Chapter 1

Requirements made under the Underwriting Byelaw

Permission to act as an underwriting agent – Part A of the Underwriting Byelaw

Criteria for deciding whether an applicant is suitable to be granted permission to act as anunderwriting agent – paragraph 8(b) of the Underwriting Byelaw
1.

In deciding whether an applicant is suitable to be granted permission to act as anunderwriting agent the Council shall assess each application on its own merits and in amanner consistent with the legal requirements that apply to the Lloyd’s new entrant
process. In doing so, it shall have regard to the following criteria –(a)the extent to which the applicant’s proposed business adds value to the Lloyd’s
market having regard to –
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)

(b)

the protection of the Central Fund;the protection of confidence in the Lloyd’s market;
broadening or retaining the underwriting expertise or innovation offeredin the Lloyd’s market;
increasing access to new or emerging lines of business;broadening members’ access to business;broadening members’ access to new policyholders; andbroadening members’ access to new and emerging markets particularly
through the use of Lloyd’s overseas underwriting arrangements.

whether the applicant is a competent, proficient and capable organisation. In
considering this the Council may have regard to the following matters –
(i)
(ii)

(iii)

the nature of the applicant’s business;
the applicant’s compliance with appropriate principles of good corporate
governance and with Lloyd’s cultural requirements and targets including
those relating to diversity;
the quality and adequacy of the applicant’s human resources including –
(i)
(ii)
(iii)

the competence, reputation, character and suitability of each of theapplicant’s directors;
the collective suitability of the applicant’s board of directors andof each of its committees;
the competence, reputation, character and suitability of theapplicant’s officers and trustees;

(iv)
(v)
(vi)

(iv)

the quality and adequacy of the applicant’s other resources including (i)
(ii)
(iii)
(iv)
(v)

(vi)
(vii)

(v)

the competence, reputation, character and suitability of theapplicant’s staff;
the quality and adequacy of the applicant’s training anddevelopment programme; andin the case of an applicant applying for permission to act as amanaging agent, the past, present and forecast underwriting
performance of the applicant’s underwriters;

the quality and adequacy of the applicant’s information
technology systems;
the quality and adequacy of the applicant’s accounting and credit
control systems;
the quality and adequacy of the applicant’s consultants, advisers,
service providers and agents;
the quality and adequacy of the applicant’s resources to set andcomply with appropriate service standards for its customers;
the quality and adequacy of the applicant’s resources to comply
with such principles and standards for the conduct oradministration of insurance business as the Council may from time
to time prescribe, recognise or endorse including principles andstandards relating to data, systems integration and systems usage;
the quality and adequacy of the applicant’s record keeping
arrangements; andin the case of an applicant applying for permission to act as amanaging agent, the quality and adequacy of the applicant’s
resources and systems for underwriting administration;

the quality and adequacy of the applicant’s controls and procedures tomanage its business including –
(i)
(ii)
(iii)
(iv)

the quality and adequacy of the applicant’s risk management andinternal audit arrangements;
the quality and adequacy of the applicant’s compliancearrangements;
the quality and adequacy of the applicant’s arrangements tomanage its service providers and agents;
the applicant’s arrangements for identifying, resolving or
managing conflicts of interest; and

(v)

(c)
(d)
(e)
(f)
(g)

in the case of an applicant applying for permission to act as amanaging agent, the quality and adequacy of the applicant’s
controls and procedures for the management of underwriting risk;

whether the applicant is of appropriate reputation and standing;whether any person who controls the applicant or who is connected or associatedwith the applicant is of appropriate reputation and standing;whether the applicant has adequate capital and financial resources;
whether the applicant is able to meet Lloyd’s performance framework of
Minimum Standards applicable to them; andthe applicant’s support for ‘Future at Lloyd’s’ and other market wide initiatives.

Criteria for deciding whether an applicant is suitable to be granted permission to manage a syndicate –paragraph 8(c) of the Underwriting Byelaw
2.

