What is Lloyd's?

The Lloyd's market

Lloyd's is the world's leading specialist insurance market, home to 44 managing agents and 62 syndicates*, which offer an unrivalled concentration of specialist underwriting expertise and talent. Lloyd's is the world's best known - but probably least understood - insurance brand. This is because Lloyd's is not an insurance company but a society of members, both corporate and individual, who underwrite in syndicates on whose behalf professional underwriters accept risk. Supporting capital is provided by investment institutions, specialist investors, international insurance companies and individuals.

Lloyd's brokers bring business to the market. The risks placed with underwriters originate from clients and other brokers and intermediaries all over the world. Together, the syndicates underwriting at Lloyd's form one of the world's largest commercial insurers and a leading reinsurer. The market structure encourages innovation, speed and better value, making it attractive to policyholders and participants alike. Immediate access to decisionmakers means that answers on whether a risk can be placed are made quickly, enabling the broker to provide fast, good value solutions.

Explanation of the market

Members of Lloyd's Lloyd's is not an insurance company. It is an insurance market of members. Members of Lloyd's, or 'capital providers' as they are often known, accept insurance business through syndicates on a separate basis for their own profit and loss (in other words, members of Lloyd's are not jointly responsible for each other's losses). The membership of Lloyd's is currently made up of companies, individuals and Scottish Limited Partnerships. Individual members, or 'Names' as they are often known, tend to support a number of syndicates, whereas some corporate members only underwrite through a single syndicate.

Syndicates Lloyd's members conduct their insurance business in syndicates, each of which is run by a managing agent. There are 62* syndicates operating within the market, covering many speciality areas including:

Marine Aviation Catastrophe Professional indemnity Motor

Syndicates tailor solutions to respond to the specific risks of the client base. Syndicates compete for business, thus offering choice, flexibility and continuing innovation. Syndicates cover either all or a portion of the risk and are staffed by underwriters, the insurance professionals on whose expertise and judgement the market depends. Managing agents It is the responsibility of the managing agent to employ the underwriting staff and manage the syndicate on the members' behalf. The managing agent must be a company specifically established for the purpose of managing a syndicate, and it may not carry out any other function. A managing agent may be responsible for more than one syndicate. Lloyd's brokers Accredited Lloyd's brokers place risks in the Lloyd's market on behalf of clients. These brokers use their specialist knowledge to negotiate competitive terms and conditions for clients. There are 164** firms of brokers working at Lloyd's, many of whom specialise in particular risk categories. Each Lloyd's broker is required to demonstrate an understanding of the Lloyd's market, as part of Lloyd's assessment of its suitability to be accredited as a Lloyd's Broker. Lloyd's operates an accreditation process for brokers seeking access to the Lloyd's Market. All brokers must satisfy all relevant regulatory requirements. Lloyd's performs a careful assessment of all applicant brokers, affirming their reputation and financial standing and investigating the character and suitability of officers and employees before making the decision to accredit. Firms receive provisional accreditation for three years before becoming entitled to use the term "Lloyd's broker". Local brokers Any insurance broker can access the expertise and resources of Lloyd's by making contact with an accredited Lloyd's broker

Business strategy
Lloyd's implemented a new franchise model in 2003, which changed Lloyd's status from that of regulating the market to that of commercially managing the market. The aim of the Lloyd's franchise is to be the world's leading specialist insurance market place. Lloyd's businesses are independent and operate within the Franchise. They are committed to delivering consistent underwriting profit, benefiting from a common rating and mutual security, and attracting the highest quality management and underwriting talent. Franchise objectives The franchise has three core objectives:

To create and maintain a commercial environment at Lloyd's in which the long-term return to all capital providers is maximised To make Lloyd's the preferred market of choice for policyholders, brokers, underwriters and capital To create a disciplined market place of well managed businesses

The Lloyd's Franchisor The Franchisor's role is that of proactive and prudent commercial management. This role encompasses three core streams of activity: 1. Capital management Lloyd's Risk Based Capital model determines the level of capital a member is required to place at Lloyd's in support of their underwriting, and promotes the efficient distribution of capital in relation to risk. 2. Franchise performance Lloyd's franchise performance model covers the following:

Underwriting review and business planning - to facilitate a structured, disciplined approach to underwriting Performance benchmarking: to identify underperformance at the earliest opportunity

Claims and reinsurance management: to ensure 'best practice' is implemented marketwide.

3. Risk management Loyd's risk management activity covers:

Franchise risk assessment - to provide clear focus for risk management activity Realistic Disaster Scenarios (RDS) framework seeks to manage catastrophe exposure at both a syndicate and market level.

