements for combined certificates would need to be followed.
[Refer to Market Bulletin Y4133].

There may be occasions where a Service Company Coverholder may
put a line down on a slip or subscription policy. Assuming it isdoing so only on behalf of its aligned syndicate and not for or on
behalf of any other carrier then that would not breach theprohibition on issuance of combined certificates.
Section 18
Procedure for the Handlingand Settlement of Claims andPursuit of Recoveries

Managing Agents should ensure when delegating claims authority toa Service Company Coverholder that local law(s) or regulation(s)do not prohibit the Service Company Coverholder or theiremployees performing such claims tasks/functions.
Where Underwriters do not delegate claims authority to theService Company Coverholder sub-section 18.1 should show “No”
and words to express that all claims are to be advised by theService Company Coverholder to the Underwriters for instructions
as to their handling and settlement, should be added under theheading “Procedure for the Handling and Settlement ofClaims…etc.”.
Where authority to agree and/or settle claims has been delegatedto the Service Company Coverholder, sub-section 18.1 should show
"Yes". The wording contains a default wording for claims handlingwhich provides contractual clarity and demonstrates the “minimum
standard” of controls over any level of authority to be granted to
the Service Company Coverholder. However, the default wording
can be replaced, amended or supplemented by adding a moredetailed claims authority wording in sub-section 18.1 of the
Schedule.
Lloyd’s would encourage Managing Agents to consider the use of amore detailed claims authority wording bespoke to each SCUA in
replacement of Section 18, however, where the default wording as
per Section 18 is used, the Schedule should be completed asfollows:
18.1.1 – show the total claim limit of authority delegated to theService Company Coverholder.
If Underwriters wish to appoint a third party to agree and/or settle
claims on their behalf this must be done by a separate Third Party
Administration (‘TPA’) Agreement between the TPA and theUnderwriters.
If Underwriters require the Service Company Coverholder toappoint a TPA to handle claims on Underwriters behalf then thismust be expressly stated in the SCUA.
Where Underwriters appoint a TPA, 18.1 should show “No” and thedetails of the TPA should be shown under the heading “Procedure
for the Handling and Settlement of Claims…etc.” stating that all
claims should be referred to the TPA. The TPA(s) associated witheach SCUA must be notified in advance to Lloyd's in accordancewith Lloyd's Bulletin Y4630 dated 1st November 2012 and Lloyd's
must also be notified when each TPA relationship ceases.

One significant area not covered by the default claims authority
wording as per Section 18 is the establishment and operation of a
Loss Fund with the Service Company Coverholder, and because theoperation of each Loss Fund will be different a detailed agreement
will need to be in place between the Underwriters and the Service
Company Coverholder and shown under sub-section 18.1.

Section 19
Complaints or Proceedings

The Service Company Coverholder is required to promptly notify
Underwriters of all complaints made in relation to the insurances
bound under the SCUA and to implement and maintain procedures
to ensure complaints can be dealt with promptly and reasonably.
Additionally, the Service Company Coverholder is required to
notify Underwriters of any matter which might give rise tolitigation or result in a complaint to any regulatory authority.
In many cases it may be appropriate for Underwriters to refer inthis section to their own applicable complaints handlingprocedures.
Details of Lloyd’s requirements for complaints handling can befound at: www.lloyds.com/the-market/operating-atlloyds/regulation/complaints/complaints-handling

Section 20
Reporting

The model binding authority agreement for third party
Coverholders contains a number of prescribed reporting
requirements. The SCUA is less prescriptive given the risk profile
of Service Company Coverholders and the nature of therelationship between the Service Company Coverholder and its
associated managing agency. Instead this Section provides
Underwriters with a generic ability to require from the Service
Company Coverholder written reports in such form and containing
such information as Underwriters require.
Therefore, Underwriters need to consider exactly what type ofreports they want their Service Company Coverholder to provide
and make sure that they inform the Service Company Coverholderof those requirements.
(Lloyd’s guidance provides that the Service Company Coverholder
should report by class or category in respect of all premiums, paid
claims, outstanding claims and expenses in respect of all
insurances bound.)Section 21
Records, Statistical
Information and
Audit/Inspection

Section 22
Advertising and Promotional
Material

This section requires that the Service Company Coverholder
maintains complete records relating to all insurances bound, andthe SCUA requires that the Service Company Coverholder retain all
such records for a minimum of 7 years or such longer period as
required by the law. The SCUA also provides that Underwriters
shall own all such records and shall have the right to access,inspect, audit and copy all such records.

