market bulletin

Ref: Y4126

Title

Streamlining Approval of Appointments to Senior Positions (Individual Registration),
Advance Consents for fully-aligned syndicates and Change of Control for
Underwriting Agents.

PurposeTo notify market participants of the new procedures and requirements in respect ofappointments to senior positions, advance consents for fully-aligned syndicates andchange of control for underwriting agents.

TypeEventFrom

Sean McGovern, Director and General Counsel
020 7327 6142 sean.mcgovern@lloyds.com

Date

22 February 2008

Deadline

Amended byelaws, requirements and procedures effective immediately

Related links

Lloyd’s market bulletin Y4080 dated 23 November 2007
Underwriting Byelaw
Requirements made under the Underwriting Byelaw
Lloyd’s market bulletin Y3116 dated 14 August 2003
lloyds.com: Appointments to senior positions
lloyds.com: Change of control for underwriting agentslloyds.com: Advance Consents

A key priority for Lloyd’s is to make it easier to do business at Lloyd’s. Consequently, we aredetermined to remove unnecessary administration and duplication of effort between Lloyd’s and theFSA.
In light of these priorities, and following consultation with the Lloyd’s Market Association (LMA), theAssociation of Lloyd’s Members (ALM) and market participants, the Council has approved simplified
procedures and arrangements with regard to:
1. Appointments to senior positions at underwriting agents and approved run-off companies;
2. Change of control for underwriting agents; and3. Advance consents for fully-aligned syndicates.
The proposed changes were previously set out for consultation in market bulletin Y4080.

Y4126

Lloyd’s is authorised under the Financial Services and Markets Act 2000

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1Appointments to senior positions

Lloyd’s has adopted a new simplified procedure for notifying appointments to senior positions. Thisreplaces the Individual Registration scheme, which has been revoked.
Until now individuals who carry out certain regulated functions could only do so if registered by
Lloyd’s under our Individual Registration scheme. This regime was introduced prior to theestablishment of the FSA. However, since the introduction of the FSA Approved Person regime any
individual who requires registration by Lloyd’s also requires FSA approval as an “Approved Person”.
In order to avoid duplication of processes, Lloyd’s has decided, following discussion with the FSA
and the market, to replace the Individual Registration scheme with the following procedure:

Firm speaks informally to Lloyd’s Head of Risk Management or
their Risk Executive to discuss a proposed senior appointment (andalso to Lloyd’s Franchise Performance Department in the case of a
new active underwriter of run-off manager)

Prior to the appointment, firm completes electronic notification formon lloyds.com and completes the NAIC declaration (annex 1)(which can be found by clicking here)

Unless Lloyd’s indicates within three business days that further
information is required, the firm may submit its “Approved Person”
application to the FSA

Firm submits “Approved Persons” application to the FSA

Firm receives notification of approval from FSA

Firm completes electronic confirmation form on lloyds.com(which can be found by clicking here)

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This process applies when an appointment is made to any one of the following positions:
(1)
(2)
(3)
(4)Director of a managing agent or members’ agent;
Director or partner of an approved run-off company;
Active underwriter;
Run-off manager.

There is no requirement to give notification of non-director compliance officers. Separate to theabove process, Lloyd’s Franchise Performance Department will continue to approve intended
changes to Active Underwriters or Run-Off Managers.
A separate electronic notification will be required for termination of appointments or changes ofdetails. This can be found on lloyds.com by clicking here.
With regard to surplus lines business transacted in the USA, Lloyd’s will continue to report to theNAIC on behalf of the Market in respect of all persons appointed to the above senior positions. To
facilitate this, individuals to be appointed to one of the senior positions listed above will be required tomake a declaration in a form prescribed by the NAIC (as set out at annex 1).
Although the status of “registered individual” has been removed, it is very important that only
individuals who are fit and proper or otherwise suitable are appointed to senior positions. A newprovision (paragraph 42A) has been added to the Underwriting Byelaw which provides that managingagents, members’ agents and approved run-off companies may not permit a person to continue in
one of the above senior positions if the Council decides the person is not fit and proper or otherwise
suitable.
The new process is effective immediately. Any Individual Registration applications already submitted
will be processed as before. Any new applications should be made as set out above.

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2Change of control for underwriting agentsThe approval of controlling interests in an underwriting agent requires both Lloyd’s approval(paragraph 43 of the Underwriting Byelaw) and the approval of the FSA. In broad terms, theoverriding principle is that where a company or individual acquires 10% or more of the shares and/or
voting interests in an underwriting agent (as defined in FSMA 2000) or its parent company, the firmneeds prior approval from the FSA and Lloyd’s.
At present, firms submit their FSA application (which primarily focuses on whether the new controller
is a fit and proper person and additionally considers whether there is a threat to the interests ofconsumers) and the firm then copies that application to Lloyd’s. In addition, Lloyd’s also sets out (ona case by case basis) the additional information that it requires to consider the application. Typicallythis will include a request for the rationale for the acquisition, changes to the board, future (threeyear) strategy and retention of key directors and resources. Lloyd’s consent, where given, isprovided in writing to the underwriting agent.
Going forward, it will continue to be the case that Lloyd’s written consent will be required for any
change in controlling interest. However, Lloyd’s is adopting the following simplified process:Firm speaks informally to Lloyd’s Head of Risk Management or their
Risk Executive to discuss a proposed change of control

Firm completes electronic notification/application form on lloyds.com(which can be found by clicking here). By submitting the notification,
the firm is also giving confirmation that any tax implications inconnection with any corporate member owned by the agent’s group
have been addressed with Lloyd’s Tax Department

Unless Lloyd’s indicates within three business days that furtherinformation is required, the firm may submit its “Change of Control”
application to the FSA

Firm submits “change of control” application to the FSA

Firm receives notification of approval from FSA

Firm completes electronic confirmation form on lloyds.com(which can be found by clicking here)

Lloyd’s gives written approval of the change of control

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In most cases, it is expected that Lloyd’s will not require further information beyond the basic
information required on notification via Lloyds.com and Lloyd’s will rely on the firm obtaining FSA
change of control approval when giving its own consent to the change of control. It should be noted,
however, that in the case of a new majority controller, it is likely that Lloyd’s will perform further due
diligence.
The new process is effective immediately. Any changes of control already submitted will beprocessed as before. Any new changes of control should be dealt with as set out above.

