Lloyd’s – Latest Guidance and Updates
Thu Apr 2 2020
Delegated Authority Operational Guidance
Lloyd’s recognises that the current COVID-19 situation is presenting unique challenges to many of our consumer and SME customers. In addition, the current working restrictions may impact upon the operational arrangements for underwriters, brokers and coverholders. Accordingly, Lloyd’s has decided to provide the following market guidance in order to ensure fair outcomes for our customers during these unprecedented times.
However, please note that local regulatory and legal requirements should always be met and nothing in the following is intended to supersede or vary those requirements. For example, many US states have issued guidance on cancellation/nonrenewal and/or premium grace periods as a result of COVID-19.
- Premium non payment:Lloyd’s expects underwriters to ensure that they do not automatically cancel policies for consumer and SME customers by reason solely of the application of a non-payment of premium clause for a period of non-payment for up to 60 days. Therefore, underwriters should discuss the operation of this clause with their coverholders to ensure that this provision is not being automatically applied regardless of the policyholder’s circumstances. Cancellation may still be made for any other valid reason whether in-line with contractual or other legal basis.In respect of policies for other customers, Lloyd’s expects underwriters to have regard to the suitability and fairness of applying such a provision.2. Extensions of binding authority contracts:We are aware that there are currently challenges in completing the renewal of binding authority arrangements. It is preferable that binding authorities are renewed rather than extended (even if arranged as a short period renewal pending a full renewal).However, where an existing binding authority contract is due for renewal, but current operational restrictions impede the ability to effect a timely renewal or where tacit renewal provisions mean an extension of the binding authority is necessary, then underwriters should consider an extension to the binding authority. Underwriters may give such an extension even if this extends the overall binder period to more than the current limit of 18 months (or 36 months for a three year binding authority). In this case please email firstname.lastname@example.org so that we may keep a record and to obtain an email that may be used for Bureau processing.Where the effect of the extension would have the effect of overwriting the syndicate’s agreed business plan then we expect underwriters to take a pragmatic approach having regard to both the interests of customers as well as wider prudential considerations. However, Lloyd’s would not expect an extension to be refused solely because it would lead to overwriting a business plan.
- Reducing administrative requirements for renewals:We are also notifying the following changes intended to reduce the current administrative burden on effecting renewals. These apply with immediate effect until otherwise notified:(a) We expect the lead managing agent on a binding authority to be responsible for the binding authority renewal compliance due diligence in accordance with the DA Code of Conduct. Key compliance information should be uploaded to ATLAS so that followers have access to that information and all reasonable efforts should be made to avoid duplication of compliance due diligence.(b) Currently, binding authority contracts need to name each individual who has authority in the coverholder to bind risks, issue insurance documents or settle claims (and binders need to be endorsed with any changes to these named persons). This would include ‘remote workers’ carrying out the above functions who would also be named on the binding authority.With immediate effect, only the individual(s) with overall responsibility for the binding authority (i.e. those who would be named in section 3.1 of the model binder wording) must be named. A list of the persons who would otherwise be named in sections 3.2, 3,3 and 3.4 and any remote workers should be separately maintained on ATLAS.In addition, ‘remote worker application forms’ do not need to be completed in respect of coverholder staff who are now working from home (unless that location is now a new trading location for the coverholder). Please visit our key staff page further information.
- Delegated Claims Resilience: Service continuity of DA service providers, particularly TPAs, is being assisted through the LMA’s DA Claims and COVID-19 Claims Steering Group. To help enable TPAs to focus on their resources and the ability to service customers we would encourage managing agents to utilise the LMA’s centralised delegated claims database which can assist with operational, service resilience and claims performance questions and data.Any questions in respect of the above may be sent to email@example.com.
Delegated Authority Audits
Following a number of enquiries raised around the ramifications of COVID-19 on audits scheduled globally in Q1 and Q2 of 2020, Lloyd’s audit team would like to offer the following guidance for consideration by our global network of delegated authorities:
- In the first instance, we request that you follow the recommendations of each national government as well as your individual organisation’s internal procedures and continue to actively monitor the situation.
- Where feasible, automatic cancellations of booked audits should be avoided. The use of technology should be fully utilised and remote reviews offered in place of traditional onsite visits. This includes allowing remote file reviews, remote access document repositories and interviews conducted by telephone or video conferencing facilities.
- Without compromising the risk-based approach to audit scoping, where feasible, managing agent’s should consider targeting their audit scopes and adjust their instructions accordingly to allow remote reviews.
If the above options are not feasible and a booked audit must be postponed or cancelled, please consider what/if alternative dates can be offered within reasonable timeframes, taking into consideration capacity limitation in Q3/Q4 which historically is the most demanding time in the audit annual schedule. Please refer all deferred and cancelled coordinated audits to both the Lloyd’s audit team and managing agents, as per the usual process.
Electronic Placement of Contracts of (re)Insurance
Please also view Llyods Market Update document to confirm Lloyd’s approach to the use of recognised electronic systems and email for the placement of contracts of (re)insurance. Download document
We hope that with your cooperation, we can continue to deliver 2020 coordinated audits scheduled with minimal disruption. Please do not hesitate to contact the Lloyd’s audit team on AIMS@lloyds.com should you require any further assistance.