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Chapter 9 Reinsurance market 9/7

• Substantial capital backing, which allows them to participate in reinsurance risks greater than they
would have the ability to do based on their own capacity if they had to work solely from their own
capital.
• Access to a wider range of business either coming into the London Market through such channels as
the international brokers, or from business passed on from their parent company arising from the
domestic market.
The London Market has a positive impact on the UK economy as its substantial international insurance
and reinsurance business generally brings in substantial premium income. Originally growing from a
centre of international marine insurance, it also oversaw the modern development of reinsurance such
as excess of loss and many speciality lines.
London is a recognised market leader in marine hull, energy, aviation, space and a few speciality areas
such as political risks. This means that the London Market has a significant market share in these areas
and other markets will look to London to assess the rates for these risks.

Useful website
An excellent way to keep up to date with changes in the London Market is to be a regular visitor to
www.londonmarketgroup.co.uk.

B1A Lloyd’s
The Lloyd’s market, based in Lime Street, London, has operated for over 325 years. It is the world’s
Lloyd’s is the world’s
leading insurance market and the world’s third largest non-life insurer. It also occupies sixth place in leading insurance
terms of gross global reinsurance premium income. market
The Corporation of Lloyd’s, which manages the Lloyd’s market, is not itself an insurance company, but a
society of members, both corporate and individual, who underwrite in syndicates on whose behalf
professional underwriters accept risks.

Be aware
Prior to 1994, all Lloyd’s members were private individuals, often referred to as Names, who participated on an Reference copy for CII Face to Face Training
unlimited liability basis. The effect of this was that a member could lose everything they owned in order to pay
underwriting losses.

Capital is provided by the members who might be investment institutions, specialist investors,
international insurance companies or, as we have seen, individuals. Syndicates can comprise one single
corporate member, or any number of corporate and individual members, underwriting severally for their
own account.

Members of Lloyd’s are authorised to underwrite insurance both in the UK and in over 200 countries and
territories worldwide. The agency businesses in the market which employ the underwriters and act for
the members of Lloyd’s are supported by Lloyd’s common infrastructure, offering technical expertise,
information exchange and an efficient processing capability.
Following the introduction of the Financial Services Act 2012, the Lloyd’s market and its participants are
The Lloyd’s market
now regulated by the Prudential Regulatory Authority (PRA) and/or the Financial Conduct Authority (FCA). and its participants
The Corporation of Lloyd’s and Lloyd’s managing agents are dual-regulated, that is, prudential regulation are now regulated by
the PRA and/or
conducted by the PRA and business conduct regulation by the FCA. Lloyd’s members’ agents and Lloyd’s the FCA
brokers are both regulated by the FCA but will also have to meet certain Lloyd’s accreditation criteria.

Structure of the market Chapter
The Lloyd’s market is a subscription market where a number of separate syndicates often participate on
a risk, sharing premiums and claims, according to their respective share. The majority of its business is 9
introduced by accredited Lloyd’s brokers.
As we have seen, members underwrite through syndicates. Syndicates are not legal entities in
Syndicates are not
themselves and each is managed by a managing agent. Managing agents, authorised by the PRA in legal entities in
conjunction with the FCA, write insurance business on behalf of the member(s) of the syndicate, who themselves
receive profits or bear losses in proportion to their share in the syndicate. Syndicates are annual
ventures, formed at the beginning of each underwriting year of account and disbanded once the year of
account is closed, usually after 36 months, by way of a reinsurance to close (RITC) policy to a successor
syndicate.

The management and governance of Lloyd’s business is incorporated by Act of Parliament, currently the
Lloyd’s Act 1982. Under the Act, the Council of Lloyd’s is responsible for the management and
supervision of the market.