CII LM3 key terms

A group of underwriting members at Lloyd's who pool capital to accept risks for a single underwriting year. Each syndicate is managed by a managing agent and trades under its own capacity and business plan.

A company approved by Lloyd's that runs one or more syndicates: it employs the underwriters, sets the business plan, manages capital and reports results to Lloyd's and the members backing the syndicate.

A firm accredited by Lloyd's to place business with syndicates on behalf of clients. Accreditation requires regulatory authorisation and compliance with Lloyd's market rules on conduct, security and premium handling.

A way of placing risk where several insurers each accept a stated share of the same terms, rather than one insurer taking the whole risk. London company market and Lloyd's business are commonly placed this way.

The placing document that sets out the risk, cover, conditions, limits, premium and subscribing insurers' shares. Once signed by underwriters it evidences the contract and forms the basis of the policy wording.

The percentage or monetary share of a risk that an individual insurer accepts. Lines added together must equal 100 per cent before the risk is fully placed and the slip can be closed.

The underwriter who first assesses the risk, sets the terms and price, and writes the lead line. Following markets rely heavily on the lead's judgement when deciding whether to subscribe.

Reducing the share an insurer is offered so that total subscriptions match the required 100 per cent. It usually happens when a risk is oversubscribed and the lead controls allocation among followers.

A written delegation allowing a coverholder to accept risks and issue documentation on an insurer's behalf, within stated limits, classes and territory. It is also called a delegated authority and must be properly controlled and audited.

A firm authorised under a binding authority to underwrite or issue documents for a Lloyd's syndicate or insurer. It typically works in a local market and must comply with the terms of its delegated authority.

A facility where underwriters agree in advance to accept a defined share of risks that fall within stated criteria, allowing rapid placement without individual subscription. The broker declares qualifying risks to each subscriber.

The intermediary that introduces the client and originates the business, often in the client's own country. It may pass the risk to a London placing broker who has direct access to market underwriters.

The broker who presents the risk to underwriters in the London Market, negotiates terms and secures subscriptions. The role requires technical knowledge of the class and of market practice.

The standard template for London Market slips and endorsements, setting out required sections such as risk details, conditions, claims control and signing provisions. It replaced older slip formats to improve clarity and consistency.

The insured's obligation to disclose every material circumstance it knows or should know, and to give a fair and clear presentation of the risk. Breach can allow the insurer to avoid the policy or adjust the claim.

A fact that would influence a prudent insurer's decision on whether to accept the risk, or on what terms and premium. The test is objective, judged from the insurer's perspective.

The principle that both parties must deal openly and honestly in forming and performing the contract. It underpins disclosure duties and the insurer's duty to handle claims fairly.

A policy term that the insured promises to comply with, or a statement of fact that must be true. Breach can discharge the insurer's liability for losses occurring while the breach continues.

A term that must be satisfied before the insurer's liability arises, or before a claim is payable. Examples include notification deadlines and claims cooperation requirements.

A clause requiring the insured to notify the insurer promptly and to let the insurer control the investigation, defence or settlement of a claim. Breach can prejudice cover, so wording must be followed precisely.

A clause obliging the insured to assist the insurer in handling a claim, for example by providing information and access to records. It supports the insurer's ability to investigate and defend.

A schedule listing individual risks or transactions under a facility or treaty, used for premium accounting, claims reporting and audit. Accuracy of bordereaux is a key control in delegated authority business.

A separate account in which a broker holds client premiums and claims monies, protected from the broker's own creditors. Rules govern what may be paid in and out and when funds must be transferred.

The point at which the insured's premium is treated as received by the insurer, bringing certainty to cover inception and premium payment. Market rules set when this occurs in the absence of contrary agreement.

Money held by an intermediary on behalf of clients, including premiums and claim settlements. It must be segregated and handled under regulatory client money rules, with records showing whose money it is.

A document that amends an existing policy, adding, removing or varying cover, terms or premium. It must be agreed by all subscribing insurers and attached to and read with the policy.

The full contractual document issued after placing, setting out cover, exclusions, conditions and definitions. It should reflect the slip terms exactly and is the reference point for claims and disputes.

A clause that removes specified losses, perils or circumstances from the cover granted. Exclusions must be clear and are read alongside the insuring clause and any conditions.

