A New
Approach toThird Party
Oversight
Proposed amendments to the Intermediaries Byelaw
and related Requirements (to be read together with
Consultation Document)
January 2019

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Section 1: Amendments to theIntermediaries Byelaw

FOR CONSULTATION (JANUARY 2019)

INTERMEDIARIES BYELAW______________________________________________
PurposeThe purpose of this Byelaw is to –
1.
2.
32.
3.
4.
5.
6.

7.

permit the acceptance of business at Lloyd’s through coverholders;
permit the determination of claims at Lloyd’s through third party administrators
specify to whom a managing agent may delegate its authority to underwrite contracts
of insurance, and issue insurance documentation and to determine claims;
state which type of coverholder must be approved by the Franchise Board;
provide for the registration of persons to whom delegated authority is given all
approved coverholders;provide for the registration of certain contracts of delegated authority binding
authorities; andprovide for the Franchise Board to prescribe conditions and requirements relating tocontracts of delegated authority and to insurance documentation issued bycoverholderspersons to whom delegated authority is given; andprovide for the registration of Lloyd’s brokers.

The Byelaw also revokes –1.
2.

The Delegated Underwriting Byelaw (No. 1 of 2004); andThe Lloyd’s Broker Byelaw (No. 7 of 2004); andAmendments
This byelaw was amended byIntermediaries (Service Company Amendment) Byelaw (No. 5 of 2008)
The Legislative Reform (Lloyd’s) Order (Market Provisions) Byelaw (No. 1 of 2009)
Intermediaries (Claims Determination) Amendment Byelaw (No. 1 of 2012)
Intermediaries (Restricted Coverholder Revocation) Amendment Byelaw (No. 1 of 2014)
Intermediaries () Amendment Byelaw (No. X of 2019)
Words and terms shown in italics have the meaning set out in the Definitions Byelaw.
This Byelaw was made by the Council on 28 March 2007 in exercise of its powers under
section 6(2) and 8(3) of, and paragraphs (4), (12), (14), (19), (21), (24), (37) and (41) of

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Schedule 2 to, Lloyd’s Act 1982 and may be referred to as the Intermediaries Byelaw (No. 3 of2007).
The headings and these notes are for guidance only and do not form part of the Intermediaries
Byelaw.
Commentary (not part of the byelaw):
This version of the byelaw has been prepared showing amendments proposed by Lloyd’s. Some
commentary has been provided to aid an understanding of the key changes - this has been
included for the purposes of the consultation only. The commentary does not form part of thebyelaw.

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FOR CONSULTATION (JANUARY 2019)

Contents______________________________________

Section 1

Delegated UnderwritingAuthority

Part A

Delegation of authority
Delegation of authority to enter into contracts of insurance
Delegation of authority to issue insurance documentation
Delegation of authority to determine claims

Part B

Registers of persons with delegated authoritycoverholders and contracts
of delegated authorityregistered binding authorities
Establishment and maintenance of registers
Registration of approved coverholders, approved third party administrators andothers to whom the Franchise Board has permitted authority to be delegated or
sub-delegatedRegistration of contracts of delegated authority

Part CApproved coverholders
Applications for approval
Approval
Directions, conditions and requirements
Review of approval
Revocation of approval
Decisions may be made by electronic processes[Part D

Deleted by the Intermediaries (Restricted Coverholder Revocation) Amendment Byelaw(No. 1 of 2014).]

Part E

Binding authoritiesContracts of delegated authority
Requirements relating to binding authoritiescontracts of delegated authority
Registration of binding authorities and third party administrator agreements

Part F

Requirements for insurance documentation

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FOR CONSULTATION (JANUARY 2019)[Part G

Deleted by Intermediaries (administrators]

Part H

Suspension

Section 2

Lloyd’s Brokers

Part I

Registration) Amendment Byelaw (No. X of 2019)Claims and third party

Registration
Criteria for registration
Part J

Additional requirements for Lloyd’s brokers
Terms of business agreements
Notification to Lloyd’sPart K

Review of registration
Power to conduct reviews

Part L

Removal from the register
Removal from the register
Postponed removal
Permission to broke insurance business after removal

Section 3

Miscellaneous and transitional arrangements

Part M

Miscellaneous and transitional arrangements
Acceptance of business
The Franchise Board
Managing agent’s obligations (coverholder and third party administrator
arrangements)
Publication
Fees
Divestment

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FOR CONSULTATION (JANUARY 2019)
Prohibition on unregistered persons broking insurance business at Lloyd’s
Disclosure of information
Revocations and consequential amendments
Transitional and miscellaneous arrangements
Supplementary directions, conditions and requirements
Commencement

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Section 1

Delegated UnderwritingAuthority

Part A – Delegation of authority
Delegation of authority to enter into contracts of insurance
1.

A managing agent shall not delegate its authority to enter into contracts of insurance
to be underwritten by the members of a syndicate managed by it to any person otherthan –
(a)

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

to a director or employee of the managing agent or, with the consent of theFranchise Board, to any other individual engaged to provide services to the
managing agent;
to another managing agent or authorised insurance company in accordancewith the terms of a line slip;
to another managing agent in accordance with the terms of a registeredbinding authorityconsortium agreement;
to an approved coverholder in accordance with the terms of a registeredbinding authority;
to such other person or class or category of persons as the Franchise Board
may permit in accordance with the terms of a contract of delegated authority;[(e)deleted by the Intermediaries (Restricted Coverholder Revocation) Amendment Byelaw (No. 1
of 2014).](f)

to the Society, or a representative or agent of the Society; or(g)in accordance with any other of the requirements of the Council.

Commentary (not part of the byelaw):
The inclusion of a new sub-paragraph (e) is intended to allow Lloyd’s to take a more flexible
and risk based-approach to permitting different types of delegation, in appropriate cases. In
these cases, prior approval by Lloyd’s of the third party will not be required before delegatedauthority is given by managing agents, provided the requirements Lloyd’s will prescribe in eachcase are complied with. It is intended to provide for any detailed requirements in the ‘Code ofPractice – Delegated Authority’, which can be updated from time to time.
An equivalent provision to sub-paragraph (e) is also included in paragraph 3 (delegation ofissuance of insurance documentation) and 4A (delegation of determination of claims).
Note that a new defined term of ‘contract of delegated authority’ has also been introduced
which includes all contracts of delegated authority, including (but not limited to) binding
authorities, line slips and consortium agreements (as well as third party administrator
agreements –referenced below).

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FOR CONSULTATION (JANUARY 2019)2.

Any person, other than the Society, or a managing agent, with to whom authority toenter into contracts of insurance to be underwritten by members of a syndicate has
been delegated in accordance with paragraph 1 shall not sub-delegate that authority
other than –
(a)

(b)

to a director, partner or employee of that person or, with the consent of theFranchise Board, to any other individual engaged to provide services to that
person in accordance with the terms of the binding authority or line slip inquestion; or,to any of the persons and in accordance with such specified contract ofdelegated authority as is listed in paragraph 1 (b) to (g),save that the Franchise Board may from time to time prescribe conditions andrequirements as to the sub-delegation of authority in accordance with this paragraphby or to any person or class or category of persons (which may include prohibiting
the sub-delegation of authority). save that a service company coverholder may also
sub-delegate its authority under its service company agreement to another approved
coverholder in accordance with the terms of a binding authority.
Commentary (not part of the byelaw):
Paragraph 2 now permits sub-delegation to any person to whom delegation of authority ispermitted. This changes the position from the current byelaw provision, which only allows for
sub-delegation in a very limited number of cases. This change is intended to allow Lloyd’s totake a more flexible and risk-based approach to sub-delegation.
Lloyd’s view of sub-delegation remains, however, that in most cases it will be imprudent toallow unrestricted sub-delegation. The paragraph therefore expressly provides that Lloyd’s may
restrict the ability to sub-delegate and a new paragraph A1 has been inserted in the related
Requirements made pursuant to the Intermediaries Byelaw (see separate document). This
imposes requirements prohibiting sub-delegation except by managing agents and service
company coverholders other than where Lloyd’s further prescribes. The updated ‘Code ofPractice – Delegated Authority’ will provide for the additional circumstances where Lloyd’s
proposes to allow limited sub-delegation by coverholders.
Equivalent amendments have been made to paragraph 4 (sub-delegation of issuance of
insurance documentation) and 4B (sub-delegation of determination of claims).

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FOR CONSULTATION (JANUARY 2019)
Delegation of authority to issue insurance documentation1
3.

A managing agent shall not delegate its authority to issue documents evidencing
contracts of insurance underwritten by the members of a syndicate managed by it toany person other than to –
(a)
(b)

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

[(f)

deleted by the Intermediaries (Restricted Coverholder Revocation) Amendment Byelaw (No. 1
of 2014).](g)

the Society, including for the purpose of issuing or otherwise making available
marine insurance certificates in accordance with the Marine Insurance
Certificates Byelaw (No. 3 of 2002), or a representative or agent of theSociety.; orto such other persons as the Franchise Board may permit.

(h)4.

the LPSO;
a director or employee of the managing agent or, with the consent of theFranchise Board, to any other individual engaged to provide services to the
managing agent;
another managing agent or an authorised insurance company in accordancewith the terms of a line slip;
another managing agent in accordance with the terms of a registered binding
authorityconsortium agreement;
an approved coverholder in accordance with the terms of a registered binding
authority or a restricted binding authority;
to such other person or class or category of persons as the Franchise Board
may permit in accordance with the terms of a contract of delegatedauthority; or

Any person, other than the Society, or LPSO or a managing agent, with to whom
authority to issue documents evidencing contracts of insurance underwritten on behalfof the members of a syndicate has been delegated in accordance with paragraph 3
shall not sub-delegate that authority other than –(a)to a director, partner or employee of that person or, with the consent of theFranchise Board, to any other individual engaged to provide services to that
personin accordance with the terms of the binding authority or line slip inquestion,; or

1 Paragraph 3 of the Intermediaries Byelaw does not prohibit:

(1)
(2)

the use of electronic systems or repositories for the formation, recording and storage of insurance contracts; orbrokers from producing evidence of cover from such systems or repositories as this in itself does not constitutedelegation of authority by the managing agent. In that context, brokers may produce insurer authorised evidenceof cover held on the system for onward transmission to the insured provided that the reproduction is a complete
and accurate reproduction of the insurer authorised evidence of cover.
This footnote has been included because Lloyd’s has received enquiries seeking clarification of this paragraph in the context
of electronic systems and repositories. This footnote does not form a part of the byelaw. Lloyd’s August 2008.

