London Market Insurance Specialisation
London Market Insurance Specialisation
This domain tests the operating model of the London subscription market: how Lloyd's syndicates, company-market insurers and brokers place, bind, document and handle claims for complex and international risks. The exam expects you to know who bears which liability, what a broker or delegated underwriter is authorised to do, and how market documentation and regulation constrain each step.
Subscription and authority
- Lloyd's is a marketplace of syndicates; each syndicate is a separate underwriting entity. Company-market insurers, often IUA members, sit alongside Lloyd's.
- A subscription placement splits 100% of a risk across participants. Liability is several, not joint: each insurer is liable only for its subscribed share.
- The leader negotiates terms and writes the signing line; followers accept the leader's terms and subscribe their own percentages. "Follow the leader" does not make one insurer liable for another's share.
- Binding authorities and lineslips delegate underwriting to an MGA or coverholder within stated limits. Anything outside the binder must be referred to the principal insurer.
- Firms are dual-regulated by the PRA and FCA; Lloyd's managing agents also answer to Lloyd's own rules.
Documentation and claims
- The Market Reform Contract (MRC) is the standard placing document. It records risk details, clauses, subscriptions and signing provisions; it is evidence of the contract, not a substitute for the underlying legal agreement.
- Electronic placing, for example through PPL, and market reform reduce paper, but the same authority and disclosure rules apply.
- Claims are notified through the broker to the leader or claims lead; each subscribing insurer pays its share. Sanctions and financial-crime checks apply before payment.
Worked example
An MGA's binder says: maximum £2m any one risk; flood excluded. A broker presents a £3.2m property risk in a flood zone and the MGA underwriter binds it. Reasoning: the underwriter had no actual or apparent authority for either the size or the peril. The principal insurer is not bound for the excess or the flood element; the MGA or broker may face a negligence or breach-of-authority claim. The correct action is to refer to the insurer for specific acceptance or decline.
Traps
- Treating a subscription as joint liability, so one insurer covers a defaulting insurer's share.
- Assuming a leader can bind followers to terms outside the binder or slip.
- Confusing a binding authority, which is delegated authority, with a policy.
- Missing that an MRC records the deal; it does not cure a lack of underwriting authority.