The amount of each loss the insured must bear before the insurer pays, or the amount deducted from the settlement. It differs from a franchise, which removes cover entirely below the stated figure.

A clause reducing the claim payment in proportion to underinsurance, so the insured bears part of the loss where the sum insured is below the value at risk. Common in property and marine covers.

Reinsurance of a single risk or defined risk, offered and accepted individually. The reinsurer assesses the specific exposure and may decline it, unlike under a treaty.

An agreement under which the reinsurer automatically accepts a defined class or portfolio of risks that meet the treaty terms. It covers many policies under one contract, giving the cedant capacity and stability.

A proportional treaty in which the reinsurer takes a fixed percentage of every risk in scope, sharing premium and losses in the same proportion. It is often used to increase capacity or support new business.

A non-proportional reinsurance arrangement where the reinsurer pays losses above a stated retention, up to a limit. It protects the cedant against large single losses or accumulation events.

The amount of loss or the share of risk that the cedant keeps for its own account before reinsurance responds. Setting retention balances cost of cover against appetite for volatility.

The insurer that buys reinsurance and transfers part of its risk to a reinsurer. The cedant remains the insured's insurer and handles claims, recovering the reinsured share.

The insurer's right, after paying a claim, to step into the insured's position and pursue recovery from a third party responsible for the loss. It prevents the insured recovering twice.

The principle that where more than one policy covers the same loss, insurers share the cost, usually in proportion to their independent liability. It avoids the insured recovering more than the loss.

The situation where the same interest is insured against the same risk by more than one policy. The insured cannot recover more than the loss, and the insurers contribute between them.

The remaining value of damaged property, or the recovery of that value, which reduces the insurer's net loss. Salvage rights may pass to the insurer after a total loss settlement.

A partial loss of insured cargo or property caused by an insured peril, borne by the party whose interest is damaged. It is distinct from general average, where sacrifices are shared across the venture.

A maritime principle where losses or expenses deliberately incurred to save a venture in peril are shared proportionately among cargo, ship and freight interests. Insurers typically cover the insured's contribution.

A legal or financial relationship to the subject matter such that the insured benefits from its safety and suffers loss from its damage. It is required for a valid insurance contract.

The principle that insurance restores the insured to the financial position held before the loss, no better and no worse. It underlies limits, deductibles and the treatment of betterment.

An improvement in the insured's position when a claim pays for new property in place of old. Insurers may deduct for betterment so the settlement reflects indemnity value rather than new-for-old.

The initial assessment of a notified claim to decide urgency, reserve level, specialist involvement and whether immediate action is needed. It helps allocate resources and meet service standards.

An estimate of the amount an insurer expects to pay on a claim, including expenses, set aside in its accounts. Reserves are reviewed as the claim develops and adjusted up or down.

Losses that have occurred but have not yet been notified to the insurer by the reporting date. Actuaries estimate these liabilities so that reserves reflect the true cost of claims.

The UK body that resolves complaints between eligible complainants and regulated financial firms, including insurers and brokers. Its decisions are binding on the firm if the complainant accepts them.

The regulatory principle that firms must deliver fair outcomes for customers across product design, sales, servicing and claims. It is embedded in supervision and in firms' culture and governance.

The UK regime requiring firms to act to deliver good outcomes for retail customers, with rules on products, price and value, understanding and support. It raises the standard from fair treatment to positive outcomes.

The process of checking clients, insureds and payments against sanctions lists before and during a relationship. Firms must avoid prohibited dealings and report matches to the relevant authority.

Controls that prevent criminals using insurance and broking to disguise the origin of funds. They include risk assessment, customer due diligence, monitoring and suspicious activity reporting.

The process of identifying a client, verifying its identity and understanding its business and ownership before acting. It supports anti-money laundering and sanctions compliance.

The maximum amount of premium a Lloyd's syndicate is approved to write in an underwriting year, as set in its business plan. It limits growth and is monitored by Lloyd's.

The layers protecting Lloyd's policyholders: syndicate assets, members' assets at risk, and the Central Fund. It explains why Lloyd's ratings and policyholder confidence are strong.

A Lloyd's reserve available to meet policyholder claims if a syndicate or member cannot. It sits at the heart of the chain of security and is overseen by the Council.