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FOR CONSULTATION (JANUARY 2019)(b)

to any of the persons and in accordance with such specified contract ofdelegated authority as is listed in paragraph 3 (a) and (c) to (g),save that the Franchise Board may from time to time prescribe conditions andrequirements as to the sub-delegation of authority in accordance with this paragraphby or to any person or class or category of person (which may include prohibiting the
sub-delegation of authority).save that a service company coverholder may also subdelegate its authority under its service company agreement to another approved
coverholder in accordance with the terms of a binding authority.
Commentary (not part of the byelaw):
The changes to paragraph 3 and 4 are intended to mirror those made to paragraphs 1 and 2.

Delegation of authority to determine claims
4A.

A managing agent shall not delegate its authority to determine claims on contracts of
insurance underwritten by the members of a syndicate managed by it to any person
other than –
(a)

(b)
(c)
(d)
(da)

(e)
(f)
(g)

to a director or employee of the managing agent or, with the consent of theFranchise Board, to any other individual engaged to provide services to the
managing agent;
to another managing agent or authorised insurance company in accordancewith the terms of a line slip;
to another managing agent in accordance with the terms of a consortium
agreement;
to an approved third party administrator in accordance with the terms of athird party administrator agreement;
an approved coverholder where the contract of insurance has been entered into
or is being administered by that approved coverholder in accordance with theterms of a binding authority;
to an approved run-off company in accordance with the terms of a contract ofdelegated authority;
to a Lloyd’s claims settling agent in accordance with the terms of a contract ofdelegated authority;a lawyer or firm of lawyers qualified to practice law under the laws andregulations where they are located in accordance with the terms of a contractof delegated authority;

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FOR CONSULTATION (JANUARY 2019)
(h)

(i)
4B.

to such other person or class or category of persons as the Franchise Board
may permit in accordance with the terms of a contract of delegated authority;orto the Society, or a representative or agent of the Society.

Any person, other than the Society, to whom authority to determine claims oncontracts of insurance underwritten by members of a syndicate has been delegated inaccordance with paragraph 4A shall not sub-delegate that authority other than –
(a)

(b)

to a director, partner or employee of that person or, with the consent of theFranchise Board, to any other individual engaged to provide services to that
person; orto any of the persons and in accordance with such specified contract ofdelegated authority as is listed in paragraph 4A (b) to (i),save that the Franchise Board may from time to time prescribe conditions andrequirements as to the sub-delegation of authority in accordance with this paragraphby or to any person or class or category of person (which may include prohibiting the
sub-delegation of authority).
Commentary (not part of the byelaw):
Lloyd’s believes that delegated claims handling should be subject to the same oversightframework as already currently applies to delegated underwriting. Accordingly, paragraphs 4A
and 4B are intended to put in place equivalent provisions for delegated claims handling as
already exist for delegated underwriting and provide that the delegation of claims handling
authority will only be permitted by Lloyd’s in the cases listed in the new paragraph 4A. This
includes to third party administrators, who will now need to be approved by Lloyd’s.
Coverholders determining claims in respect of business written or administered by them will not
require approval as a third party administrator.
The list of persons to whom it will be permitted to delegate claims authority substantiallyfollows the existing list set out in the current Part G of the Intermediaries Byelaw.

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Part B – Registers of coverholders persons with delegated authority and contracts of delegatedauthorityregistered binding authorities

Establishment and maintenance of registers
The Franchise Board shall establish and maintain registers of –

5.

(a)
(b)
(c)

(db)

approved coverholders; andapproved third party administrators;
such other classes or categories of persons to whom the Franchise Board has
permitted authority to be delegated or sub-delegated in accordance withparagraphs 1 to 4B as the Franchise Board may prescribe from time to time;andregistered binding authoritiessuch classes or categories of contracts ofdelegated authority as the Franchise Board may prescribe from time to time.

Commentary (not part of the byelaw):
Lloyd’s currently is required to maintain a register of approved coverholders and the binding
authorities that they hold. Lloyd’s will now maintain parallel registers for approved third party
administrators and third party administrator agreements. Lloyd’s intends to maintain registersof others to whom delegated authority is given (including line slips, consortium arrangementsand ‘distributors’) and their contracts of delegated authority. Lloyd’s will publish in due course
further details, including its requirements for providing details for the registers. In practice, thiswill administratively be dealt with through Chorus, the replacement for BAR and ATLAS.
6.

The registers shall be in such form and contain such information as the Franchise
Board may prescribe.

7.

The Franchise Board may prescribe which persons or categories or classes of person
may inspect all or any part of each register referred to in paragraph 5.
Registration of approved coverholders, approved third party administrators and others to whom
the Franchise Board has permitted authority to be delegated or sub-delegated

7A.

The arrangements for entering in and removing names from the register of approved
coverholders and approved third party administrators shall be in accordance withparagraphs 11 and 19.

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7B.

The Franchise Board may from time to time prescribe the arrangement for entering in
the register of names of persons required to be registered in accordance withparagraph 5 (c), including –(a)(b)

which classes and categories of persons may register a person within thiscategory; andthe requirements and procedures that must be complied with in order toregister such a person.

7C.

The person who registers a person within this category shall ensure that the
information contained in the register relating to that person is kept up-to-date.

7D.

Managing agents, approved coverholders and approved third party administrators
shall not permit persons required to be registered in accordance with paragraph 5 (c)within this category to exercise authority delegated to them in accordance with any ofparagraphs 1 to 4B unless that person’s name is included in the register.

7E.

The Franchise Board may at any time remove from the register established andmaintained in accordance with paragraph 5 (c) the names of any persons who are notor have ceased to be persons requiring their name to be included in the register.

Commentary (not part of the byelaw):
Other than for approved coverholders and third party administrators, the onus of entering details
on the register will be on the parties. Registration does not indicate that a person is approved by
Lloyd’s. Registration in these cases will merely be a requirement that applies where delegatedauthority is given in accordance with Lloyd’s requirements and allows, amongst other things,
for Lloyd’s to track arrangements in the market. Where there is no requirement for a person to
be registered (for example, because it no longer has a contract of delegated authority) Lloyd’s
will be able to remove the person’s name from the register.

Registration of contracts of delegated authority
7F.

The Franchise Board may from time to time prescribe –(a)(b)

which classes and categories of persons may register a contract of delegatedauthority; andprescribe requirements and procedures which must be complied with in orderto register a contract of delegated authority.

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FOR CONSULTATION (JANUARY 2019)
7G.

The person who registers a contract of delegated authority shall ensure that the
information contained in the register relating to that contract of delegated authority is
kept up-to-date.

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Part C - Approved coverholders and approved third party administrators

Commentary (not part of the byelaw):
The changes in this section primarily provide for the application to third party administrators of
the same approval arrangements as currently already apply to coverholders.

Applications for approval
8.

Any company or partnership that wishes to be approved as an approved coverholder
or as an approved third party administrator (an “applicant”) may apply to theFranchise Board. Applications shall be made in accordance with such procedures
and shall be accompanied by such documents and information as the Franchise Board
may from time to time prescribe.

9.

The Franchise Board may require an applicant, which is not a Lloyd’s broker, to besponsored by a Lloyd’s broker or a managing agent (the “sponsor”).

10.

At any time after receiving an application, the Franchise Board may, in connection
with the consideration of the application, require –
(a)
(b)
(c)

the applicant;any sponsor; or
any managing agent which proposes to enter into a binding authority or third
party administrator agreement with the applicant,or any of the directors, partners and employees of any such person to –
(i)
(ii)
(iii)
(iv)
(v)

provide information, documents, books, records and other materials;
answer questions;give undertakings or make declarations to the Franchise Board;
attend before the Franchise Board or any representative or agent of theSociety;permit the Franchise Board or any representative or agent of the Society toattend at the applicant’s business premises to inspect, review or assess theapplicant’s business operations, books and records and to pay or contribute to
the costs of that inspection, review or assessment;

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FOR CONSULTATION (JANUARY 2019)(vi)

provide funds or other security (including, but not limited to letters of credit,
charges or guarantees) for the settlement and payment of insurance
transactions incurred by it.

Approval
11.

The Franchise Board may consider applications for approval as an approved
coverholder or approved third party administrator and grant or refuse any suchapproval. Upon granting any such approval the name of the applicant shall be enteredinto the register of approved coverholders or approved third party administrator, as
applicable.

12.

The Franchise Board shall not approve an applicant as an approved coverholder orapproved third party administrator unless the applicant has demonstrated to theFranchise Board that it is suitable to be approved as such an approved coverholder.

13.

In deciding whether an applicant is suitable to be approved as an approved
coverholder or as an approved third party administrator the Franchise Board shallhave regard to such criteria as it may from time to time prescribe for all or any classor category of applicants.

13A. The Franchise Board shall not approve an application to become an approved
coverholder unless the applicant can demonstrate that, upon approval, it has areasonable expectation of entering into a binding authority and the Franchise Board issatisfied that the syndicate for whose members any contracts of insurance are to beunderwritten is managed by a managing agent that has the capabilities andcompetencies to underwrite the business in question through that applicant.
Commentary (not part of the byelaw):
This new paragraph introduces an express requirement for Lloyd’s, before approving acoverholder, to take into account the capabilities of the managing agent on whose behalf the
new coverholder will be underwriting. In practice, both the suitability of any coverholder andthe capabilities of the managing agent need to be considered together to make an informed
decision on a new coverholder proposition and this is now expressly provided for.
14.

A person shall not hold itself out as being an approved coverholder or as an approved
third party administrator unless its name appears in the register of approved
coverholders or the register of approved third party administrators, as applicable.

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FOR CONSULTATION (JANUARY 2019)15.

The approval of a person as an approved coverholder or as an approved third party
administrator may be –
(a)

(b)
(c)
(d)

subject to that person entering into a binding authority or third party
administrator agreement to be registered in accordance with this Byelaw
within such period as the Franchise Board may specify;
subject to the provision of undertakings or declarations from such persons as
the Franchise Board may require;
for a specific or an indefinite period;in the case of approved coverholders, subject to that person being classified asa service company coverholder.

Directions, conditions and requirements
16.

The Franchise Board may at any time give such directions to or impose suchconditions or requirements on an approved coverholder or approved third party
administrator (or any class or group thereof) as it thinks necessary or appropriate. A
direction, condition or requirement given or imposed under this paragraph may
include a direction, condition or requirement for the purposes of ensuring that theapproved coverholder or approved third party administrator (or any class or group
thereof) –
(a)
(b)

(c)

(d)

(e)

(f)

is or will continue to be suitable to be an approved coverholder or approved
third party administrator;
will only act in that capacity in accordance with a binding authority or third
party administrator agreement which has such parties, or which was arranged
or broked by such person or persons, as the Franchise Board may specify;
will only act in that capacity in respect of certain classes or categories of
insurance business or in respect of certain geographical areas as specified by
the Franchise Board;in the case of approved coverholders, may only determine the premium to be
charged in respect of each contract of insurance to be entered into under abinding authority in accordance with such restrictions or limitations as theFranchise Board may specify;.
in the case of approved coverholders. may only determine claims on contracts
of insurance which have been entered into or are being administered by thatapproved coverholder in accordance with such restrictions or limitations as theFranchise Board may specify;
may only sub-delegate any authority to enter into or to issue documents
evidencing contracts of insurance or to determine claims on contracts of
insurance underwritten by or, as the case may be, to be underwritten by

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members of a syndicate in accordance with such restrictions or limitations as
the Franchise Board may specify (which may include prohibiting any subdelegation of authority).
Commentary (not part of the byelaw):
The non-exhaustive list of directions that Lloyd’s can make in relation to approved coverholders
and approved third party administrators has been extended to reflect changes made elsewhere in
the byelaw.

