Lloyd’s Principles Based Oversight Framework
Materiality Measures for setting
Maturity Expectations
July 2024© Lloyd’s 2024

Materiality Measures for setting Expected Maturity• The guidance supporting Lloyd’s Principles for Doing Business is expressed across four levelsof maturity.
• The expected maturity level for each syndicate or managing agent is determined by materiality
metrics, which are specific to each Principle (or Dimension).
• The following slides provide high-level detail of the materiality metrics and their thresholds.
• Materiality metrics drive expected maturity in most cases. However, Lloyd’s may also, in
exceptional circumstances, choose to override the data-led expected maturity, where the risk fora specific syndicate is not adequately captured by this.

© Lloyd’s 2024

2Classification: Confidential

Materiality measures and thresholds (1 of 4)
DimensionMateriality measure

Low
Foundational

Moderate
IntermediateHigh
Established

HighestAdvanced

Principle 1:
Underwriting
Profitability

Gross Written Premium (current year SBF)

< £100m>= £100m>= £500m> £1bnPrinciple 1: Legacy
Reinsurance
Underwriting
Profitability(RITC syndicatesonly)

Gross Booked Reserves (Technical Provisions)​<= £1bn​

N/A​> £1bn​> £2bn​Principle 2a:Catastrophe
Exposure

Either / Or:• Level of the Gross Catastrophe risk (Gross WW All Perils TVaR 1:200)

Bottom quartile

3rd quartile

2nd quartile

Top quartile(NaturalCatastrophe)• Importance of Catastrophe risk to Syndicate SCR (LCR Ultimate All LCM
Cat claims as a proportion of diversified ultimate SCR, multiplied by Net
WW All perils TVaR 1:200)

Bottom quartile

3rd quartile

2nd quartile

Top quartile

Principle 2b:
Catastrophe
Exposure

Either / Or:•Exposure to non-nat cat exposed classes of business in absolute terms(GWP)< £50m>= £50m>= £250m> £1bn(Non-NaturalCatastrophe)•Proportion of non-nat cat exposed business written relative to totalbusiness written (GWP) / Materiality to syndicate---> 99.5% AND
GWP > £100m•

Exposure to potential major non-nat cat losses (RDS analysis)---> £500m© Lloyd’s 2024

3Classification: Confidential

Materiality measures and thresholds (2 of 4)
DimensionMateriality measurePrinciple 3:Outwards
Reinsurance•

YOA Gross RI Premium (£m)•

YOA Gross RI Premium as % of GWP•

LCM5 1:200 AEP RI Recovery (£m)

< £200m•

Balance Sheet RI Recoverables (£m)

< £400m•

Balance Sheet RI Recoverables as % of ECA

Principle 4:
ClaimsManagement

Principle 5:
Customer
Outcomes© Lloyd’s 2024

Low
Foundational

Moderate
IntermediateHigh
Established

HighestAdvanced< £90m>= £90m>= £225m>= £600m>= £200m>= £600m>= £1,500m>= £400m>= £850m>= £1,400m>=40%>=150%

Aggregated, to form an average. 'Volume of open claims – lead' is double
weighted:• Volume of open claims – lead (Absolute number)<4,000>= 4,000>= 9,000> 24,000• Proportion of delegated lead claims (%)< 31%>= 31%>= 45%> 60%• Proportion of lead vs follow claims (%)< 20%>= 20%>= 30%> 40%

Eligible Complainants drives overall materiality:• Eligible complainants (Absolute number)0<= 250,000>250,000

Informs materiality of sub-principle 5 only (relating to DA business).
• Active Lead Binders (Absolute number)

0->100Classification: Confidential4

Materiality measures and thresholds (3 of 4)
DimensionMateriality measure

Principle 6:
ReservingPrinciple 7:
CapitalLow
Foundational

Moderate
Intermediate

HighEstablished

HighestAdvanced

Combination of:• Syndicate Net Best Estimate Reserves< £200m>= £200m>= £1bn> £2bn

• Casualty classes as % of Syndicate Net Best Estimate Reserve Total(subject to minimum £100m net casualty reserve threshold)< 40%>= 40%>= 70%> 90%

Either / Or:• Ultimate SCR (latest approved current year, excluding RICB)​< £100m>= £100m>= £250m> £500m• Syndicate Tail Risk - 99.8 % to 99.5% Claims Ratio Thresholds(subject to minimum £250m uSCR materiality threshold)-->=6%>10%• > 90%; and• 0%N/A• < 90%; or
• >0%

N/A

Either / Or:• Gross Written Premium (current year SBF)

< £250m>= £250m>= £750m> £1.5bn• For MAs with only RITC / Run-off business - Total Size of Net Reserves< £200m>= £200m>= £1bn> £2bnPrinciple 8:Investments

Asset allocation:• Allocation to cash and government bonds; and/or• Allocation to alternative assets

Principle 9:
Liquidity

Currently N/A – Expected Maturity for all syndicates set to Foundational

Principle 10:
Governance, Risk
Management andReporting© Lloyd’s 2024

5Classification: Confidential

Materiality measures and thresholds (4 of 4)
DimensionMateriality measure

Principle 11:
Regulatory and
Financial Crime

Principle 12:
OperationalResilience

Principle 13:
CultureLow
Foundational

Moderate
IntermediateHigh
Established

HighestAdvanced

Either / Or:• Amount of premium from high-risk territories• Amount of premium from sanctioned territories<40%<0.5%>=40%>=0.5%>=60%>=1%>70%>=2%• Method of placement - number of coverholders domiciled in high-risk
territories• Method of placement - number of coverholders domiciled in sanctioned
territories<40%<0.5%>=40%>=0.5%>=60%>=1%>70%>=2%• Amount of premium in high-risk classes of business<10%>=10%>=20%>30%

Either / Or:• Number of eligible complainants<100,000>=100,000>=250,000>750,000• Total Size of Net Reserves<£750m>= £750m>= £1.5bn>£2.5bn<100>=100>=500N/A• Total Workforce© Lloyd’s 2024

6Classification: Confidential