CII LM1 key terms

A specialist insurance and reinsurance marketplace where members and syndicates underwrite risk through managing agents, governed by the Lloyd's Act framework. It is not itself an insurance company; it is a market with its own capital and regulatory arrangements.

A group of underwriting members at Lloyd's who accept risk collectively for their own account. Syndicates are managed by managing agents, have their own capacity, and share results among members rather than being a single legal entity.

The firm that operates a Lloyd's syndicate, employing the underwriters, setting the business plan, and managing capital and expenses on behalf of the syndicate's members. Managing agents are subject to Lloyd's and regulatory approval.

The maximum amount of risk an insurer, syndicate, or market can accept, usually expressed as gross or net premium limits for a year. Capacity reflects available capital and is approved in advance by regulators or Lloyd's.

At Lloyd's, the approved maximum gross premium a syndicate may write in a given underwriting year. It is set before the year begins and acts as a ceiling on the syndicate's business volume.

A firm accredited by Lloyd's to place business with syndicates on behalf of clients. Brokers must meet Lloyd's approval requirements and are the recognised route through which most Lloyd's risks are introduced.

A firm authorised by a managing agent, under a binding authority, to accept risks and issue documentation on behalf of syndicates. Coverholders extend Lloyd's reach into local markets and are subject to audit and delegated authority rules.

A written delegation allowing a coverholder to accept defined risks within set limits without referring each one to the underwriter. It specifies classes, limits, territories, and reporting requirements and is central to delegated underwriting.

The arrangement under which an insurer or syndicate grants another party power to underwrite, price, or administer business on its behalf. The authority is defined in a contract and is monitored through audits and reporting.

The process of arranging insurance, from presenting the risk to underwriters through negotiation to binding cover. In the London market, placement typically involves brokers approaching several underwriters to build the required capacity.

The document recording the details of a risk and the terms on which underwriters have agreed to accept it. It summarises the insured, coverage, limits, conditions, and each subscribing underwriter's share.

A market where several underwriters each accept a share of the same risk under one set of terms, rather than a single insurer taking the whole. London is a classic subscription market, with leaders setting terms that followers adopt.

The proportion, or percentage, of a risk that a particular underwriter accepts. Adding up all line sizes gives 100% of the risk, and each underwriter is liable only for its own line.

The underwriter who first sets the terms, rating, and conditions for a risk in a subscription market. Follow underwriters rely on the lead's assessment, so the lead's expertise and reputation strongly influence placement.

An underwriter who accepts a share of a risk after the lead has set the terms, usually without renegotiating them. Followers may still decline or take a smaller line if the terms fall outside their appetite.

The point at which an underwriter's agreement becomes legally effective, committing the insurer to the risk. In London, binding may be confirmed verbally and later evidenced in writing, so clear communication of authority matters.

The standard London market contract format that replaced the old slip for most business. It sets out risk details, clauses, and subscription in a structured layout, improving consistency and enabling electronic processing.

A standard market agreement that sets out the contractual relationship between broker and insurer for placing business, including obligations on documentation, premium payment, and claims handling. It underpins how London business is transacted.

A central London market processing organisation that handles accounting, settlement, and claims between brokers and insurers. The bureau reduces the need for bilateral transactions and supports market-wide efficiency.

The service provider that has operated the London market's central bureau and electronic claims and accounting services. It processes premium and claims transactions between brokers and insurers on a shared platform.

The trade body representing London market company insurers and reinsurers, as distinct from Lloyd's. It provides market services, lobbies on behalf of members, and supports standards for company market business.

The trade association that represents the interests of Lloyd's managing agents and syndicates. It develops model clauses, supports market committees, and engages with Lloyd's and regulators on market issues.

The part of the London insurance market made up of traditional insurance companies, as opposed to Lloyd's syndicates. Company market insurers write both direct and reinsurance business and are represented by the IUA.

The physical or electronic marketplace at Lloyd's where brokers and underwriters meet to negotiate and place risks. Historically a trading floor, it now operates alongside electronic placement systems.

The use of digital platforms to submit, negotiate, and bind insurance risks instead of paper slips. London market systems allow brokers and underwriters to share data, track progress, and record agreement electronically.

The total premium charged to the insured before deductions such as commission or brokerage. It is the amount the insured pays and the basis from which net premium and acquisition costs are calculated.

The premium retained by the insurer after deducting brokerage, commission, and sometimes taxes from the gross premium. It represents the income actually available to meet claims and expenses.

The commission a broker earns for placing business, usually a percentage of the gross premium. It is deducted before the insurer receives the premium and is a key element of acquisition cost.

An intermediary who acts for the insured in arranging cover, rather than for the insurer. In the London market, brokers must be authorised and are typically accredited to place business at Lloyd's.

Insurance bought by an insurer to transfer part of its risk to another insurer. It protects solvency, supports capacity, and allows insurers to accept larger or more concentrated risks than they could retain alone.

Reinsurance arranged for one specific risk, with the reinsurer free to accept or decline it. Each risk is individually assessed and priced, giving flexibility but requiring separate negotiation for every submission.

A standing agreement under which the reinsurer accepts a defined class or portfolio of risks automatically, within agreed terms. Treaties cover many policies under one contract and are usually renewed annually.

The amount of risk an insurer keeps for its own account after reinsurance, or the amount it must bear before reinsurance responds. Retention is a central decision in managing capital and volatility.

A proportional reinsurance arrangement where the reinsurer takes a fixed percentage of every risk in the covered portfolio, and receives the same percentage of premium. The insurer retains the remaining share.

A proportional reinsurance treaty in which the insurer retains a fixed amount per risk and cedes the excess up to a stated number of lines. It allows growth in capacity while keeping retention controlled.

A non-proportional reinsurance arrangement where the reinsurer pays losses above a stated retention, up to a limit. It protects against large single losses or aggregated catastrophe losses rather than sharing every claim.

Reinsurance or insurance protection against the accumulation of many losses from a single event such as a storm or earthquake. It is usually written as excess of loss and priced using catastrophe models.

The total exposure an insurer faces from many policies affected by one event or in one area. Managing accumulation is essential to avoid losses that exceed capital and to buy appropriate catastrophe protection.

The amount an insurer could lose if a risk or event occurs, reflecting limits, values, and the number of policies affected. Exposure assessment underpins pricing, accumulation control, and reinsurance buying.

The settlement of premium by the broker to insurers, often through the central bureau rather than individually. Payment terms and credit periods are governed by market agreement and affect cash flow.

The process of agreeing and paying claims, including notification, adjustment, and payment through the bureau or directly. In the London market, claims are often handled by a designated claims leader on behalf of all subscribers.

The insurer or syndicate responsible for managing and agreeing a claim on behalf of all subscribing insurers. Followers normally accept the leader's settlement, which reduces duplication and speeds up payment.