Review of approval
17.

The Franchise Board may at any time conduct a review of an approved coverholder’sor approved third party administrator’s approval under this Byelaw for the purpose ofdetermining –
(a)
(b)

18.

whether they continue to suitable to be approved as such approved
coverholder continues to be suitable to be an approved coverholder;
whether there are or may be any ground for exercising any power of theFranchise Board.

In connection with any review conducted by the Franchise Board under paragraph 17,
the Franchise Board may require the approved coverholder or approved third party
administrator, any managing agent which is or has been a party to a binding authority
or third party administrator agreement with the approved coverholder and any
Lloyd’s broker which arranged, broked or is a party to any such binding authority or
third party administrator agreement and any of their directors, partners or employees
to –
(a)
(b)
(c)
(d)

(e)

provide information, documents, books, records and other materials;
answer questions;attend before the Franchise Board or any representative or agent of theSociety;permit the Franchise Board or any representative or agent of the Society toattend at the approved coverholder’s or approved third party administrator’sbusiness premises to inspect, review or assess the approved coverholder’s orapproved third party administrator’s business operations, books and records
and to pay or contribute to the costs of that inspection, review or assessment;
make declarations to the Franchise Board.

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FOR CONSULTATION (JANUARY 2019)
Revocation of approval
19.

The Franchise Board may at any time revoke the approval of an approved
coverholder or approved third party administrator and remove its name from theapplicable register of approved coverholders if the Franchise Board considers that –
(a)
(aa)
(b)

(c)

(d)

(da)

(e)

the approved coverholder or approved third party administrator is not suitable
to be approved as such an approved coverholder;
the approved coverholder or approved third party administrator has failed toor has ceased to comply with any requirements of the Council;
the approved coverholder or approved third party administrator has failed toor has ceased to comply with any direction, condition or requirement given toor imposed upon it under paragraph 16;
the approved coverholder or approved third party administrator has failed toor has ceased to comply with the terms of any undertaking or declaration thatit has given to the Franchise Board;in the case of an approved coverholder, the approved coverholder has notbeen party to a registered binding authority for a period of 3 months, or such
longer period as the Franchise Board may permit, since the expiry of its
authority to enter into contracts of insurance on behalf of the members of a
syndicate under the last registered binding authority to which it was party;
in the case of an approved third party administrator, the approved third party
administrator has not been party to a third party administrator agreement fora period of 6 months, or such longer period as the Franchise Board may
permit, since the expiry of its authority to determine claims on contracts of
insurance underwritten by the members of a syndicate under the last third
party administrator agreement to which it was party; or
it is necessary or desirable in order to protect the name, reputation or standingof the Society and of its members or their authorisation to conduct insurance
business.

Commentary (not part of the byelaw):
The new sub-paragraph (aa) allows Lloyd’s to revoke approval where a coverholder or third
party administrator fails to comply with Lloyd’s requirements. Its absence in the current byelaw
is an omission, which has been corrected.

20.

Where the Franchise Board considers that there are grounds for revoking the approvalof an approved coverholder or an approved third party administrator the Franchise
Board may if it considers that there is good reason to do so –18

FOR CONSULTATION (JANUARY 2019)
(a)

(b)

postpone that revocation for such period or periods as the Franchise Board
may specify from time to time or until the Franchise Board shall otherwise
determine; andin connection with such postponement, at any time give such directions or
impose such requirements as it may think fit including directions or
requirements for the purpose of ensuring that –
(i)

(ia)

(ib)

(ii)

in the case of an approved coverholder, the approved coverholder does
not or does not continue to enter into or purport to enter into any
further contracts of insurance on behalf of members of a syndicate;in the case of an approved third party administrator, the approved
third party administrator does not or does not continue to determine or
purport to determine claims underwritten by members of a syndicate;
the approved coverholder or approved third party administrator does
not or does not continue to enter into or purport to enter into any
contract of delegated authority; andany contracts of insurance entered into by the approved coverholder onbehalf of members of a syndicate in any capacity are properly
administered.

Decisions may be made by electronic processes
21.

Where it considers appropriate, any decision in this part may be made andcommunicated by the Franchise Board using automated electronic processes.

Commentary (not part of the byelaw):
Using Chorus, which is replacing ATLAS and BAR, and adopting a risk-based approach,
Lloyd’s anticipates that a significant number of tasks relating to coverholder and third party
administrator permissions can in the future be dealt with automatically, without the need for amember of the PMD team becoming involved. This paragraph clarifies, for the avoidance of
doubt, that Lloyd’s may make decisions in this way.

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FOR CONSULTATION (JANUARY 2019)[Part D – Restricted coverholders
Deleted by the Intermediaries (Restricted Coverholder Revocation) Amendment Byelaw (No. 1 of2014).]

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Part E - Binding authorities and line slipsContracts of delegated authority
Commentary (not part of the byelaw):
The amendments to this part are largely consequential of the changes made elsewhere, which
extends Lloyd’s oversight framework to delegated claims authority and the introduction ofgreater flexibility to allow additional delegation or sub-delegation arrangements.
Requirements relating to binding authorities and line slipscontracts of delegated authority
30.

The Franchise Board may from time to time prescribe conditions and requirementswith which all binding authorities or line slipscontracts of delegated authority or any
class or category of contract of delegated authority binding authority or line slip mustcomply including conditions and requirements relating to information, provisions andterms to be included in a binding authority or line slip.

31.

An approved coverholder or a managing agent shall not enter into or purport to enter
into a contract of insurance or contract of delegated authority or issue or purport toissue a document evidencing a contract of insurance under a binding authority,
consortium agreement or a line slip unless -–
(a)
(b)

31A.

An approved third party administrator shall not determine or purport to determine aclaim or enter into a contract of delegated authority under a third party administrator
agreement unless –
(a)
(b)

32A.

each of the parties to the binding authority, consortium agreement or line slip
have agreed to its terms and conditions; andthe binding authority, consortium agreement or line slip complies with theconditions and requirements prescribed by the Franchise Board in accordancewith paragraph 30.

each of the parties to the third party administrator agreement have agreed to
its terms and conditions; andthe third party administrator agreement complies with the conditions andrequirements prescribed by the Franchise Board in accordance withparagraph 30.

An approved coverholder, an approved third party administrator or a managing agent
shall not authorise, permit or cause any person to whom they delegate or sub-delegate
authority to enter into a contract of insurance or issue a document evidencing a

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FOR CONSULTATION (JANUARY 2019)
contract of insurance or to determine a claim under a contract of delegated authority
unless –(a)(b)

each of the parties to the contract of delegated authority have agreed to its
terms and conditions; andthe contract of delegated authority complies with the conditions andrequirements prescribed by the Franchise Board in accordance withparagraph 30.

Registration of binding authorities and third party administrator agreements
32.

An approved coverholder shall not enter into or purport to enter into a contract of
insurance or a contract of delegated authority and shall not issue or purport to issue a
document evidencing a contract of insurance under a binding authority until thatbinding authority has been registered in accordance with the requirements andprocedures prescribed by the Franchise Board.

32A

An approved third party administrator shall not determine or purport to determine aclaim or enter into a a contract of delegated authority under a third party
administrator agreement until that third party administrator agreement has beenregistered in accordance with the requirements and procedures prescribed by theFranchise Board.

33.

Deleted by Intermediaries () Amendment Byelaw (No. X of 2019)The Franchise Board mayfrom time to time prescribe –
(a)
(b)

34.

which classes and categories of persons may register a binding authority; andprescribe requirements and procedures which must be complied with in orderto register a binding authority.

Deleted by Intermediaries () Amendment Byelaw (No. X of 2019)The person who registers aregistered binding authority shall ensure that the information contained in the register
relating to that binding authority is kept up-to-date.

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Part F - Requirements for insurance documentation

35.

The Franchise Board may from time to time prescribe such conditions andrequirements regarding insurance documentation issued under a contract of delegatedauthoritybinding authority or a line slip which may include conditions andrequirements relating to –
(a)
(b)
(c)

(d)

the content, form and style of the insurance documentation;
service standards for the issuance and distribution of the insurance
documentation;
arrangements to ensure, where a contract of insurance has been entered into
under a binding authoritycontract of delegated authority, that a policyholder
can verify the authority of a coverholderperson to enter into contracts of
insurance underwritten by members of a syndicate and the authenticity of theinsurance documentation issued by it; andarrangements for the proper control of the issuance and distribution of theinsurance documentation.

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FOR CONSULTATION (JANUARY 2019)

Part G – Claims and third party administrators
Deleted by the Intermediaries () Amendment Byelaw (No. X of 2019).]

Commentary (not part of the byelaw):
Lloyd’s is proposing that a similar oversight framework should apply to delegated claims
handling as currently applies to delegated underwriting. This new approach, which is provided
for by proposed amendments made elsewhere in the byelaw, will replace the current
requirements for delegated claims handling and third party administrators as currently set out inPart G. It is therefore proposed to delete Part G.

Claims36A.

In respect of contracts of insurance entered into under a binding authority, amanaging agent shall not delegate its authority to determine claims arising under acontract of insurance entered into on behalf of the members of a syndicate managed
by that managing agent to any person other than to –
(a)
(b)

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

(i)
(j)

the scheme service provider as defined under the terms of the Lloyd’s Claims
Scheme;a director or employee of the managing agent or, with the consent of theFranchise Board, to any other individual engaged to provide services to the
managing agent;
another managing agent or to a substitute agent;
an approved run-off company;a coverholder where the contract of insurance has been entered into by thatcoverholder in accordance with the terms of a binding authority;
a Lloyd’s claims settling agent;a lawyer or firm of lawyers qualified to practice law in accordance with thelaws and regulations where they are located;a third party administrator where the managing agent is satisfied that the third
party administrator is suitable having regard to such criteria that theFranchise Board may from time to time prescribe;
the Society or a representative or agent of the Society; or
to such other person or classes or category of person as the Franchise Board
may permit either generally or in respect of different types, classes or
categories of contracts of insurance.

