CII LM2 flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Subscription market

A market where a single risk is shared among several insurers, each accepting a percentage or amount of the risk, with a lead underwriter setting terms and price for followers.

Lloyd's of London

A specialist insurance marketplace, not an insurance company, where members provide capital through syndicates to underwrite risks; it is governed by the Lloyd's Act 1982.

Syndicate

A group of Lloyd's members whose capital is pooled to underwrite insurance risks for a particular year of account, managed by a managing agent and identified by a number.

Managing agent

A Lloyd's-regulated company that manages one or more syndicates, including underwriting, claims, and capital, and employs the underwriters who accept risks on the syndicate's behalf.

Central Fund

Lloyd's central assets held as a last-resort backstop to meet policyholder claims if a member's and syndicate's assets are insufficient; claims rank ahead of member capital.

Chain of security

The layered protection for Lloyd's policyholders: first syndicate assets, then member assets, and finally the Lloyd's Central Fund, ensuring claims are paid in order.

Binding authority

A written agreement by which a managing agent delegates underwriting authority to a coverholder to accept risks on behalf of syndicates within defined limits, terms, and territory.

Coverholder

A firm or individual approved by Lloyd's and granted a binding authority to underwrite risks on behalf of syndicates, often operating in a local or specialist market.

Market Reform Contract

The standard London Market placement document (MRC) that records risk details, conditions, warranties, exclusions, subscription shares, and premium basis; it is not the policy wording.

Slip

The placement document recording the risk, terms, and each insurer's subscription share; the lead underwriter signs first and followers accept the lead's terms.

Lead underwriter

The first underwriter to accept a risk on the slip, setting the terms and price that subsequent subscribing insurers (followers) generally adopt.

Several liability

The principle that each subscribing insurer is liable only for its own share of the risk, not jointly for the whole; policyholders claim against each insurer separately.

Wholesale business

Large, complex, or international risks placed in the London Market through specialist brokers, as opposed to retail business placed directly with consumers or small businesses.

Lloyd's Act 1982

The UK statute that established the modern framework for Lloyd's, including the Council, the Central Fund, and the regulation of members and underwriting agents.

PRA and FCA

The Prudential Regulation Authority regulates the financial soundness of London Market insurers, while the Financial Conduct Authority regulates conduct and market behaviour.

Lloyd's Market Association

The trade body (LMA) that represents Lloyd's managing agents and produces standard policy wordings, clauses, and market guidance for syndicates.

LIIBA

The London and International Insurance Brokers' Association, representing wholesale insurance brokers in the London Market and engaging with Lloyd's and regulators.

Claims scheme

A delegated arrangement allowing a claims administrator to handle and settle claims on behalf of syndicates within agreed authority limits, following the lead underwriter's agreement.

Lead follows principle

The London Market practice where followers adopt the lead underwriter's claims decisions and settlements, promoting consistency and efficiency in claims handling.

Year of account

The annual accounting period for a Lloyd's syndicate, normally a calendar year, during which risks are underwritten and results are calculated, often with later run-off.

Premium trust fund

A fund held by a Lloyd's managing agent into which premiums are paid and from which claims and expenses are met, protecting policyholder money before distribution.

Lloyd's broker

A broker accredited by Lloyd's to place risks with syndicates; accreditation requires meeting Lloyd's financial and professional standards and is distinct from FCA authorisation.

Lineslip

A facility allowing a broker to place multiple risks under pre-agreed terms with subscribing insurers, each accepting a predetermined percentage, without individual placement.

Open market

The traditional London Market placement route where a broker approaches underwriters individually to negotiate terms for a single risk, as opposed to a facility or lineslip.

Facility

A pre-arranged underwriting agreement allowing risks within defined criteria to be accepted automatically, often used for high-volume or standardised business in the London Market.

Franchise

A deductible arrangement where losses below an agreed amount are not paid, but once the amount is exceeded the whole loss (or the excess) is paid, depending on terms.

Excess of loss

A reinsurance arrangement where the reinsurer pays losses above a retention up to a limit; common in London Market catastrophe and specialty placements.

Quota share

A proportional reinsurance arrangement where the reinsurer accepts a fixed percentage of every risk and receives the same percentage of premium, sharing losses proportionally.

Surplus lines

Insurance placed with non-admitted insurers when admitted markets cannot cover the risk; in the US, surplus lines brokers must be licensed and follow state eligibility rules.

Admitted insurer

An insurer licensed by a state or country to transact insurance there, subject to local solvency and market conduct regulation, unlike non-admitted or surplus lines insurers.

Reciprocal jurisdiction

A country or territory whose insurance regulation Lloyd's recognises as equivalent, allowing syndicates to operate there under simplified or reciprocal arrangements.

Market oversight

Lloyd's role in supervising syndicates and members for underwriting performance, capital adequacy, and market conduct, complementing PRA and FCA regulation.