3

Advance consent for fully-aligned syndicates

The current Advance Consent Regime is set out in Market Bulletin Y3116 dated 14 August 2003. Inorder to ease further the burden on managing agents of syndicates with fully-aligned capital there will
no longer be a requirement to inform Lloyd’s about the following events (the references toappendices are references to appendices in Market Bulletin Y3116):
••
•
•
•

Agency agreement terminations (Appendix 2);
Appointment of recognised accountants as auditors for a syndicate and its managing agent
or a related group company (Appendix 3);
Multiple syndicates consent for underwriters where the additional syndicate is allocated on asplit stamp basis, is a mirror syndicate or is in run-off (Appendix 4);
Decision not to hold a syndicate annual general meeting (Appendix 6); andReinsurance to close being treated as a transfer of assets following the merger of syndicates(Appendix 7);

Note, the change in rules only applies to fully aligned syndicates. In the case of syndicates which are
not fully aligned, the existing Advance Consent Regime will continue to remain in force as before andunchanged. In addition, the change in the rules only applies to the cases listed above and to theexisting requirement to notify Lloyd’s of the relevant event. All other requirements of the Advance
Consent Regime continue to apply to aligned syndicates as before.
This change is effective immediately.

If you have any general questions regarding this bulletin, please contact Olly Reeves, Head of Risk
Management (Tel: 020 7327 6229; email: olly.reeves@lloyds.com) or Judith Hall, Manager,
Operational Risk (Tel: 020 7327 6869; email: judith.hall@lloyds.com).

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Annex 1

Declaration (Surplus Lines Business)
Notes: This declaration can be made by the person being appointed to the senior position as part the electronic notification process
on Lloyds.com. The declaration may also be confirmed on behalf of the person being appointed, provided the person completing theelectronic notification process has the authority of the individual in question to confirm the declaration. In all cases, it is recommended
that a record is kept evidencing that the individual making the declaration has seen it and, where appropriate, has agreed to it being
made on his behalf.

As a condition of transacting insurance business in the United States, the NAIC requires that individuals must provide anNAIC Biographical Affidavit. Lloyd’s has agreed with the NAIC that where individuals make the following declaration it is nolonger required that the NAIC Biographical Affidavit be submitted. Lloyd’s therefore requires that all individuals appointed to
one of the following positions must provide a declaration in the terms set out here (by clicking on the button below).
Individuals required to make the declaration include anyone appointed to be:
(a)
(b)
(c)
(d)

A director of a managing agent or member’s agent
An active underwriterA director or partner of an approved run-off company
A run-off manager of an approved run-off company

If you are not the individual giving the declaration, then by clicking on the “I accept” button you are taken to be confirmingthat you have shown the declaration to the individual making the declaration (the “Applicant”) and that you have theirauthority to confirm the following on their behalf. In all instances it is recommended that a record is kept evidencing that theindividual making the declaration has seen it and, where appropriate, has agreed to it being made on his behalf.
Declaration
I, the Applicant, understand, acknowledge, agree and confirm:
1. that references to my FSA Application to Perform Controlled Functions under the Approved Persons Regime (FSA
Handbook Reference SUP10 Annex 4D) (the “Application”) include any subsequent correspondence, data or information
submitted by me to the FSA to supplement or amend the Application; and2. that, at the request of Lloyd’s, I will provide forthwith to Lloyd’s a copy of the Application and that all or part of thecontents of the Application, and any copies thereof, whether in electronic form or otherwise, may be transmitted between
Lloyd’s and the International Insurers Department of the National Association of Insurance Commissioners in the UnitedStates; and3. that all or part of the contents of the Application, and any copies thereof, may be submitted on my behalf, whether inelectronic form or otherwise, to insurance regulatory officials in any of the fifty states of the United States, the District ofColumbia or any of the territories of the United States as a condition and specifically for the purpose of enabling me totransact insurance business in the United States and its jurisdictions; and4. that governmental regulatory officials in the United States and its jurisdictions will rely on the completeness and accuracyof the information contained in the Application and on my representation of its completeness and accuracy; and5. that if misleading information is contained in the Application , including by omission, I may be subject to criminal and civil
penalties in the United States under the law of the United States and/or any of its states, territories or jurisdictions,
including possible imprisonment for a period of up to fifteen (15) years; and6. that I have thoroughly read the information provided in the Application and that it is complete and accurate to the best of
my knowledge and belief; and7. to submit to the regulatory and disciplinary jurisdiction of Lloyd’s and be bound by and to comply with the provisions of
Lloyd’s Acts 1871-1982, the rules, byelaws and requirements made thereunder and any condition or penalty imposed orrequirement made thereunder and every direction or code of practice made by or under the authority of the Council
under Lloyd’s Acts 1871-1982.
I confirm the above/I confirm that I have shown this Declaration to the person making the declaration and have his/her authority tomake the declaration on his/her behalf.

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