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FOR CONSULTATION (JANUARY 2019)
36B

In respect of contracts of insurance other than those entered into under a binding
authority, a managing agent shall not delegate its authority to determine claims
arising under a contract of insurance entered into on behalf of the members of a
syndicate managed by that managing agent other than to a person that the managing
agent is satisfied is a competent or appropriate person taking into account suchguidelines, standards or requirements that the Franchise Board may from time to timeprescribe.

36C

For the purpose of this Part G of this Byelaw, the expression “to determine claims”
shall mean all activities relating to the acceptance or denial of a claim (in whole or inpart), the agreement of any amount payable in respect of a claim or the final
resolution of any claim, complaint or other matter ancillary to that claim (whether byagreement or by dispute resolution).

Third party administrators
Notification
36D.

A managing agent shall notify the Franchise Board –(a)(b)

where it intends to delegate its authority to determine claims pursuant toparagraph 36A(h) of this Byelaw to a third party administrator; andforthwith when the managing agent terminates its delegation of authority todetermine claims to that third party administrator,and notifications shall be made in accordance with such process or system as theFranchise Board operates for that purpose.
Obligation to inform if no longer fit and proper
36E.

A managing agent shall immediately notify the Franchise Board (a)(b)

if it has reason to believe that any third party administrator may not be a fit
and proper person; orof any other matters relating to the third party administrator which the
managing agent believes may adversely impact the name, reputation or
standing of the Society and of its members or their authorisation to conduct
insurance business.

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FOR CONSULTATION (JANUARY 2019)
Information
36F.

The Franchise Board may at any time require a managing agent, which has delegatedits authority to determine claims to a third party administrator pursuant to paragraph
36A(h) of this Byelaw, to –
(i)
(ii)
(iii)

provide information, documents, books, records and other materials;
answer questions;give undertakings or make declarations to the Franchise Board,in respect of that third party administrator.
Directions and requirements
36G

The Franchise Board may at any time give such directions to or impose suchconditions or requirements on a managing agent in respect of any third party
administrator (or any class of group thereof) as it thinks necessary or appropriate. A
direction, condition or requirement given or imposed under this paragraph may
include a direction, condition or requirement –(a)for the purposes of ensuring that a third party administrator (i)
(ii)

(b)

is or will continue to be fit and proper to be a third party
administrator;
will only act in that capacity in respect of certain classes or categories
of insurance business as specified by the Franchise Board,that the managing agent cease delegating its authority to determine claims to athird party administrator.

Claims Delegation Agreement
36H.

The Franchise Board may from time to time prescribe conditions and requirementswith which all agreements delegating a managing agent’s authority to determine
claims arising under a contract of insurance entered into under a binding authority to athird party administrator or any type, class or category of agreement must comply.
This may include conditions and requirements relating to information, provisions andterms to be included in that agreement.

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Part H - Suspension

37.

The Franchise Board may make a direction or order of suspension in respect of any
approved coverholder or approved third party administrator on such terms andsubject to such requirements as it may specify when in its opinion such a direction ororder appears to be necessary or desirable in the interests of the Society, its members
or policyholders.

38.

In respect of an approved coverholder, Tthe terms of a direction or order made by theFranchise Board under paragraph 37 may include requirements that the approved
coverholder –
(a)
(b)
(c)

38A

ceases to enter into contracts of insurance on behalf of members of a syndicate
in respect of any or all binding authorities;
ceases to administer or run-off any contract of insurance entered into by it on
behalf of members of a syndicate;ceases to issue documents evidencing contracts of insurance entered into by iton behalf of members of a syndicate.

In respect of an approved third party administrator, the terms of a direction or ordermade by the Franchise Board under paragraph 37 may include requirements that theapproved third party administrator ceases to determine claims on behalf of membersof a syndicate in respect of any or all third party administrator agreements.

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FOR CONSULTATION (JANUARY 2019)
Section 2

Lloyd’s Brokers

Commentary (not part of the byelaw):
No changes are presently proposed to the rules that govern to the registration of Lloyd’s Brokers
other than limited changes to the registration criteria. These changes to the registration criteria
are necessary to take account of the United Kingdom’s planned departure from the European
Union and changes are only required to the Requirements made pursuant to the Intermediaries
Byelaw (see separate document). No byelaw changes are therefore required to Section 2 otherthan a consequential amendment to paragraph 55.

Part I - Registration
Registration
39.

The registration of persons as Lloyd’s brokers and the renewal, review andwithdrawal of such registration shall be under the control of the Franchise Board.

40.

The Franchise Board shall maintain a register of Lloyd’s brokers which shall be insuch form and contain such information as the Franchise Board may from time totime prescribe.

41.

Any person who wishes to be registered or re-registered as a Lloyd’s broker (an“applicant”) may apply to the Franchise Board for its name to be entered or reentered in the register.

42.

Applications shall be made in accordance with such procedures and shall beaccompanied by such documents and information as the Franchise Board may fromtime to time prescribe.

43.

Subject to this Byelaw, the Franchise Board shall have power to –
(a)
(b)

(c)
(d)

consider any application for entry in the register of Lloyd’s brokers and any
application for re-registration;on the grant of any such application, cause the name of the applicant (and all
information which the Franchise Board may determine in accordance withparagraph 40) to be entered in the register of Lloyd’s brokers;
review the registration of any Lloyd’s broker in accordance with part K of this
Byelaw; andremove the name of any Lloyd’s broker from the register in accordance withpart L of this Byelaw.

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FOR CONSULTATION (JANUARY 2019)44.

The registration of a Lloyd’s broker shall be either for a specific period or for anindefinite period.
Criteria for registration

45.

An applicant shall not be registered as a Lloyd’s broker unless the applicant has
demonstrated to the Franchise Board’s satisfaction that it is eligible to be a Lloyd’s
broker.

46.

In deciding whether an applicant is eligible to be registered as a Lloyd’s broker theFranchise Board may have regard to such criteria as it may from time to timeprescribe.

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Part J – Additional requirements for Lloyd’s Brokers
Terms of business agreements[47.

deleted by The Legislative Reform (Lloyd’s) Order (Market Provisions) Byelaw (No.1 of 2009).]

Notification to Lloyd’s
48.

While a Lloyd’s broker remains on the register of Lloyd’s brokers, it shall ensure thatit remains eligible and shall immediately inform the Franchise Board in writing if it
knows or believes that it is no longer eligible.

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Part K – Review of registration

Power to conduct reviews
49.

The Franchise Board may at any time order a review of a Lloyd’s broker’s
registration under this Byelaw for the purpose of determining –(a)(b)

whether the Lloyd’s broker in question continues to be eligible to be registeredas a Lloyd’s broker; orwhether there are or may be any grounds for exercising any power of theFranchise Board.

50.

Any review ordered pursuant to paragraph 49 of this Byelaw may be conducted bysuch person or persons as may from time to time be nominated by the Franchise
Board.

51.

A person conducting a review of a Lloyd’s broker may require that it provide such
documents and information as that person may reasonably require for the purposes of
the review.

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Part L – Removal from the register

Removal from the register[52.

deleted by The Legislative Reform (Lloyd’s) Order (Market Provisions) Byelaw (No.1 of 2009).]53.

The Franchise Board may at any time remove the name of a registered Lloyd’s broker
from the register if that Lloyd’s broker –
(a)
(b)
(c)

ceases in the opinion of the Franchise Board to be eligible to be a Lloyd’s
broker;registration has expired;
so requests; orwhere the Franchise Board considers that it is necessary or desirable in order toprotect the name, reputation or standing of the Society and of its members or theirauthorisation to conduct insurance business.

Postponed removal
54.

Where the Franchise Board considers that there are grounds for removing the nameof a Lloyd’s broker from the register under any of the preceding provisions of thisparagraph (other than paragraph 52) the Franchise Board may, if it considers that
there is good reason to do so –
(a)

(b)

postpone the removal of the name of the Lloyd’s broker from the register forsuch period as the Franchise Board may specify from time to time or until theFranchise Board shall otherwise determine;in connection with such postponement at any time and from time to time givesuch directions or impose such requirements as it may think fit, including
without limitation –
(i)

(ii)

a direction or requirement that the Lloyd’s broker shall not carry on
any business or activity, or business or activity of a specified class ordescription, at Lloyd’s; anda direction or requirement that the Lloyd’s broker shall not hold itself
out as a Lloyd’s broker.

32FOR CONSULTATION (JANUARY 2019)

Permission to broke insurance business after removal
55.

Notwithstanding that the name of a Lloyd’s broker has been removed from theregister, the Franchise Board may, if it considers that there is good reason to do so,
and on such conditions and for such period as it thinks fit, permit –(a)(b)

that former Lloyd’s broker to continue to broke insurance business at Lloyd’s;or
any other person to broke insurance business at Lloyd’s on behalf of thatformer Lloyd’s broker

for the purposes only of discharging the continuing functions of that former Lloyd’s
broker in connection with insurance contracts and contracts of delegated authority,
binding authorities and line slips effected by it or for which it had undertaken
responsibility before the date of such removal from the register of Lloyd’s brokers.

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Section 3

Miscellaneous and transitional provisions

Part M – Miscellaneous and transitional provisions

Acceptance of business[56.

deleted by The Legislative Reform (Lloyd’s) Order (Market Provisions) Byelaw (No.1 of 2009).]

The Franchise Board
57.

All references in this Byelaw to the Franchise Board shall be deemed to also bereferences to the Council. The Franchise Board may exercise all of the powers,
discretions and functions set out in this Byelaw as the agent of the Council.

Managing agent’s obligations (coverholder and third party administrator arrangements)
58.

A managing agent shall not authorise, permit or cause an approved coverholder or an
approved third party administrator to act in contravention of any of the requirementsof the Council.

59.

A managing agent shall immediately notify the Franchise Board in writing if it
knows or believes or has reason to believe that any approved coverholder or approved
third party administrator is acting or has acted in contravention of any provision ofthis Byelaw or of any of the requirements of the Council.

60.

A managing agent shall take all reasonable steps to satisfy itself that an approved
coverholder or approved third party administrator remains suitable to be approved assuch an approved coverholder in accordance with this Byelaw and any requirements
as prescribed by the Franchise Board prior to the managing agent entering into abinding authority or third party administrator agreement with delegating its authority
to enter into a contract or contracts of insurance to that approved coverholder orapproved third party administrator.

61.

A managing agent shall immediately notify the Franchise Board in writing in theevent that it knows or believes or has reason to believe that any of the events atparagraph 19 (a) to (c) or (e) or paragraph 28 (a), (c) or (d) has occurred or is likely tooccur.

34

FOR CONSULTATION (JANUARY 2019)62.

