My first visit to Lloyd’s of London (Lloyd’s)
In April 2016 I visited Lloyd’s of London and various syndicates as part of Camargue’s annual renewal process. What an incredible experience as the Syndicates thinking is so different compared to our local insurance market. They have global views and experience to back it up. They are more than happy to share risk. You will find various syndicates on one insurance program.
Lloyds building from the outside
In short, Lloyd’s of London is a corporation founded to organise a marketplace for underwriters and insurance brokers to come together in one space to buy and sell risk. Here knowledge is a key element of everyday work, and the way it works is through face-to-face interaction.
The numbers in Rand terms are mind blowing, for example the Lloyd’s market profit for 2015 financial year was £2.1bn (R44bn) and total Gross Written Premiums (GWP) was £26.7bn (R561bn). To put this in perspective the total annual SA market in terms of GWP is approximately R85bn. Lloyds’ capital position was further strengthened with resources totaling £25.1bn (R527bn) as at the end of December 2015.
Lloyd’s accepts business from over 200 countries and territories worldwide. Licenses in over 75 jurisdictions, supported by a network of local offices and Coverholders across the world ensure access to insurance markets large and small. As at the end of December 2015 there were 84 Syndicates, 242 Brokers and 4008 Coverholders.
The insurance business underwritten at Lloyd's is predominantly general insurance (or short term insurance as we call it in South Africa) and reinsurance.
View from the top floor down into the atrium at Lloyds
The market has its roots in marine insurance and was founded by Edward Lloyd at his coffee house on Tower Street in 1688.
Lloyds’ is not an insurance company; it is a market of members. As the oldest continuously active insurance marketplace in the world, Lloyd’s has retained some unusual structures and practices that differ from all other insurance providers today. Lloyd’s itself does not underwrite insurance business, leaving that to its members. Instead, the Society operates effectively as a market regulator, setting rules under which members operate and offering centralized administrative services to those members.
Policyholders can have full confidence that Lloyds can meet all valid claims because of the Chain of Security. Lloyd’s unique capital structure, referred to as the Chain of Security, provides excellent financial security (global A-rated paper) to policyholders and capital efficiency for members. The Chain of Security provides the financial strength that ultimately backs all insurance policies written at Lloyd’s and the common security that underpins the market’s financial ratings and license network.
Lloyd’s chain of Security has three links:
Link one – Syndicate assets
All premiums received by syndicates are held in trust as the first resource for paying policyholders’ claims. Until all liabilities have been provided for, no profits can be released.
Link two – Members’ funds at Lloyds’s
Each member, whether a corporate or individual, must provide sufficient capital to support their underwriting at Lloyds’. The capital held in trust for the benefit of policyholders, but is not available for the liabilities of other members.
Link three – Lloyd’s central assets
The central assets are available, at the discretion of the Council of Lloyd’s, to meet any valid claim that cannot be met from the resources of any member further up the chain. Should the first link need additional funds, the second link ensures members have additional resources available. In the rare event that these two links are insufficient, the third link provides further back-up to members to ensure all valid claims are paid.
Camargue operates as one of Lloyd’s 4008 worldwide coverholders. Our lead syndicate on most lines is Brit (syndicate 2987) definitely one of the top Lloyd’s syndicates. As matter of interest Brit have for over twenty years led the Brit Space Consortium, offering bespoke wordings for both launch and in-orbit risks to selected clients.
A Coverholder is a business authorised by a managing agent to accept insurance risks on behalf of a syndicate. The scope of the coverholder’s remit is set out in a Binding Authority Agreement between the managing agent agent and the coverholder. Coverholders (also known as managing general agents, or MGAs or in South Africa, UMAs) are a vital distribution channel offering a local route to Lloyd’s from around the world.