Placing risk
UK clients Before a risk can be placed in the market a number of interactions must take place:

The customer (which might be an individual, company or other Lloyd's syndicate) approaches a Lloyd's accredited broker with the details of a risk to be insured. The Lloyd's broker approaches a specialist underwriter (a leader) in the relevant class of business to discuss premium, terms and conditions. If the underwriter is interested, a proposal will be made to accept a percentage of the total risk. A number of underwriters may accept portions of one risk. This is known as a subscription market. The broker feeds back information to the customer to enable the customer to place an order. The broker prepares a 'slip' with the details of the insurance, which is signed by the lead underwriter. The broker then approaches the other (following) underwriters with a view to obtaining written lines of insurance which total 100% or more of the risk. XIS, (see the link on the right), processes the slip and the broker adjusts or 'signs down' the lines if they have exceeded 100% of the risk. The premium is paid by the insured to the broker, who deducts any agreed brokerage fee and submits the net amount to Lloyd's Central Accounting (LCA) as part of a regular bulk settlement process. LCA allocates the premium to the managing agent of the syndicates involved.

Overseas clients Lloyd's is licensed to do business in certain countries. For information on Lloyd's current licensing arrangements, follow the link on the right. All US business underwritten at Lloyd's must be placed in accordance with US regulatory requirements and coverage must comply with local law. New insurance enquiries from US residents should be directed to an insurance agent or broker who is licensed to conduct business in the relevant state. Insurance intermediaries Lloyd's underwriters do not generally deal directly with policyholders. Instead, business is normally accepted by Lloyd's underwriters through the following intermediaries: Lloyd's brokers - insurance business is generally brought to Lloyd's by Lloyd's brokers who are insurance broking firms accredited by Lloyd's to broke insurance business at Lloyd's. Coverholders - Lloyd's underwriters may delegate their authority to enter into contracts of insurance to an intermediary known as a 'coverholder'. In such

circumstances the general principle is that the coverholder acts as agent of the Lloyd's underwriters (rather than as agent of the policyholder). Registered Open Market Correspondents - certain brokers are registered as Open Market Correspondents which permits them to negotiate contracts of insurance with the Lloyd's market through intermediary of a Lloyd's broker. Payments to intermediaries Intermediaries receive payments in a variety of ways, which may include the payment of commissions. Lloyd's strongly supports the disclosure and transparency of these commission arrangements. A policyholder may ask the intermediary with whom the policyholder deals for details of how and by whom the intermediary is being paid. Ownership and other financing links to intermediaries Under the terms of the Lloyd's Act 1982, Lloyd's brokers are prevented from being Lloyd's managing agents or being associated with managing agents. (Lloyd's underwriters accept business as members of syndicates each of which is managed by a 'managing agent'). Lloyd's also has risk management procedures in place in respect of the relationship between Lloyd's managing agents and any related companies that act as intermediaries. This is to ensure that the managing agent makes proper disclosures of any such arrangements. A policyholder may ask the intermediary whom he is dealing with to disclose if it is a related company to a Lloyd's managing agent.

Who insures with Lloyd's?

Lloyd's syndicates insure the world's leading businesses: 93% of Dow Jones Industrial Average companies 94% of FTSE 100 companies 82% of Fortune Top 50 European companies 85% of Fortune 500 US companies Top 7 pharmaceutical companies Top 20 global banks

Sources of capital
The capital which backs the syndicates comes from corporate and individual members (known as 'Names'). Corporate capital was introduced in 1994 and now makes up 89.5%* of the market capacity.

Regulation of Lloyd's
Lloyd's of London is regulated by the UK Financial Services Authority (FSA), under the Financial Services and Markets Act 2000. The FSA oversees Lloyd's regulation to ensure consistency with general standards in financial services. In practical terms however, in order to avoid unnecessary duplication, the FSA delegates a substantial part of its regulatory activity to the Council of Lloyd's and focuses on a supervisory role. The Council of Lloyd's is the governing body of the Society, under the Lloyd's Act 1982. Much of the market's rule structure is embedded in a series of byelaws passed by the Council. In recent years however, these have been supplemented by the introduction of core principles for underwriting agents and a number of codes of conduct are published to the market in a Codes Handbook. Changes to regulatory requirements are communicated to the market by means of regulatory bulletins. Day to day supervision of the market is undertaken by the Risk Management Division of the Corporation of Lloyd's.

The market place

The Lloyd's market brings together an unrivalled concentration of specialist expertise and talent. Its a Society of members, corporate and individual, who underwrite in syndicates. There are currently 62 syndicates, which are run by 44 managing agents (whose names appear below) firms of highly experienced specialist underwriters, who accept risk on behalf of syndicate members.

Market Risk & Reserving (Actuarial Department)

Overview The Market Risk and Reserving Unit is responsible for:

Risk-based capital - creation and delivery. Systemic risk - including war and financial guarantee. Lloyd's Actuarial services.