Nothing in this Byelaw shall permit a managing agent to –
(a)
(b)
(c)

delegate its authority to enter into a contract of insurance to be underwritten by
the members of a syndicateon behalf of a member; or todelegate its authority to issue documents evidencing contracts of insurance
underwritten by the members of a syndicateon behalf of a member;delegate its authority to determine claims on contracts of insurance underwrittenby the members of a syndicate,

where such delegation would be contrary to the laws, regulations or requirements ofthe country in which the business will be transacted.

Publication
63.

The Franchise Board may, where appropriate, publish any decision made under this
Byelaw in such terms as it sees fit.

Fees
64.

Every applicant for registration as a Lloyd’s Broker shall pay to the Society such fees
as the Franchise Board may from time to time require.

65.

Every registered Lloyd’s broker shall pay to the Society such fees as the Council mayfrom time to time require.

Divestment[66.

deleted by The Legislative Reform (Lloyd’s) Order (Market Provisions) Byelaw (No.1 of 2009).]

Prohibition on unregistered persons broking insurance business at Lloyd’s
67.

No person may broke insurance business at Lloyd’s unless registered as a registered
Lloyd’s broker under this Byelaw or a person referred to at paragraph 27 of theUnderwriting Byelaw as a person from or through whom a managing agent may
accept business on behalf of the members of a syndicate which it manages.

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FOR CONSULTATION (JANUARY 2019)
Disclosure of information
68.

The Franchise Board may where necessary or appropriate require a registered Lloyd’s
broker to give its consent to the Financial Services Authority or any other insuranceintermediary regulator to disclose information which relates to that registered Lloyd’s
broker to the Franchise Board.

Revocations and consequential amendments
69.

The following Byelaws are revoked –(a)(b)

The Lloyd’s Broker Byelaw (No. 7 of 2004); andThe Delegated Underwriting Byelaw (No. 1 of 2004).

70.

Every reference in the requirements of the Council to the Byelaws referred to atparagraph 69 shall, save where the context otherwise requires, be deemed to be areference to this Byelaw or, in the case of a definition, to the Definitions Byelaw.

71.

The Definitions Byelaw (No. 7 of 2005) is amended by deleting the words “Lloyd’s
Brokers Byelaw (No.7 of 2004)” and “Delegated Underwriting Byelaw (No.1 of
2004) and substituting therefor a reference to this Byelaw.

Transitional and miscellaneous arrangements
72.

The Franchise Board shall on 2 April 2007 enter in the register of approved
coverholders, maintained in accordance with this Byelaw, the name of any person
who on 1 April 2007 was an approved coverholder in accordance with the Delegated
Underwriting Byelaw (No. 4 of 2004).

73.

The Franchise Board shall on 2 April 2007 enter in the register of restricted
coverholders, maintained in accordance with this Byelaw, the name of any person
who on 1 April 2007 was a restricted coverholder in accordance with the Delegated
Underwriting Byelaw (No. 1 of 2004).

74.

Every coverholder which as at 1 April 2007 was subject to a direction, condition or
requirement, imposed under paragraph 16 of the Delegated Underwriting Byelaw (No.
1 of 1994) shall from 2 April 2007 be deemed to be subject to a corresponding
direction, condition or requirement imposed under paragraph 16 of this Byelaw.

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FOR CONSULTATION (JANUARY 2019)75.

Every review of a coverholder’s approval which as at 1 April 2007 was being
conducted pursuant to the terms of paragraph 17 of the Delegated Underwriting
Byelaw (No. 1 of 1994) shall from 2 April 2007 be deemed to be a review conductedby the Franchise Board in accordance with paragraph 17 of this Byelaw.

76.

The Franchise Board shall on 2 April 2007 enter in the register of Lloyd’s brokers,
maintained in accordance with this Byelaw, the name of any person who on 1 April
2007 was an accredited Lloyd’s broker or a provisionally accredited Lloyd’s broker inaccordance with the Lloyd’s Brokers Byelaw (No. 7 of 2004).

76A

The Franchise Board shall on [] enter into the register of approved third party
administrators, maintained in accordance with this Byelaw, the name of any person
who on [] had been notified to the Franchise Board by one or more managing
agents in accordance with paragraph 36D (a) of this Byelaw as a third party
administrator to whom the managing agent(s) intended to delegate authority todetermine claims other than where all such managing agents have subsequently
notified the Franchise Board in accordance with paragraph 36D (b) of this Byelaw.

Commentary (not part of the byelaw):
Paragraph 76A provides for the grandfathering arrangements of third party administrators
previously notified to Lloyd’s so that they will become approved third party administrators
under the new framework Lloyd’s is putting in place for delegated claims handling, without
having to go through an initial approval process. Over a period of time, Lloyd’s will review all
third party administrators to determine that they remain suitable to be on the register ofapproved third party administrators.
Supplementary directions, conditions and requirements
77.

The Franchise Board may at any time give such directions or impose such conditions
or requirements as may be necessary in order to clarify or supplement the matter set
out in this Byelaw or otherwise to give effect to orderly transitional arrangements.

Commencement
78.

This Byelaw shall come into force on 2 April 2007.

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Notes
These notes, the note setting out the purpose of this Byelaw and the part and paragraphheadings are for guidance only and do not form part of the Byelaw.

38

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Section 2: Amendments to theRequirements made pursuant to
the Intermediaries Byelaw

FOR CONSULTATION (JANUARY 2019)

Commentary (not part of the requirements):
This version of the Requirements has been prepared showing amendments proposed by Lloyd’s.
Some commentary has been provided to aid an understanding of the key changes - this has been
included for the purposes of the consultation only. The commentary does not form part of thebyelaw.

Chapter 2

Requirements made under the Intermediaries Byelaw
Section 1

Delegated UnderwritingAuthority

Delegation of authority – Part A of the Intermediaries Byelaw
Sub-delegation of authority – paragraphs 2, 4 and 4B of the Intermediaries Byelaw
A1

Except where permitted in the ‘Code of Practice – Delegated Authority’, as amended
from time to time and in accordance with any conditions and requirements set out
there, or where otherwise permitted by the Franchise Board –(a)no person to whom authority has been delegated to enter into contracts of
insurance to be underwritten by the members of a syndicate in accordance withparagraph 1 (d) or (e) of the Intermediaries Byelaw, other than a service
company coverholder, shall sub-delegate that authority pursuant to paragraph
2 (b) of the Intermediaries Byelaw.

(b)

no person to whom authority has been delegated to issue documents
evidencing contracts of insurance underwritten by the members of a syndicate
in accordance with paragraph 3 (e) or (f) of the Intermediaries Byelaw, otherthan a service company coverholder, shall sub-delegate that authority pursuant
to paragraph 4 (b) of the Intermediaries Byelaw.

(c)no person to whom authority has been delegated to determine claims oncontracts of insurance underwritten by the members of a syndicate inaccordance with paragraph 4A (d) to (h) of the Intermediaries Byelaw, otherthan a service company coverholder, shall sub-delegate that authority pursuant
to paragraph 4B (b) of the Intermediaries Byelaw.

and references in these Requirements to sub-delegation shall, except where thecontext requires otherwise, apply only to the extent that sub-delegation is notprohibited by this paragraph.

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Commentary (not part of the requirements):
Paragraph 2 (sub-delegation of underwriting authority), paragraph 4 (sub-delegation of authority
to issue insurance documentation) and paragraph 4B (sub-delegation of authority to determine
clams) in the Intermediaries Byelaw as it is proposed to amend those paragraphs now provide a
broad permission to sub-delegate authority to any person to whom delegated authority can begiven, subject to any restrictions Lloyd’s may impose. This changes the position from thecurrent byelaw provisions, which only allow for sub-delegation in a very limited number ofcases.
The change is intended to allow Lloyd’s to take a more flexible and risk-based approach to subdelegation.
Lloyd’s view of sub-delegation remains, however, that in most cases it will be imprudent toallow unrestricted sub-delegation. It is therefore proposed to include paragraph A1 in these
Requirements. This has the effect of prohibiting sub-delegation other than by managing agentsand service company coverholders except where Lloyd’s further prescribes. The updated ‘Codeof Practice – Delegated Authority’ will provide for the additional circumstances where Lloyd’s
proposes to allow limited sub-delegation by coverholders.

2FOR CONSULTATION (JANUARY 2019)
Registers of coverholders and registered binding authorities – Part Bof the Intermediaries Byelaw
Commentary (not part of the requirements):
Part B of the Intermediaries Byelaw as it is proposed to amend it now provides that Lloyd’s
should maintain a register of approved third party administrators and gives Lloyd’s the power tomaintain registers of other persons given delegated authority and their contracts of delegatedauthority.
The proposed changes in this part of the Requirements are consequential to the proposedchanges in the Byelaw and remain consistent with Lloyd’s current approach. The updated
requirements therefore provide that the registers of persons given delegated (or sub-delegated)authority should be available for public inspection. The register of contracts of delegatedauthority will only be open to inspection by those with an interest in the contract. This part also
provides requirements for who can register details.
In practice, this will administratively be dealt with through Chorus, the replacement for BAR
and ATLAS.
Format and content of the registers - paragraph 6 of the Intermediaries Byelaw
1.

The registers of approved coverholders and registered binding authoritiesto beestablished and maintained pursuant to paragraph 5 of the Intermediaries Byelaw shallbe held electronically on the system the Franchise Board operates for that purpose.

Inspection of the registers - paragraph 7 of the Intermediaries Byelaw
2.

Any person may inspect the register of –
(a)
(b)
(c)

3.

approved coverholders;approved third party administrators; andthose prescribed classes or categories of persons to whom the Franchise Board
has permitted authority to be delegated or sub-delegated in accordance withparagraphs 1 to 4B.

Any approved coverholder, managing agent and any Lloyd’s broker which is a party
to a registered binding authority or any Lloyd’s broker which arranged or broked that
registered binding authorityThe following persons may inspect the part of the registerof registered binding authoritiesprescribed classes or categories of contracts ofdelegated authority which relates to that registered binding authoritycontract of3

FOR CONSULTATION (JANUARY 2019)delegated authority –
(a)

(b)
(c)

the managing agent of the syndicate that underwrites or is to underwrite thecontracts of insurance in respect of which authority has been delegated or subdelegated in accordance with that contract of delegated authority;a person which is a party to that contract of delegated authority; anda Lloyd’s broker which arranged or broked that contract of delegatedauthority.

Registration of persons required to be registered in accordance with paragraph 5 (c) paragraph 7B of the of the Intermediaries Byelaw
3A.

A person required to be registered in accordance with paragraph 5 (c) of theIntermediaries Bylaw may only be registered by –
(a)

(b)

3B.

the managing agent of the syndicate that underwrites or is to underwrite thecontracts of insurance in respect of which authority has been delegated or subdelegated in accordance with that contract of delegated authority;
such other classes or category of persons as the Franchise Board may notify
from to time.

Registration of a person required to be registered in accordance with paragraph 5 (c)shall be by means of the electronic system the Franchise Board operates for that
purpose.