In deciding whether a managing agent is suitable to manage a syndicate the Council shallhave regard to the criteria set out in paragraph 1 above having regard to the nature andquality of the business plan prepared and submitted by the managing agent in respect of
the syndicate in question. The Council will have particular regard to –(a)the predicted performance of the underwriting set out in the business plan having
regard to –
(i)
(ii)
(iii)
(iv)

where relevant, the performance of any other syndicate under the
management of the managing agent;
all relevant Lloyd’s risk metrics;
the predicted acquisition costs and expenses of the syndicate and theimpact that these will have on the performance of the syndicate;
the ability of the managing agent to manage pricing, underwriting
exposure and portfolio management to deliver the predicted performanceset out in the business plan.

The Council will assess each application on its own merits and in a manner consistent withthe legal requirements that apply to the Lloyd’s new entrant process.

Principles of relationship and service standards – Part B of the Underwriting Byelaw

3.

[Deleted]Service standards – paragraph 12 of the Underwriting Byelaw

3A.

The Council has prescribed the following standards and arrangements for the conduct
and administration of insurance business at Lloyd’s provided always that failure tocomply with these standards and arrangements shall not invalidate or call into question
any contract or agreement entered into by or on behalf of a managing agent or syndicate
nor shall failure to comply with these standards and arrangements create any right ofaction or claim in any third party against a managing agent or syndicate, the authority to
enforce compliance being exclusively vested in the Council –
(a)

3B.

a managing agent shall not permit the syndicate stamp of a syndicate managed by
it to be affixed to any contract or contracts of insurance unless –(i)the contract is in the format and has been completed in accordance withthe guidance issued by the London Market Group (or any successor bodyfulfilling the same role) from time to time ;(ii)

the contract is marked as “Exempt” from the format prescribed inparagraph (i) by reason of client requirement; or(iii)

the contract relates to motor business, personal lines business or term life
insurance business and the contract will not be processed by LPSO
Limited;(b)a managing agent shall not permit the syndicate stamp of a syndicate managed by
it to be affixed to any binding authority unless the binding authority has been
completed in accordance with the relevant guidelines from time to time issued by
the London Market Group (or any successor body fulfilling the same role);(c)a managing agent shall not permit the syndicate stamp of a syndicate managed by
it to be affixed to any line slip unless the line slip has been completed inaccordance with the relevant guidelines from time to time issued by the London
Market Group (or any successor body fulfilling the same role).

Lloyd’s has established a Volume Claims Service and, under that service, a managing
agent may enter into arrangements with a service provider recognised and accredited by

the Council as being suitable to determine claims within the scope of the service within
the contractually required service standards.
In that context, in deciding whether a service provider is suitable at all times to berecognised as an accredited service provider the Council shall have regard to thefollowing matters –(a)whether the service provider is a competent, proficient and capable organisation
to provide a volume claims service. In considering this the Council shall haveregard to the following matters –(i)the service provider’s ISAE 3402 report (or other suitable report)
prepared by a reputable professional services firm or such other report as
may be determined by the Council;(ii)

the quality of the service provider’s human resources including –••the competence, knowledge, experience and reputation of the service
provider’s directors;
the competence, knowledge, experience and reputation of the service
provider’s staff and, in particular, of the service provider’s claims
adjusting staff and their knowledge and experience of –
•
•
•

(iii)

the adequacy of the service provider’s human resources including –
•
•
•
•

(iv)

providing a volume claims service;
the relevant classes of business; andLondon market processes and systems;

the number of staff that the service provider will assign or dedicate to
the provision of the volume claims service;
how those staff will be organised and grouped including bygeographical location;
the service providers plans for managing workflow and the day to day
and periodic peaks and troughs of demand; andthe service provider’s plans and strategy for recruiting, retaining,developing, training and replacing staff;

the quality and adequacy of the service provider’s other resources
including –•

the quality, adequacy and compatibility of the service provider’ssystems and information and technology systems and, in particular, of
its systems for –
•
•
•
•

•
•

(v)

the quality and adequacy of the service providers accounting andinvoicing arrangements; andits reliance on outsourced service providers or sub-contractors and thequality and adequacy of the governance supporting sucharrangements;

the service provider’s approach and any track record in providing a
volume claims service and in particular to –
•
•
•
•

