Endorsements for Binding Authority Contracts
Guidance for managing agents

Date

September 2023

Feedback from both managing agents and brokers as well as insights into processes via
DCOM has identified that guidance regarding the correct approach to effective dates ofendorsements to binding authority contracts would be beneficial. In particular, a highvolume of queries are received by the DCOM service desk by users seeking to register
retrospective endorsements.
In order to assist the market we have set out below Lloyd’s expectations for the use of‘retrospective endorsements’. Retrospective endorsements are endorsements where thedate inserted for when the endorsement takes effect is before the date when there is fulland final agreement of the terms, as evidenced by all the parties signing the endorsement.
In certain specific cases of proposed retrospective endorsements, we set out below detailsof where we will now require that managing agents obtain prior agreement from Lloyd’s
before adopting the endorsement. But this note also makes clear that in the majority ofcases Lloyd’s prior agreement is not needed.

Background
The Contract Certainty Code of Practice (September 2018, at A.2) says the following
regarding the use of retrospective contracts and endorsements:“Wherever possible, the insured and insurer should enter into the contract prior toinception. In circumstances where this is not possible, Contract Certainty can still beachieved by applying the Contract Certainty principles. Firms should be able todemonstrate the extent to which contracts are being entered into later thaninception, their causes and actions being taken to reduce their frequency.”
It is therefore recognised in the Contract Certainty guidelines and by Lloyd’s that
retrospective endorsements cannot always be avoided and there may be good reason thatendorsements need to be backdated. Nevertheless, the Contract Certainty guidelines
require that wherever possible, the parties should have complete and final agreement of allterms prior to inception.

The risks of excessive or improper use of retrospective endorsements are that:••

Changes to binding authority agreements are often backdated unnecessarily orincorrectly. This means there is an excessive number of ‘retrospective
endorsements’, where the inception date has been backdated to the inception of thebinding authority or some other date prior to the date when the endorsement wasentered into by all the parties.
Failing to enter into endorsements promptly and relying on them applying
retrospectively creates legal uncertainty, risking determent to the policyholder,coverholder and managing agent. In some instances, retrospective endorsements
are being used to implement inappropriate changes to the binding authority
arrangement.

ExampleFor example, a change to Section 3.2 “The Person(s) Authorised to Bind Insurances”
should be identified and changed on the binder prior to this authority being granted. If thiswere to be backdated this would suggest the person has already been acting outside theparameters of the agreement and therefore in breach of the agreement and theIntermediaries Byelaw.
Lloyd’s recognise there can be special circumstances and human error which would mean aretrospective endorsement would be required, however we expect managing agents to havethe appropriate controls in place to prevent these from occurring regularly.

Oversight
Managing agents should have robust processes in place to ensure endorsements arebound before they take effect so that retrospective endorsements are only adopted wherestrictly required and not because of inefficiency or poor oversight and control of coverholder
relationships.
Lloyd’s are introducing a new process for registering retrospective endorsement which all
managing agents must follow from 1st January 2024. The new process is outlined below:
Lloyd’s is requiring that retrospective endorsements that fall into ‘Category 1’ below arereferred to Lloyd’s for prior approval. Lloyd’s has seen evidence that retrospective
endorsements falling into Category 1 are sometimes being used to make incorrect changes
to the binding authority.
Lloyd’s will monitor through DCOM the use of retrospective endorsements and, where thereis evidence of a higher use by managing agents, we will investigate and, where appropriate
take action to require the managing agent to improve their processes. This will also betaken into account in setting the managing agent ratings for The Principles of DoingBusiness.

CategoryCategory 1 – Referral
requiredAny endorsements
which will
retrospectively amend
the binding authority
agreement in any of theways listed are required
to be referred to Lloyd’s
DA team for prioragreement.

Category 2 – ManageinternallyManaging Agentsshould manage theseendorsements inaccordance with bestpractice. Justification
should be evidenced

Types of changes included
endorsements
•
•
•
•
•
•

UMR (other than where there
is a mid-term broker change)
Agreement template
Capacity changes
Year of Account
Inception or expiry dateParameters of binding
authority – where this change
could trigger either a valid
claim being excluded or new
claim being covered, which
was not originally covered by
the terms of the contract:
Class of business, coverage,exclusions, territorialchanges, limits anddeductibles/ excess, period
of insurances, income andaggregate limits.

All endorsements not listed in
Category 1. This includes but is not
limited to:• Change in coverholder/broker and/or their address• Any change to Person(s)responsible listed in thebinding authority agreement

Process
1. Prior to the endorsement
being agreed, the leadmanaging agent should email
coverholders@lloyds.com torefer the endorsement to theLloyd’s DA team. Please
complete and include thereferral information table in
Table 1, below.
2. The managing agent will thenneed to liaise with Lloyd’s DA
team and may be required toprovide additional information
so that Lloyd’s canunderstand the reason why
the retrospective
endorsement is required.
3. Once Lloyd’s have received
the appropriate information
the managing agent can thenproceed with theendorsement.
4. These types ofendorsements will trigger avalidation error on DCOM
when the date that all parties
have agreed to theendorsement is after theeffective date.
5. The broker can raise a ticket
via the Market Support
Centre portal and can attach
the email confirmation from
Lloyd’s or confirm theendorsement number andUMR.
6. DA team to check Lloyd’sagreement vs. endorsement
match and then agree
override on DCOM.
1. These endorsements will
trigger a validation error on
DCOM (when the effective
date is prior to theconfirmation date).
2. Managing agents shouldraise a ticket via the Market
Support Centre portal andwill be asked to confirm thatfor any retrospective
endorsements that arerequired.

••••••

Parameters of binding
authority – where this change
will not trigger either a valid
claim being excluded or a
new claim being covered,
which was not originallycovered by the terms of thecontract: COB, coverage,
exclusions, territorialchanges, limits anddeductibles/ excess, period
of insurances, income, andaggregate limits
Binding authority controls:
Notifiable percentage, claims
authority, reporting
requirements, bordereaux
requirements
Commissions; profit
commission, brokerage,
coverholder commission, anyother fees.
Contractual requirements:
Data protection, notice oftermination
Change in UMR if not unique
Manifest errors – for example
instances where a ‘0’ is left
off a number or it can beevidenced that the binding
authority, as a result of an
administrative error,
incorrectly reflects theoriginal intention of all theparties.

these are a Category 2
endorsement and that theappropriate controls havebeen followed
3. Managing agents will be
expected to be able toevidence the reason whyendorsements have beenbackdated. For example, if
the reason is because of a
mistake in the slip themanaging agent should beable to evidence that thechange reflects the original
intention of the agreement.
4. Once this information has
been validated, Lloyd’s willagree an override on DCOM
so the endorsement can becorrectly processed.

Table 1 Table of information to be included in 'Referral email' from managing agent

UMR
Endorsement No.
DCOM ID
Change being madeRationale forretrospective
endorsement
Please direct any questions relating to this guidance and its contents tocoverholders@lloyds.com.