Claims handling and the claims process in the London Market
Claims handling and the claims process in the London Market
This domain tests how claims are notified, led, adjusted and settled across subscribing insurers, and the rules that let one insurer act for the market.
Notification and leadership
Claims are notified to the broker, who presents to the lead claims adjuster (or lead insurer). Under market claims agreements (the Lloyd's Claims Scheme and equivalent company market arrangements), subscribers who have agreed to the scheme authorise the lead to adjust and settle claims within defined thresholds, which avoids every subscriber negotiating separately.
The process
- Notification and coverage review; reservation of rights where cover or liability is unclear.
- Investigation by adjusters; reserving and periodic review.
- Agreement of quantum and settlement; processing through central services and the electronic claims file.
- Recoveries: subrogation against third parties, salvage, and reinsurance recoveries.
Legal and practical points
Late notification may prejudice cover only if it causes prejudice, under the Insurance Act 2015 approach to terms; fraudulent claims are governed by the same Act. Good faith, promptness and clear audit trails matter, and settlements must respect the terms subscribed.
Worked example. A £20m loss falls on a five-subscriber slip with a claims scheme threshold of £10m for lead authority. Because the claim exceeds the threshold, the lead adjusts but each subscriber must agree its share; the broker coordinates the sign-off. Had the loss been £6m, the lead could settle for all scheme participants, and the followers would be bound by that decision.
Traps. Assuming the lead can always settle alone - thresholds bind. Treating a reservation of rights as a declinature. Forgetting that recoveries (subrogation and reinsurance) must be pursued and credited. Ignoring the effect of prejudice when notification is late.
Key points
- Claims are notified through the broker to a lead adjuster or lead insurer.
- Market claims schemes let the lead settle for subscribers within thresholds.
- Above threshold, each subscriber agrees its own share.
- Reservations of rights preserve an insurer's position; they are not denials.
- Subrogation, salvage and reinsurance recoveries must be pursued and credited.