•

•
•
(vi)

the tracking and management of claims whilst they are being
determined and the recording of the reasons for decisions;the setting, adjustment and recording of case reserves; andfraud and counter-fraud management , the handling of suspicious
loss notifications and the reduction of ‘claims leakage’;
the capturing and reporting of management information and data,in particular, for managing information relating to contractual
service standards;

meeting the required service standards and complying the terms of thestandard form of volume claims service contract;
claims and service management and to continuous improvement;
fraud and counter-fraud management , the handling of suspicious loss
notifications and the reduction of ‘claims leakage’;to setting reserves in accordance with clear and concise processes,
procedures and philosophy using clear and auditable documentation
with appropriate management oversight and audit;
appointing and managing third party experts including determining
whether a third party expert is required, defining the third party’s
instructions and objectives;
identifying breaches of international sanctions by policyholders,claimants or beneficiaries of claims payments; andmaintaining appropriate claims files.

the quality and adequacy of the service providers’ compliancearrangements and, in particular, its arrangements for –•business continuity and disaster recovery arrangements;

•
•
•
•
•
•

(b)
(c)
(d)
(e)

arrangements for the identification, disclosure and management ofconflicts of interest;
data protection compliance;complaints reporting having to regard Lloyd’s requirements;
Lloyd’s claims management principles and minimum standards;
sanctions monitoring; andother legal and regulatory compliance including compliance with theBribery Act;the service provider’s solvency and the adequacy of its financial resources andprofessional indemnity insurance;
the service provider’s standing and reputation and the standing and reputation of
its controllers;
the suitability of the location of the service provider’s premises from which
services will be provided; andthe quality of the service provider’s –
•
•
•
•
•

relationship management arrangements;
outsources service providers and sub-contractors;
risk management and insurance arrangements;
claims quality assurance framework; andcompliance with appropriate principles of good corporate governance.

Underwriting – Part D of the Underwriting Byelaw

Underwriting guidelines – paragraph 24 of the Underwriting Byelaw
4.

The underwriting guidelines made and issued by the Council relating to run-off are set
out in Market Bulletin Y4829 (Amended Run-Off Guidelines) issued on 8 October 2014.

Risk management requirements – Part E of the Underwriting Byelaw

Codes of practice – paragraph 31 of the Underwriting Byelaw
5.

The Council has made and issued the following codes of practice –
(a)
(b)
(c)
(d)
(e)

Code of Practice - Delegated Underwriting
Service Companies Code of PracticeCode for Underwriting Agent’s Syndicate Expenses
Code for Underwriting Members’ Agents: Responsibilities to Members
Code for Underwriting Agents: UK Personal Lines Claims & Complaints
Handling

Consent to changes – paragraph 32 of the Underwriting Byelaw
6.

No underwriting agent shall permit any of the following events to occur without theprior written consent of the Council –(a)In the case of a managing agent, the appointment or removal of a person as amanaging agent’s trustee or the appointment by any managing agent’s trustee (inhis capacity as such) of any person as attorney.

Advance Consents – paragraph 33 of the Underwriting Byelaw
6A

Subject to the conditions and requirements prescribed, the Council has waived therequirement to obtain the consent of the Council in relation to requirements of theCouncil as set out in Market Bulletin Y3116 (Advance Consents Regime) as modified byMarket Bulletin Y4126 (Streamlining Approval of Appointments to Senior Positions
Individual Registration Advance Consents for fully aligned syndicates and Change ofControl for Underwriting Agents).

Notification of changes - paragraph 34 of the Underwriting Byelaw
7.

An underwriting agent, and in the case of paragraph 7(e), also an approved run-off
company, shall without delay notify the Council in writing if any of the following eventsoccur –

(a)an event that must be notified to the Financial Services Authority via Lloyd’s inaccordance with the Supervision Arrangements for Underwriting Agents between
the Financial Services Authority and the Society. Namely –
(i)

(ii)
(iii)

(iv)

the appointment of an auditor and information about the auditor inaccordance with the Financial Services Authority’s Handbook (SUP 3.3.2
R(2)and (5));
the notification of matters raised by an auditor in accordance with the
Financial Services Authority’s Handbook (SUP 3.7.2 G);
the termination of an auditor’s term of office in accordance with the
Financial Services Authority’s Handbook (SUP 3.8.11 R and SUP 3.8.12
R);
the general notification requirements in accordance with the Financial
Services Authority’s Handbook (SUP 15.3) including –
i.
ii.
iii.
iv.
v.
vi.