For more details on how Service Company Coverholders can use
Lloyd’s brand, see:www.lloyds.com/the-market/tools-and-resources/brand-andmarketing/lloyds-brand/brand-guidelines.
For more information on country specific legal and regulatory
requirements relating to advertising see Crystal atwww.lloyds.com/crystal or contact Lloyd’s International Trading
Advice at lita@lloyds.com. Note in particular that care is requiredin relation to US surplus lines risks where there are State
restrictions on the solicitation of business.

Section 23
Separate Bank Accounts

This Section deals with the manner in which Service Company
Coverholders have to handle insurance monies (premiums, return
premiums and claims). This is important to protect bothunderwriters and policyholders’ funds if the Service Company
Coverholder becomes insolvent.
Purpose of the section
Where the Service Company Coverholder handles 'monies intransmission' only (i.e. does not hold or retain monies, forexample, in order to establish or maintain a claims fund) suchmonies must be held in a separate bank account set apart for
insurance monies (i.e. premiums, return premiums and claimsmonies). For the sake of clarity, this means that it must be held
separately from the general and operating accounts of the Service
Company Coverholder, but may be co-mingled with insurancemonies from other insurers. This Section allows the Service
Company Coverholder to handle money in this way and is based
upon LMA5141 (which is the US Coverholder version of the Separate
Bank Accounts Clause).
Investments
Sub-section 23.1.4.2 makes clear that the Service Company
Coverholder cannot “invest” the monies held in theaccount. Accordingly any proposal to allow the Service Company
Coverholder to invest such monies needs to be specificallyagreed. A proposal that the Service Company Coverholder bepermitted to sweep assets into overnight deposit should beexpressly agreed by Underwriters and in particular should be
subject to the Service Company Coverholder obtaining
acknowledgement from its bank that it has no right of set-off orcounterclaim against the assets held on deposit. Any other form ofinvestment is likely to present much higher risks and therefore
should not be agreed to other than with the express agreement of
the managing agent’s compliance or finance functions (who in turnshould discuss the proposal with Lloyd’s).

Section 23 may not be suitable in all cases for example where theService Company Coverholder may hold insurance money underother client protection arrangements permitted by local law.
Claims funds
Where the Service Company Coverholder holds or retains monies(for example to establish or maintain a claims fund), such monies
must be held in accordance with the Lloyd’s Premium Trust
Deed. The provision of such a claims fund should be incorporated
by using Section 21.
Further guidance is provided in Lloyd’s Market Bulletin Y4332 (13November 2009) as well as the Code.

Section 24
Licences and Taxes

Section 25
Fees and Charges

Section 27
Confidentiality

Section 28
Conflicts of Interest

For information regarding the regulatory and tax requirements that
apply in each territory where Lloyd’s is licensed see Crystal atwww.lloyds.com/crystal or contact Lloyd’s International Trading
Advice at lita@lloyds.com.

This Section makes it clear that any fees or charges added by theService Company Coverholder to the premium, i.e. policy, service
or other charges, are to be disclosed to the Insured(s) and theUnderwriters and shown on the documentation issued.