Registration of contracts of delegated authority - paragraph 7F of the of the Intermediaries
Byelaw
3C.

A contract of delegated authority may only be registered by –
(a)

(b)

3D.

the managing agent of the syndicate that underwrites or is to underwrite thecontracts of insurance in respect of which authority has been delegated or subdelegated in accordance with that contract of delegated authority;
such other classes or category of persons as the Franchise Board may notify
from to time.

Registration of a contract of delegated authority shall be by means of the electronicsystem the Franchise Board operates for that purpose.

4FOR CONSULTATION (JANUARY 2019)

Approved cCoverholders and approved third party administrators - Part Cof the Intermediaries Byelaw

Applications for approval - paragraphs 8 and 9 of the of the Intermediaries Byelaw
4.

An applicant shall apply to the Franchise Board for approval as an its name to beentered in the register of approved coverholders or approved third party
administrator by completing the relevant parts of the appropriate form of application
which shall be completed and submitted by means of the electronic system theFranchise Board operates for that purpose or by such other means as the Franchise
Board may permit.

5.

Any applicant, which is not a Lloyd’s broker, must be sponsored by a Lloyd’s broker
or a managing agent (“the “sponsor”). The sponsor shall complete the relevant partof the appropriate form of application.

Approval – paragraph 13 of the of the Intermediaries Byelaw
6.

In deciding whether an applicant is suitable to be an approved coverholder orapproved third party administrator the Franchise Board shall, taking into account theparticular characteristics of the applicant’s business, have regard to the following
criteria and all other relevant matters –(a)whether the applicant is a competent, proficient and capable organisation andin considering that the Franchise Board may have regard to the following
matters –(i)the applicant’s compliance with appropriate principles of good
corporate governance;(ii)

the applicant’s membership of any body or organisation that theFranchise Board considers to be necessary or desirable;(iii)

the quality and adequacy of the applicant’s human resources
including –(i)the competence, reputation, character and suitability of theapplicant’s directors, officers and staff; and5

FOR CONSULTATION (JANUARY 2019)

(ii)

(iv)

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

(vi)

(v)

(ii)

(iii)

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

systems, procedures, protocols and arrangements for the
conduct of its business;resources to comply with appropriate service standards for its
customers;
resources to comply with such principles and standards for the
conduct or administration of insurance business in the Lloyd’s
insurance market as the Franchise Board may from time totime prescribe, recognise or endorse; andresources and systems for underwriting administration and or,
as applicable, for the administration and agreement
determination of claims;

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

(vi)

the knowledge and experience of the applicant’s directors,
officers and staff of the conduct and regulation of insurance
business in the Lloyd’s insurance market and in any otherrelevant jurisdiction;

the applicant’s arrangements for identifying, resolving or
managing conflicts of interest;
the applicant’s procedures for its conduct with customers(including procedures to ensure a fair outcome for consumers);
andthe quality and adequacy of the applicant’s controls andprocedures for the management of underwriting risk, for the
management of the administration and agreementdeterminationof claims and for the handling and recording of complaints;

the nature of the applicant’s business including, in the case of an
applicant to be an approved coverholder, its past, present and forecast
underwriting performance;

whether the applicant is of appropriate reputation and standing;whether any person who controls the applicant or who is connected or
associated with the applicant is of appropriate reputation and standing;whether the applicant has adequate capital and financial resources;
whether the applicant has adequate professional indemnity insurance;

6FOR CONSULTATION (JANUARY 2019)

(f)
(g)

7.

whether the applicant is capable and willing to comply with the terms of any
undertaking given by it to the Franchise Board; andwhether the applicant possesses all the licences, approvals or authorisations inorder to act as an approved coverholder or approved third party administrator
wherever it will conduct insurance business in that capacity.

A managing agent that intends to enter into a binding authority or third party
administrator agreement with the applicant must, in accordance withparagraph 15 (b) of the Intermediaries Byelaw, complete the declaration or provide
such other confirmation as the Franchise Board may require.
Commentary (not part of the requirements):
This part includes the criteria Lloyd’s applies to assess the suitability of coverholders. To
ensure a consistent approach, it is proposed that the same criteria should be adopted for theapproval of third party administrators.

[8, 9.

Deleted by the Intermediaries (Restricted Coverholder Revocation) Amendment Byelaw(No.1 of 2014).]

7

FOR CONSULTATION (JANUARY 2019)
Binding AuthoritiesContracts of delegated authority - Part E of the Intermediaries Byelaw

Requirements relating to binding authorities - paragraph 30 of the of the Intermediaries Byelaw
10.

Every registered binding authority (other than a registered binding authority that
authorises a coverholder to enter into a contract of insurance where the contract is inrespect of motor business) shall contain the following information, provisions andterms and comply with the following conditions and requirements –
(a)
(b)
(c)
(d)
(e)

(f)

(g)

(h)

(i)

an agreement number by which the binding authority can be identified;the name and address of each approved coverholder which is a party to thebinding authority;
the name and address of each Lloyd’s broker which is a party to the binding
authority or which arranged or broked the binding authority;
the syndicate or syndicates on whose behalf each managing agent isdelegating authority to enter into contracts of insurance (the “syndicates”);
the period of the binding authority which shall be no greater than 36 months
from the date of inception of the binding authority in total, subject to binding
authorities which have periods greater than 18 months must comply with therequirements prescribed for the writing of multi-year binding authorities set
out in Market Bulletin Y4931;
the name of the approved coverholder’s director or partner who is directly
responsible, on behalf of the approved coverholder, for the overall operationand control of the binding authority;
the names of the approved coverholder’s directors, partners or employees whowill have principal authority to enter into contracts of insurance under thebinding authority;
the names of the approved coverholder’s directors, partners or employees (ifany) who will have principal authority to issue documents evidencing
contracts of insurance under the binding authority;
the name of any person who will have principal authority to agree determine
claims made on contracts of insurance entered into or to be administered by
the approved coverholder under the binding authority;

Commentary (not part of the requirements):
It is proposed to amend the requirements for binding authorities (as set out in sub-paragraphs(g), (h) and (i)) so that now only the name of the individual with principal authority for binding
policies, issuing documents and/or determining claims needs to be stated in the binding
authority. It will no longer be required to list all individuals with authority.

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FOR CONSULTATION (JANUARY 2019)

(j)

(k)

a precise description of the nature or classification of the contracts of
insurance that the approved coverholder will be authorised to enter into under
the registered binding authority and any relevant exclusions and limitations;a list of the terms and conditions which must be incorporated in contracts of
insurance entered into under the binding authority including (i)
(ii)
(iii)
(iv)

(l)

(m)
(n)
(o)

(p)
(q)

(r)

(s)
(t)
(u)

relevant wordings, exclusions and limitations;the maximum period of cover;the limits of liability (other than where inclusion of such a limit would
be contrary to any applicable law); andany applicable territorial wordings or general cover conditions asprescribed or endorsed by the Franchise Board;the maximum aggregate premium income limit in respect of all contracts of
insurance that the approved coverholder may enter into under the binding
authority;
the maximum limits of liability in respect of contracts of insurance that theapproved coverholder may enter into under the binding authority;
the territorial limitations on the approved coverholder’s authority under thebinding authority;
provisions requiring the approved coverholder to report in respect of all
premiums, paid claims, outstanding claims and expenses in respect ofcontracts of insurance entered into by class or category by the approved
coverholder under the binding authority;
provisions setting out how and when the payment and settlement of monies
due from each of the parties to the binding authority should be made;provisions for the cancellation and termination of the binding authority
including provisions that enable the binding authority to be terminated upon
the Franchise Board giving such direction or order to the managing agent orapproved coverholder;provisions relating to the ongoing obligations of the approved coverholder inthe event that the binding authority expires or is terminated or cancelled forany reason; andprovisions setting out the jurisdiction and governing law for the settlement ofdisputes arising from the binding authority;
provisions setting out any business continuity or disaster recovery
arrangements of the approved coverholder;provisions to require the approved coverholder to produce to the Franchise
Board or to any relevant regulatory body any information, documents, books,
records and other materials which, in the opinion of the Franchise Board or
the relevant regulatory body relate or purport to relate to the operation of the9FOR CONSULTATION (JANUARY 2019)

(v)
(w)

binding authority and to give to the Franchise Board or to any relevant
regulatory body all reasonable facilities in its premises for the purpose of
examining such materials;
the manner or basis for the calculation of premiums, discounts, commissions,brokerages, fees, charges and expenses; and.
provisions setting out if the approved coverholder has authority and, if so, thescope of any such authority to sub-delegate in accordance with a contract ofdelegated authority.

Commentary (not part of the requirements):
As it is proposed that sub-delegation by coverholders will be permitted in limited circumstances,
new sub-paragraph (w) provides that any authority to permit a coverholder to sub-delegate must
be addressed in the binding authority. Any authority given to a coverholder will, of course,
need to be consistent with the permissions given by Lloyd’s to that coverholder to sub-delegate.

[10A, 11, 12.

Deleted by the Intermediaries (Restricted Coverholder Revocation) Amendment Byelaw(No.1 of 2014).]Requirements relating to line slips and consortium agreements - paragraph 30 of the of theIntermediaries Byelaw
12A.

Every line slip and consortium agreement shall contain the following information,
provisions and terms and comply with the following conditions and requirements –
(a)
(b)
(c)

(d)

(e)
(f)

a reference number or other method of identification by which the line slip or
consortium agreement can be identified;in the case of line slips, the name and address of the Lloyd’s broker
responsible for placing or administering the line slip;
the syndicate or syndicates on whose behalf each managing agent isdelegating authority to enter into contracts of insurance (the “syndicates”) and(if any) the authorised insurance companies that are delegating authority toenter into contracts of insurance;
the managing agent or (if a line slip) authorised insurance company that is
authorised to enter into contracts of insurance under the line slip or consortium
agreement (the “slip leader”);
the period of the line slip or consortium agreement which shall be no greaterthan 18 months from the date of inception of the line slip in total;
the maximum aggregate premium income limit in respect of all contracts of
insurance that the slip leader may enter into under the line slip;

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FOR CONSULTATION (JANUARY 2019)

(g)
(h)
(i)

(ia)

(j)

(k)
(l)
(m)

(n)

the maximum limits of liability in respect of contracts of insurance that theslip leader may enter into under the line slip;
the territorial limitations on the slip leader’s authority under the line slip;
provisions to ensure that each of the parties to the line slip or consortium
agreement receive an appropriate level of information relating to the operationof the line slip or consortium agreement and ofincluding, in respect of eachcontract of insurance entered into, including any amendments to thereto under
the line slip, details of the name of the insured, the sum insured, the premium
charged and the period of the contract of insurance;
provisions setting out the authorities given under the line slip or consortium
agreement to agree amendments to any contracts of insurance that may beentered into;
provisions setting out how and when the payment and settlement of monies
due from each of the parties to the line slip or consortium agreement should be
made;provisions for the amendment, cancellation and termination of the line slip or
consortium agreement by the parties to the line slip;
provisions setting out the jurisdiction and governing law for the settlement ofdisputes arising from the line slip or consortium agreement;a precise description of the nature or classification of the contracts of
insurance that the slip leader will be authorised to enter into under the line slip
and any relevant exclusions and limitations; andthe manner or basis for the calculation of premiums, discounts, commissions,brokerages, fees, charges and expenses.