matters having serious regulatory impact (SUP 15.3.1 R);
communication with the FSA in accordance with Principle 11(SUP 15.3.7 G);
breaches of rules and other requirements in or under the Financial
Services and Markets Act 2000 (SUP 15.3.11 R);
civil, criminal or disciplinary proceedings against a firm (SUP
15.3.15 R);
fraud, errors or other irregularities (SUP 15.3.17 R);
insolvency, bankruptcy and winding up (SUP 15.3.21 R);(v)

the Core information requirements in accordance with the Financial
Services Authority’s Handbook (SUP 15.5);(vi)
where an underwriting agent becomes aware that inaccurate, false or
misleading information has previously been provided, in accordance with
the Financial Services Authority’s Handbook (SUP 15.6);(vii) the change of an accounting reference date in accordance with the
Financial Services Authority’s Handbook (SUP 16.3.17 R);(viii) annual controllers report in accordance with the Financial Services
Authority’s Handbook (SUP 16.4); and(ix)
annual close links report in accordance with the Financial Services
Authority’s Handbook (SUP 16.5);
(b)
(c)
(d)

[deleted by The Legislative Reform (Lloyd’s) Order (Market Provisions) Byelaw (No.1 of 2009).]in the case of a managing agent, the death or resignation of, or the occurrence ofany notifiable event in relation to any managing agent’s trustee; andin the case of a managing agent, if at any time the syndicate premium income
allocable to any year account of a syndicate managed by it exceeds or appears to(e)have exceeded or likely to exceed the syndicate allocated capacity for that yearof account. The notification shall include full particulars of the extent of theexcess or expected excess, the reasons why the excess has arisen or is expected toarise and what remedial action the managing agent has taken or proposes to take.
in the case of an underwriting agent or approved run-off company, there are anychanges of a kind prescribed from time to time by the Council relating to theappointment of directors (and in the case of an approved run-off company,
partners), active underwriters or run-off managers. The detailed requirements
prescribed by the Council for the provision of information are set out in Market
Bulletin Y4126 (Streamlining Approval of Appointments to Senior Positions(Individual Registration), Advance Consents for fully-aligned syndicates andChange of Control for Underwriting Agents) issued on 22 February 2008.

Disaster scenarios – paragraph 35 of the Underwriting Byelaw
8.

Details of the disaster scenarios prescribed by the Council and the requirements relating
to the realistic disaster reports are set out at www.lloyds.com/rds.

Syndicate premium income – paragraph 36 of the Underwriting Byelaw
9.

When calculating syndicate premium income, managing agents shall –
(a)
(b)

(c)

allocate insurance business underwritten through a syndicate to a year of accountin accordance with the accounting policies adopted in respect of that syndicate;allocate premium income to the same year of account as the insurance businessout of which it arises unless that year of account of the syndicate has been
reinsured to close in which case any payments subsequently received or made by
way of additional premiums or returns in respect of such business shall beallocated to the reinsuring syndicate;
where a year of account of a syndicate is closed by reinsuring all liabilities
outstanding in respect of insurance business allocated to it into a later year ofaccount of –
(i)

(ii)

the same syndicate, the premium in respect of such reinsurance to close
shall not itself be treated as premium income allocable to the later year ofthat syndicate;another syndicate, the premium in respect of such reinsurance to close
shall, unless the Council otherwise directs, be treated as premium income
allocable to the later year of that syndicate;(d)treat premium income as being credited to a member –
(i)
(ii)

where it arises out of insurance business processed through the central
accounting system, in accordance with the central accounting system;
where it arises out of other insurance business, in accordance with theaccounting policies adopted by the managing agent of the syndicate
through which that business is underwritten.

(e)convert premium income which is credited in a currency other than sterling inaccordance with the rates set by the Council from time to time for a year ofaccount and shown on the Lloyd’s Core Market Return system.

(f)treat premiums paid by a member of a syndicate under a reinsurance contract
which satisfies the requirements for qualifying quota share contracts set out inMarket Bulletin Y3024 (Qualifying Quota Share Reinsurance Arrangements For
The 2003 Year Of Account) issued on 2 April 2003 as qualifying reinsurance
premiums.