This Section ensures that each party keeps confidential any
information it obtains as a result of entering into or performing its
duties under the SCUA. However, nothing in this Section isintended to prevent each party disclosing confidential information
where they are legally obliged to do so e.g. under any"whistleblowing" laws.
Managing agents must ensure that their outsourced providers(which include Service Company Coverholders) manage conflicts ofinterest.
A key concern will be to ensure that the Service Company
Coverholder has no actual or perceived conflicts of interest whichmay impair the Service Company Coverholder’s performance of its
obligations under the SCUA. Guidance on managing conflicts is inincluded in the Code of Practice for Delegated Underwriting at thefollowing link:
http://www.lloyds.com/the-market/tools-andresources/resources/code-of-practice-for-delegatedunderwriting_new
Section 29
Compliance with the Law and
Financial Crime

Service Company Coverholders need to ensure that they comply
with all applicable laws for the proper handling of insurances
bound.
Due to their relationship with Managing Agents, Service Company
Coverholders (wherever they are worldwide) can pose a potential
financial crime risk to Managing Agents as "associated persons"under the UK Bribery Act. This Section has been drafted torespond not only to bribery risks but to also take account of money
laundering and international sanctions. This Section is materiallyin similar terms to the Financial Crime Endorsements (LMA5173,
LMA5174, LMA5175, and LMA5176 and therefore thoseendorsements should not be added to this model wording.
Although this Section represents a model wording, any
amendments to it that make it materially less robust are unlikely
to be acceptable.
Lloyd’s guidance for managing agents regarding financial crimerisks can be found at:
http://www.lloyds.com/the-market/communications/regulatorycommunications-homepage/financial-crime-internationalsanctions-and-regulatory-risk

Section 30
Data Protection

Section 31
Termination

Even though the Service Company Coverholder may hold data inaccordance with group corporate data procedures it is neverthelessimportant that Underwriters are satisfied that data protection
requirements are met in any applicable territory(ies) where theService Company Coverholder is located or does business.
This Section identifies the circumstances and the way in which the
SCUA may be terminated. In general, where a party wishes toterminate the SCUA, a notice should be given and the SCUA willterminate at the end of the notice period. In certain
circumstances, set out in sub-section 31.5, the Underwriters canterminate immediately by delivering a notice to the Service
Company Coverholder.
A notice period for termination must be included at the time ofplacement and such period inserted in sub-section 31.2.1 of the
Schedule.
This Section SHOULD NOT be used for the termination terms of theinsurances bound by the Service Company Coverholder. This isdealt with in accordance with Section 17.
The term “Termination” in Section 31 is used to cover all forms oftermination, including cancellation by notice, automatic
termination and non-renewal.
Section 32
Effect of Termination or Non
RenewalTermination (including non-renewal) of the SCUA has the effect ofplacing the business into run-off and the Service Company
Coverholder continues to be responsible for managing the run-off
in accordance with the terms of the SCUA.
Section 32 sets out various restrictions that apply to the Service
Company Coverholder’s authority to conduct the run-off following
termination of the SCUA. The Section also gives the Underwriters
additional rights to remove authority from the Service Company
Coverholder.
The term “Termination” in Section 32 is used to cover all forms oftermination, including cancellation by notice, automatic
termination and non-renewal.

Section 35
Rights of Third Parties

Section 36
Several Liability

Section 37
Jurisdiction and Governing
Law

This Section makes clear that the terms of the SCUA can only be
enforced by the parties to the SCUA (i.e. the Underwriters andService Company Coverholder), and that third parties whom the
SCUA may benefit in some way do not have the right to enforce thecontract.
Every binding authority (including a SCUA) must include a clear
statement that explains that subscribing underwriters’ liability isseveral and not joint. This applies whether or not the SCUA is
subscribed to by one or more than one syndicate or other insurer
and reflects the fact that the individual members of a Lloyd’s
syndicate have several liability.
This Section governs the applicable law and jurisdiction of the
SCUA. It provides that any disputes shall be resolved inaccordance with English law and that, as a default, the Courts ofEngland and Wales shall have exclusive jurisdiction. Where theService Company Coverholder is based outside of England andWales, this Section gives Underwriters the option of pursuingproceedings in the local jurisdiction of the Service Company
Coverholder. Changing the law and jurisdiction could materiallyalter the enforceability of the SCUA so care should be taken whenamending the law and jurisdiction.
This Section SHOULD NOT be used for the Law and Jurisdiction of
the insurances bound by the Service Company Coverholder. This isdealt with in accordance with sub-section 17.6.4.