Henry Johnson is Head of the Unit, and is the Lloyd's Actuary, reporting to Andrew Moss, Director, Finance, Risk Management and Operations. The Unit is divided into teams as follows:

Capital Modelling Risk Based Capital (RBC) Techncial Systemic Risk

Lloyd's Actuary

Capital Modelling The Capital Modelling team is responsible for determining capital requirements for ongoing members of Lloyd's. This involves developing and running the Risk Based Capital Model and estimating the associated risk exposure to the fund. Capital requirements for non-traditional products and new classes of business are also investigated by the Capital Modelling team. RBC Technical The RBC (risk-based capital) Technical team is responsible for communicating capital requirements to the market, communicating developments in RBC methodology and explaining syndicate/member level capital movements. The team also deals with bespoke capitalisation issues and coordinates internal and external uses of RBC information as well as developing capital modelling software functionality and coordinating capital modelling software releases to the market. Systemic Risk The Systemic Risk team is responsible for examining risks affecting the Lloyd's market as a whole (or its systems) and their potential impact on the Central Fund. Risks associated with individual syndicates are addressed by Risk Management. Key areas include: reinsurance aggregation, catastrophe risk and secretariat function for the War, Civil War and Financial Guarantee Committee. Lloyd's Actuary The Lloyd's Actuary is responsible for monitoring syndicate reserving and in particular the actuarial certification process under which each syndicate is required to

provide a formal actuarial report and reserve statements. The team also provides reserving output for some overseas regulators.

Management of Lloyd's
The management structure and rules under which Lloyd's operates, including information about the Council of Lloyd's, Lloyd's Franchise Board and the Corporation of Lloyd's. The Council of Lloyd's responsible for the management and supervision of the market. Lloyd's Franchise Board Overview of Lloyd's Franchise Board, responsible for the franchise strategy. Key people The Council of Lloyd's
An Act of Parliament, the Lloyd's Act 1982, defines the management structure and rules under which Lloyd's operates. Under the Act, the Council of Lloyd's is responsible for the management and supervision of the market. It is regulated by the Financial Services Authority (FSA) under the Financial Services and Markets Act 2000. The Council normally has six working, six external and six nominated members. The appointment of nominated members, including that of the Chief Executive Officer, is confirmed by the Governor of the Bank of England. The working and external members are elected by Lloyd's members. The Chairman and Deputy Chairmen are elected annually by the Council from among the working members of the Council. All members are approved by the FSA. The Council can discharge some of its functions directly by making decisions and issuing resolutions, requirements, rules and byelaws. Other decisions are delegated to the Lloyd's Franchise Board and associated committees.

Lloyd's Franchise Board The Franchise Board sets the franchise strategy, and is responsible for risk management and profitability targets across the market. It lays down guidelines for all syndicates and operates a business planning and monitoring process to safeguard high standards of underwriting and risk management, thereby improving sustainable profitability and enhancing the financial strength of the market. The Board is chaired by the Chairman of the Council of Lloyd's, and has three further executive members:

Chief Executive Officer Director of Finance and Risk Management Franchise Performance Director.

Reflecting current best practice in corporate governance, the Board has seven nonexecutive independent directors appointed for their specialist knowledge and expertise. In order to carry out its functions, the Franchise Board will have a number of key subcommittees. Key people Chairman Profile on the Chairman, Lord Peter Levene. Chief Executive Officer Profile on the Chief Executive Officer, Nick Prettejohn. (Left)

Deputy Chairmen Profiles on John Coldman, Chairman of Benfield, and Bronek Masojada, Chief Executive of Hiscox. Director, Finance & Risk Management Profile on the Finance Director, Luke Savage. Director, Franchise Performance Profile on the Franchise Performance Director, Rolf Tolle. Director & General Counsel Profile on the Director and General Counsel, Sean McGovern. Director, Operations Profile on the Director of Operations, Steve Quiddington. Director, Worldwide Markets Profile on the Director of Worldwide Markets, Julian James. Key contacts Find out about key contacts at Lloyd's including contact information. Pictures of Lloyd's Executives Pictures of Lloyd's executives including the Chairman and CEO.

History of the building

Lloyd's has occupied a number of buildings across the City of London over the past three centuries. Tower Street, City of London Lloyd's earliest home was Edward Lloyd's coffee house, firmly established by 1688 in Tower Street in the City of London. This small club of marine underwriters moved to Lombard Street, closer to the heart of the City, in 1691.

The Royal Exchange, Cornhill Lloyd's slowly evolved into a more formal society and in 1774 the 'Subscribers to Lloyd's' occupied new premises at the Royal Exchange in Cornhill. Sadly, the building was destroyed by fire in 1838, and Lloyd's moved to South Sea House before returning to the rebuilt Royal Exchange in 1844.

12 Leadenhall Street In 1928 the Society moved into the first building it had owned, at 12 Leadenhall Street. As business expanded, the market moved to a second new building in Lime Street in 1958.

One Lime Street By 1978 Lloyd's again faced the prospect of overcrowding. The Committee commissioned the architect Richard Rogers (now Lord Rogers of Riverside) to redevelop the Leadenhall Street site. In November 1986 HM The Queen officially opened the new building at One Lime Street, which Lloyd's occupies today. The Lloyd's building and its collections are not open to the public.