Reports relating to syndicate premium income – paragraph 39 of the Underwriting Byelaw
10.

The requirements prescribed by the Council regarding syndicate premium income
forecasts and syndicate premium income monitoring are set out in the Lloyd’s Core
Market Return system.

Criteria for determining whether a person is fit and proper or otherwise suitable – Paragraph 42Aof the Underwriting Byelaw
10A

In determining whether a person is fit and proper or otherwise suitable to act as adirector of an underwriting agent, director or partner of an approved run-off company, as
an active underwriter or run-off manager, the Council may take into account any
consideration it thinks fit including but not limited to:
(a)
(b)
(c)
(d)
(e)
(f)

the person’s integrity;
the person’s professional competence;the person’s compliance with any regulatory requirements or any requirements of
the Council;
the person’s business conduct;
the professional and administrative support to be provided to the person;
whether the person has passed or secured exemption from any examinations
required by the Council.

Financial resources and financial returns – Part F of the Underwriting Byelaw

Financial resources – paragraph 49 of the Underwriting Byelaw
11.

The requirements prescribed by the Council regarding the possession by underwriting
agents of financial resources and capital and the maintenance of solvency margins are set
out in Market Bulletin Y3086 (Underwriting Agents Financial Resource Requirements(FRRs)) issued on 30 June 2003.

Financial returns – paragraphs 50 and 51 of the Underwriting Byelaw
12.

The requirements prescribed by the Council in respect of quarterly financial returns andannual financial returns are set out in Market Bulletin Y3086 (Underwriting Agents
Financial Resource Requirements (FRRs)) issued on 30 June 2003 and in Market
Bulletin Y4030 (Payment of managing agent’s profit commission in line with interim
profits released to members) issued on 27 June 2007.

Run-off – Part L of the Underwriting Byelaw

Delegation of run-off functions – paragraph 86 of the Underwriting Byelaw
13.

The following functions undertaken in the management of a run-off syndicate or a runoff account shall be called executive functions –(a)responsibility for syndicate strategy, including –
(i)
(ii)
(iii)
(iv)
(v)

(b)
(c)
(d)
(e)
14.

reporting and accounting to members;
performance of duties under premiums trust deed – including (but not limited to)investment management policy;
management of conflicts of interest between syndicates and years of account; andresponsibility for the performance of any delegated or sub–contracted functions.

The following functions undertaken in the management of a run-off syndicate or a runoff account shall be called insurance functions –
(a)
(b)
(c)
(d)
(e)
(f)
(g)

15.

approval of forecasts and budgets;claims reserving and commutation policy and approval;
annual solvency and syndicate accounts;
compliance with the requirements of the Council;
management and control of expenses;

claims adjusting;identifying reinsurance recoveries;
purchasing reinsurance;
evaluating reinsurance security;
effecting commutations, negotiations and set–off of inwards and outwards
business;
preparing and maintaining reserving and actuarial data; andundertaking cash and investment management.

The following functions undertaken in the management of a run-off syndicate or a runoff account shall be called administrative and processing functions –
(a)
(b)
(c)
(d)
(e)

maintaining policy risk records;
administering and processing claims;
aggregating claims and calculating reinsurance recoveries;
credit control in collecting reinsurance recoveries; andmaintaining statistical records.

Dispute resolution and appeals – Part M of the Underwriting Byelaw

Dispute resolution
16.

The following arrangements and procedures are designed to resolve disputes between
underwriting agents and the Council arising under the Underwriting Byelaw in a timely,
constructive and cost effective manner.
1.

“Minded to” decisions and reasons

1.1

Before a decision is taken by or on behalf of the Council which will be
unfavourable to a specific underwriting agent the decision taker will, unless heconsiders that the circumstances make it inappropriate to do so –
(a)
(b)
(c)

inform the underwriting agent that the decision taker is minded to decide
the matter in that way;provide the underwriting agent with the decision taker’s reasons for
deciding the matter in that way; andprovide the underwriting agent with an opportunity to makerepresentations to the decision taker prior to the decision being taken.