Commentary (not part of the requirements):
Line slips and consortia are similar arrangements as they are both delegations of underwritingfrom one or more managing agent(s) to another managing agent. (In the case of line slips there
can also be delegation of authority to another insurer.) Because of the similarity of thearrangements Lloyd’s considers that the requirements that presently apply to line slips should
also apply to consortium agreements and it is proposed to amend paragraph 12A accordingly.
Note that only line slips need to include the details of the broker as the involvement of a single
broker is generally the distinguishing feature of line slips.

Requirements relating to third party administrator agreements - paragraph 30 of theIntermediaries Byelaw
13.

Every third party administrator agreement and every contract of delegated authority
delegating a managing agent’s authority to an approved coverholder to determine
claims arising under contracts of insurance entered into or being administered by that

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FOR CONSULTATION (JANUARY 2019)

approved coverholder in accordance with the terms of a binding authority shallcontain the following information, provisions and terms and comply with thefollowing conditions and requirements –
(a)
(b)

(c)

an agreement number by which the agreement can be identified;the name and address of each party to the agreement including the syndicate orsyndicates on whose behalf each managing agent is delegating authority todetermine claims arising under contracts of insurance;
the functions, duties and responsibilities of the approved coverholder or theapproved third party administrator that are relevant to its authority todetermine claims. This shall include –
i.

ii.

iii.
iv.

(d)
(e)

(f)

(g)
(h)

the level of the approved coverholder’s or the approved third party
administrator’s authority to determine claims (including thecircumstances in which a claim shall be referred to the managing
agent);
details of the approved coverholder’s or the approved third party
administrator’s responsibility to investigate claims and whereappropriate appoint external experts (including the circumstances inwhich the decision to appoint an external expert shall be referred to the
managing agent) and take steps to ensure claims are defended as
appropriate and to seek to make any recoveries;
details of the approved coverholder’s or the approved third party
administrator’s responsibility to assess and review claim estimates;
details of any applicable service levels or standards (including service
standards for dealing with complaints and enquiries) where thoseservice levels or standards shall be consistent with any applicableminimum standards prescribed by the Franchise Board from time totime;details of the manner by which any insurance monies are to be held,
maintained and properly safeguarded;
provisions requiring the approved coverholder or the approved third party
administrator or any of its directors or staff to meet any relevant professional
competence standards;
provisions requiring the approved coverholder or the approved third party
administrator to maintain records and documents in such manner and for such
period as the managing agent may require or as may be required by any
applicable legal or regulatory provision;
provisions regarding the maintenance and security of confidential information;
provisions requiring the approved coverholder or the approved third party
administrator to report to the managing agent in respect of paid claims,

12FOR CONSULTATION (JANUARY 2019)

(i)

(j)

(k)

outstanding claims and expenses in such form and at such intervals as the
managing agent may determine (taking into account any minimum standards
the Franchise Board may from time to time make);provisions requiring the approved coverholder or the approved third party
administrator to produce to the managing agent or to any auditor or agent
appointed by the managing agent any information, documents, books, records
and other materials which, in the opinion of the managing agent relate or
purport to relate to the operation of the agreement and to co-operate with the
managing agent, auditor or agent;
provisions requiring the approved coverholder or the approved third party
administrator to produce to any relevant regulatory body any information,
documents, books, records and other materials which in the opinion of therelevant regulatory body relate or purport to relate to the operation of theagreement;
provisions requiring the approved coverholder or the approved third party
administrator to notify the managing agent of any –
i.
ii.

(l)
(m)

(n)

(o)

(p)

complaint or actual, pending or potential litigation;
circumstance or development that may materially impact upon its
ability to perform its functions under the claims agreement effectively
and in compliance with applicable laws and regulations;provisions for the cancellation and termination of the agreement;
provisions relating to the ongoing obligations of the approved coverholder orthe approved third party administrator in the event that the agreement expires
or is terminated or cancelled for any reason;
provisions setting out if the approved coverholder or approved third party
administrator has authority and, if so, the scope of any such authority to subdelegate in accordance with a contract of delegated authority;
provisions prohibiting the approved coverholder or the approved third party
administrator from subcontracting or assigning any of its rights, powers,functions or obligations under the agreement without the prior consent of the
managing agent; andthe jurisdiction and governing law that relates to the operation of theagreement.

Commentary (not part of the requirements):
Paragraph 13 sets out the proposed requirements for third party administrator agreements. Subparagraph (n) is a new addition but otherwise the requirements remain the same as those that
presently apply, as set out in the current paragraph 17B of the Requirements, which will be
replaced by this paragraph.

13

FOR CONSULTATION (JANUARY 2019)14.

The terms of the agreement referred to in paragraph 13 may be set out in one or more
contractual documents.

Registration of registered binding authorities - paragraphs 32 and 33 of the of theIntermediaries Byelaw
13.

A binding authority may only be registered by –
(a)
(b)

14.

a Lloyd’s broker which is a party to the binding authority or which arranged or
broked the binding authority; ora managing agent which is a party to the binding authority.

Registration of a binding authority shall be in accordance with the electronic system
the Franchise Board operates for that purpose. The address of that web-site (theBinding Authority Registration (BAR) website) is
https://www.coverholders.lloyds.com

Commentary (not part of the requirements):
These paragraphs are now replaced by paragraphs 3C and 3D.

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FOR CONSULTATION (JANUARY 2019)

Requirements for insurance documentation – Part Fof the Intermediaries Byelaw

Requirements relating to insurance documentation issued under a binding authority pParagraph 35 of the Intermediaries Byelaw
15.

Insurance documentation evidencing contracts of insurance issued by an approved
coverholder under a registered binding authority shall include the following
information, provisions and terms (a)(b)

the name and address of the approved coverholder;
all relevant terms and conditions that relate to the contract of insurance enteredinto by the approved coverholder including:
(i)
(ii)
(iii)
(iv)

(c)

(d)
(e)
(f)
(g)
(h)
(i)

16.

relevant wordings, exclusions and limitations;the maximum period of cover;the limits of liability (other than where inclusion of such a limit would
be contrary to any applicable law); andany applicable excess or deductible,

the amount of the premium and any other information relating to the cost of
the contract of insurance that is required by applicable laws or requirements tobe disclosed;
information about the procedures for handling claims arising under thecontract of insurance and for the resolution of complaints;a unique contract number;provisions that explain the several liability of the members of the syndicate
underwriting the contract of insurance;other information as the policyholder may properly require;the law and jurisdiction applicable to the contract of insurance; andany other provisions required under the laws or requirements of thejurisdiction in which the contract was concluded, where the insured is
domiciled or of any other relevant jurisdiction and any other provisions as
required by the relevant representative or agent of the Society.

An approved coverholder under a registered binding authority may only issue
insurance documentation evidencing contracts of insurance in which a proportion of
the risk is to be accepted by insurers other than members (a “combined certificate”)
provided that:

15

FOR CONSULTATION (JANUARY 2019)(a)each managing agent that is a party to the binding authority has agreed to theissue of combined certificates;(b)
the combined certificate includes all the details that are required to be included
in insurance documentation evidencing contracts of insurance that are issued
by an approved coverholder under a registered binding authority;(c)the proportion or amount of risk accepted by Lloyd’s underwriters syndicatesis expressly stated on the combined certificate and is specified separately fromthe proportion or amount of risk accepted by other insurers;(d)the combined certificate contains the following appropriate several liability
statement in accordance with Mmarket Bbulletin Y4133(Binding Authorities US and non US Combined joint certificates issued bycoverholders) dated 11 March 2008; and(e)the issuance of combined certificates has been confirmed as an acceptable
practice by the general representative in the country in which their issuance isrequired or, in the absence of such a general representative, by the Franchise
Board,
save that nothing in this paragraph shall permit a combined certificate to be issued incircumstances where that would contravene any relevant territorial general covercondition or would contravene any requirements of the jurisdiction in which theapproved coverholder is domiciled, or any other jurisdiction in which the approved
coverholder trades, provides services or does business.

16FOR CONSULTATION (JANUARY 2019)

Third party administrators – Part G of theIntermediaries Byelaw
Commentary (not part of the requirements):
This part of the Requirements currently sets out various requirements for the delegation ofclaims authority. As it is proposed to adopt a new Lloyd’s framework for delegated claims
handling oversight these requirements will no longer apply and it is proposed to delete them.
The requirements in paragraph 17B will, however, remain the requirements for third party
administrator agreements – see paragraph13 above.

Deleted by the Intermediaries () Amendment Byelaw (No. X of 2019).]

Paragraph 36A(h) of the Intermediaries Byelaw
Suitability criteria
17A

The criteria to be applied by a managing agent in determining whether a firm issuitable to be appointed as a third party administrator are whether the firm (a)
(b)

(c)

(d)
(e)
(f)

(g)

is a competent, proficient and capable organisation (taking into account theneeds of the managing agent and of the members of its managed syndicate);
has suitable resources for the determination of claims and for handlingcomplaints including resources to ensure compliance with the terms of theclaims agreement and any appropriate service standards;
has suitable internal procedures and processes for the administration andagreement of claims (including procedures for the appointment of experts,
complaints handling, litigation management and file retention) and that thoseare properly documented and made available to all relevant directors, officers
and staff;
has suitable systems and procedures to report to the managing agent in respectof its performance of its obligations under the claims agreement;
is able on a timely basis to properly assess and review claim estimates;
has suitable arrangements for identifying, resolving or managing conflicts ofinterest. This includes where the firm or any of its directors, officers or staff
have or will have authority to enter into contracts of insurance or have or will
have any financial interest in an entity that may give rise to circumstances that
may constitute a conflict of interest);
has suitable and effective risk management (including business continuity andsuccession plans), internal control and internal audit processes;

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FOR CONSULTATION (JANUARY 2019)

(h)
(i)
(j)

(k)
(l)
(m)
(n)

has directors, officers and relevant staff of suitable competence, reputation andcharacter;or any controller of the firm is of appropriate reputation and standing;has adequate professional indemnity insurance and whether there are any
circumstances regarding the candidate’s professional indemnity insurance
history that may be relevant to the candidate’s suitability;
has adequate capital and financial resources;
has suitable procedures in place to ensure that insurance monies (money
relating to premiums, return premiums and claims) are properly safeguarded;
the candidate maintains appropriate levels of data security and that it complies
with any applicable data protection legislation; andpossesses any necessary licences, approvals or authorisations in order to act asan third party administrator wherever it will conduct business in that capacity.

