CII LM2 cheat sheet
CII LM2 · Keep the key ideas within reach.
London Market Insurance Specialisation
The London Market is a subscription market: risks are placed with multiple insurers (syndicates, companies, Lloyd's members) each accepting a percentage share via a slip, with one lead underwriter setting terms and price.
Lloyd's of London is a marketplace, not an insurer: it is a society of members (capital providers) organised into syndicates, regulated by the Prudential Regulation Authority and the Financial Conduct Authority, and governed by the Lloyd's Act 1982.
The Lloyd's chain of security: (1) syndicate-level assets, (2) member-level assets including letters of credit and Lloyd's Central Fund, (3) the Central Fund as a last-resort backstop; policyholder claims rank ahead of member capital.
Subscription market mechanics: the slip records each insurer's line (percentage or amount), the lead's terms bind followers, and 'several liability, not joint' means each insurer pays only its own share.
Binding authorities (delegated underwriting): a coverholder is granted authority by a Lloyd's managing agent to underwrite risks on behalf of syndicates within a defined scope, subject to a binding authority agreement and Lloyd's coverholder approval.
The MRC (Market Reform Contract) replaced the old slip and is the standard placement document: it sets out risk details, conditions, warranties, exclusions, subscription agreement, and the basis of premium; it is not itself the policy wording.
Wholesale versus retail: London Market business is predominantly wholesale (brokers place large, complex, international risks), and the market's comparative advantage is specialist underwriting capacity for catastrophe, marine, aviation, energy, and political risk.
Key regulatory and market bodies: Lloyd's (market oversight), the PRA/FCA (prudential and conduct regulation), the LMA (Lloyd's Market Association, policy wordings), the LIIBA (broker association), and the CII (professional body).
Claims in the London Market follow the 'lead follows' principle: the lead underwriter's claims agreement is generally adopted by followers, and claims are handled by the Lloyd's Claims Office or delegated claims administrators under a claims scheme.