1.2

Where a decision is taken by or on behalf of the Council which is unfavourable toa specific underwriting agent the decision taker will unless he considers that thecircumstances make it inappropriate to do so, provide the underwriting agent
with the decision taker’s reasons for deciding the matter in that way.

2.

Requests to review decisions taken on behalf of the Council
Step 1 – Submitting a request for a decision to be reviewed

2.1

In the event that a decision is taken on behalf of the Council which isunfavourable to a specific underwriting agent, the underwriting agent may,where it reasonably and objectively considers the decision to be wrong or
unreasonable, request that the decision is reviewed (a “request”).

2.2

A request shall be made in writing as soon as reasonably practicable following
receipt of the decision. The request shall include an explanation as to why theunderwriting agent considers that the decision is either wrong or unreasonable.
The request shall be made on behalf of the board of directors of the underwriting

agent and shall be signed by a director of the underwriting agent. The request
shall be submitted to the decision taker.
Step 2 – Review of the decision by the original decision taker
2.3

Following receipt of the request, the decision taker shall review the request andmay, where he considers appropriate, amend, modify or withdraw his decision.
Step 3 – Review of the decision by a director or the Executive Team

2.4

Where the decision taker does not propose to amend, modify or withdraw his
decision he shall refer the request to a director or, where appropriate, to the
Executive Team. The request shall be reviewed by the director or the Executive
Team and, where the director or the Executive Team considers appropriate, thedecision may be amended, modified or withdrawn.
Step 4 – Review of the decision by the Market Supervision and Review Committee

2.5

If, following the review of the request by a director or the Executive Team(including where the original decision taker was the Executive Team), theunderwriting agent still reasonably and objectively considers the decision to be
wrong or unreasonable, the underwriting agent may apply to the Market
Supervision and Review Committee to review the request. The application shallbe made in writing as soon as reasonably practicable. The application shall bemade on behalf of the board of directors of the underwriting agent and shall besigned by two directors. The application shall be submitted to the Secretary to theCouncil.

2.6

The Market Supervision and Review Committee shall review the request andmay, where it considers appropriate, amend, modify or withdraw the decision.
Step 5 – Application for permission to appeal to the Appeal Tribunal

2.7

Where, following a review of the request by the Market Supervision and Review
Committee, the underwriting agent wishes to apply for permission to appeal to
the Appeal Tribunal, the underwriting agent may make an application to theMarket Supervision and Review Committee to do so. The application shall bemade in writing as soon as reasonably practicable. The application shall be madeon behalf of the board of directors of the underwriting agent and shall be signedby two directors. The application shall be submitted to the Secretary to theCouncil.

2.8

The Market Supervision and Review Committee may, where it considers
appropriate, give permission to the underwriting agent to appeal to the Appeal
Tribunal.

3.

Request to review decisions taken by the Council itself
Step 1- submitting a request for a decision to be reviewed

3.1

In the event that a decision is taken by the Council which is unfavourable to a
specific underwriting agent, the underwriting agent may, where it reasonably andobjectively considers the decision to be wrong or unreasonable, request that thedecision is reviewed (a “request”).

3.2

A request shall be made in writing as soon as reasonably practicable following
receipt of the decision. The request shall include an explanation as to why theunderwriting agent considers that the decision is either wrong or unreasonable.
The request shall be made on behalf of the board of directors of the underwriting
agent and shall be signed by two directors of the underwriting agent. The request
shall be submitted to Secretary to the Council.
Step 2 – Review of the decision by the Council

3.3

The Council shall review the request and may, where it considers appropriate,
amend, modify or withdraw the decision.
Step 3 – Application for permission to appeal to the Appeal Tribunal

3.4

Where, following a review of the request by the Council, the underwriting agent
wishes to apply for permission to appeal to the Appeal Tribunal, the underwriting
agent may make an application to the independent non-executive directors of theCouncil to do so. The application shall be made in writing as soon as reasonably
practicable. The application shall be made on behalf of the board of directors of
the underwriting agent and shall be signed by two directors. The application shallbe submitted to the Secretary to the Council.

3.5

The independent non-executive directors of the Council may, where they
consider appropriate, give permission to the underwriting agent to appeal to the
Appeal Tribunal.