Paragraph 36H of the Intermediaries Byelaw
Content of claims agreements
17B.

Every agreement delegating a managing agent’s authority to determine claims arisingunder contracts of insurance to a coverholder or to third party administrator shallcontain the following information, provisions and terms and comply with thefollowing conditions and requirements –
(a)
(b)

(c)

an agreement number by which the agreement can be identified;the name and address of each party to the agreement including the syndicate orsyndicates on whose behalf each managing agent is delegating authority todetermine claims arising under contract of insurance;
the functions, duties and responsibilities of the coverholder or the third party
administrator that are relevant to its authority to determine claims. This shall
include –i.

ii.

the level of the coverholder’s or the third party administrator’s
authority to determine claims (including the circumstances in which aclaim shall be referred to the managing agent);
details of the coverholder’s or the third party administrator’s
responsibility to investigate claims and where appropriate appoint
external experts (including the circumstances in which the decision toappoint an external expert shall be referred to the managing agent) andtake steps to ensure claims are defended as appropriate and to seek tomake any recoveries;

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FOR CONSULTATION (JANUARY 2019)

iii.
iv.

(d)
(e)
(f)

(g)
(h)

(i)

(j)

(k)

details of the manner by which any insurance monies are to be held,
maintained and properly safeguarded;
provisions requiring the coverholder or the third party administrator or any of
its directors or staff to meet any relevant professional competence standards;
provisions requiring the coverholder or the third party administrator tomaintain records and documents in such manner and for such period as the
managing agent may require or as may be required by any applicable legal or
regulatory provision;
provisions regarding the maintenance and security of confidential information;
provisions requiring the coverholder or the third party administrator to reportto the managing agent in respect of paid claims, outstanding claims andexpenses in such form and at such intervals as the managing agent may
determine (taking into account any minimum standards the Franchise Board
may from time to time make);provisions requiring the coverholder or the third party administrator to
produce to the managing agent or to any auditor or agent appointed by the
managing agent any information, documents, books, records and othermaterials which, in the opinion of the managing agent relate or purport torelate to the operation of the agreement and to co-operate with the managing
agent, auditor or agent;
provisions requiring the coverholder or the third party administrator to
produce to any relevant regulatory body any information, documents, books,
records and other materials which in the opinion of the relevant regulatory
body relate or purport to relate to the operation of the agreement;
provisions requiring the coverholder or the third party administrator to notify
the managing agent of any –
i.
ii.

(l)

details of the coverholder’s or the third party administrator’s
responsibility to assess and review claim estimates;
details of any applicable service levels or standards (including service
standards for dealing with complaints and enquiries) where thoseservice levels or standards shall be consistent with any applicable
Lloyd’s minimum standards;

complaint or actual, pending or potential litigation;
circumstance or development that may materially impact upon its
ability to perform its functions under the claims agreement effectively
and in compliance with applicable laws and regulations;provisions for the cancellation and termination of the agreement;

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FOR CONSULTATION (JANUARY 2019)

(m)

(n)

(o)

17C.

provisions relating to the ongoing obligations of the coverholder or theregistered third party administrator in the event that the agreement expires oris terminated or cancelled for any reason;
provisions prohibiting the coverholder or the third party administrator fromsubcontracting or assigning any of its rights, powers, functions or obligations
under the agreement without the prior consent of the managing agent;
the jurisdiction and governing law that relates to the operation of theagreement.

The terms of the agreement referred to in paragraph 17B may be set out in one ormore contractual documents.

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FOR CONSULTATION (JANUARY 2019)
Section 2

Brokers

Registration – Part I of the Intermediaries Byelaw(and paragraph 27 of the Underwriting Byelaw)

Commentary (not part of the requirements):
The changes to the registration criteria for Lloyd’s Brokers proposed are necessary to takeaccount of the United Kingdom’s planned departure from the European Union.
Paragraph 46 of the Intermediaries Byelaw and Paragraph 27 (i) (i) of the Underwriting Byelaw.
18.

The criteria to be applied in respect of a person established in a member state of theEuropean Unionthe United Kingdom are that it –
(a)

(b)

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

is authorised by the Financial Conduct Authority with the permissions
required to undertake the activities of an insurance intermediaryregistered witha competent authority for the purposes of the European Parliament andCouncil Directive of 9 December 2002 on insurance mediation(No.2002/92/EC)(the “Directive”);
is able and willing to enter into an agreement with each managing agent withwhom it intends to place business recording the general terms and conditions
on which business will be conducted between them;has adequate, suitable and compatible systems, protocols and arrangements forthe conduct of business in the London insurance market;
has suitable procedures in place to ensure that insurance monies (money
relating to premiums, return premiums and claims) are properly safeguarded;
has adequate professional indemnity insurance; andcan demonstrate its ability to comply with any other criteria that the Franchise
Board may from time to time prescribe,and regard shall be had to any guidance the Franchise Board may issue from time totime in respect of the application of the above criteria as published in ‘Becoming a
registered Lloyd’s Broker – A Guide for Applicants’. (See Section 3 of the “Guide forApplicants” at http://www.lloyds.com/The-Market/I-am-a/Broker-Agent/How-tobecome-a-Lloyds-Registered-Broker and http://www.lloyds.com/The-Market/Toolsand-Resources/Resources/Managing_Agents_dealing_with_non_Lloyds_brokers)
19.

The criteria to be applied in respect of a person not established in the United
Kingdoma member state of the European Union are that it –(a)either –21

FOR CONSULTATION (JANUARY 2019)

(i)

(ii)

(b)
(c)

is registered or approved by a regulator or other statutory body that
requires the intermediary or broker to meet professional requirements
in relation to its competence, good repute and financial capacity
equivalent to those provided for in the Directiverequired by the
Financial Conduct Authority for persons authorised as insuranceintermediaries in the United Kingdom; orcan demonstrate that it meets professional requirements in relation toits competence, good repute and financial capacity equivalent to thoserequired by the Financial Conduct Authority for persons authorised as
insurance intermediaries in the United Kingdomprovided for in the
Directive;

satisfies the criteria at paragraph 18(b) to (f) above; andcan demonstrate that it is capable and suitable to transact business having
regard to such following criteria and any other relevant matter –
(i)
(ii)
(iii)
(iv)

whether the person possesses appropriate knowledge and ability to
conduct insurance business in the London insurance market;
whether the person and its directors, employees and controllers orpartners in it are of good repute;the adequacy of the capital and financial resources of the person;
whether the person complies with all laws, rules and fiscal
requirements applicable to it as an insurance intermediary wherever it
is established and wherever it conducts or will conduct business.

and regard shall be had to any guidance the Franchise Board may issue from time totime in respect of the application of the above criteria as published in ‘Becoming a
registered Lloyd’s Broker – A Guide for Applicants’.
Requirements made under paragraph 46 of the Intermediaries Byelaw (registration of Lloyd’s
brokers)
20.

In determining whether an applicant should be registered as a Lloyd’s broker theFranchise Board shall have regard to the criteria at paragraphs 18 to 19 above of
these requirements save that the Franchise Board may, where it considers it
appropriate, disapply, amend or add to these criteria as it considers appropriate.

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Section 3: Amendments to theDefinitions Byelaw andconsequential amendments

FOR CONSULTATION (JANUARY 2019)
This section shows proposed changes to the Definitions Byelaw and required consequentialchanges to other byelaws.
Proposed changes to definitions in the Definitions Byelaw
New Definitions
Insert into the Definitions Byelaw the following new definitions:“approved third party administrator” means a company or partnership authorised todetermine claims on contracts of insurance underwritten by the members of a
syndicate in accordance with the terms of a third party administrator agreement andwhich has been approved to act as an approved third party administrator inaccordance with the Intermediaries Byelaw (No. 3 of 2007);“consortium agreement” means a contract of delegated authority (other than a lineslip) by which a managing agent delegates its authority to enter into a contract orcontracts of insurance to be underwritten by the members of a syndicate managed by
it to another managing agent;“contract of delegated authority” means any agreement (including a binding authority,a consortium agreement, a line slip and a third party administrator agreement) underwhich authority is delegated or sub-delegated –
(a)
(b)
(c)

to enter into contracts of insurance to be underwritten by the members of a
syndicate,to issue documents evidencing contracts of insurance underwritten by themembers of a syndicate; orto determine claims on contracts of insurance underwritten by the members ofa syndicate;“determine” in relations to claims means all claims handling activities necessary inorder to (i) accept or deny a claim in whole or in part; (ii) agree any amount payable;or (iii) resolve finally any open matter by agreement or, if necessary, dispute
resolution;“third party administrator agreement” means a contract of delegated authority with anapproved third party administrator to delegate authority to the third party
administrator to determine claims on a contract or contracts of insurance underwrittenby the members of a syndicate, in accordance with the terms of the agreement;
Definitions to be deleted
Delete the following definitions: “coverholder”, “registered binding authority” and “third
party administrator”.

FOR CONSULTATION (JANUARY 2019)
Definitions to be amended
Delete the definition of “approved coverholder” and replace with the following:“approved coverholder” means a company or partnership authorised to enter into acontract or contracts of insurance to be underwritten by the members of a syndicate inaccordance with the terms of a binding authority and which has been approved to act
as an approved coverholder in accordance with the Intermediaries Byelaw (No. 3 of2007);
Delete the definition of “binding authority” and replace with the following:“binding authority” means a contract of delegated authority with an approved
coverholder to delegate authority to the approved coverholder to enter into a contract
or contracts of insurance to be underwritten by the members of a syndicate inaccordance with the terms of the agreement;
Amend the definition of “line slip” by deleting the first reference to “agreement” and replacewith “contract of delegated authority”;
Proposed consequential amendments to other byelaws
Underwriting Byelaw
Amend the Underwriting Byelaw, paragraph 27 –by deleting the word “registered” in sub-paragraph (c); andby deleting the words“[(d) deleted by the Intermediaries (Restricted Coverholder Revocation) Amendment
Byelaw (No. 1 of 2014)]”and replacing with a new paragraph (d) as follows“through a person to whom the Franchise Board, pursuant to paragraph 1 (e) of theIntermediaries Byelaw (No. 3 of 2007), has permitted a managing agent to delegate
its authority to enter into contracts of insurance to be underwritten by the members ofa syndicate managed by it, in accordance with the terms of a contract of delegatedauthority.”
Insurance Certificates Byelaw
Amend the Insurance Certificates Byelaw by adding the word “approved” before the word
“coverholder” in each case other than in headings, the Contents and the introductory Notes.