Risk management requirements

2. The Council may from time to time make and issue codes of practice in respect of any matters relating to the business of insurance at Lloyd’s.

^{Underwriting Byelaw, paragraph 31}

3. The Council has made and issued the following codes of practice –

(a) Code of Practice - Delegated Underwriting

(b) Service Companies Code of Practice

(c) Code for Underwriting Agent’s Syndicate Expenses

(d) Code for Underwriting Members’ Agents: Responsibilities to Members

(e) Code for Underwriting Agents: UK Personal Lines Claims & Complaints Handling

^{Requirements Made Under the Underwriting Byelaw, paragraph 5}

1. The Council may from time to time prescribe events which no underwriting agent, approved run-off company or substitute agent shall permit to occur without the prior consent of the Council.

^{Underwriting Byelaw, paragraph 32}

2. No underwriting agent shall permit any of the following events to occur without the prior written consent of the Council –

(a) In the case of a managing agent, the appointment or removal of a person as a managing agent’s trustee or the appointment by any managing agent’s trustee (in his capacity as such) of any person as attorney.

^{Requirements Made Under the Underwriting Byelaw, paragraph 6}

3. The Council may from time to time waive a requirement contained in any requirement of the Council that an underwriting agent obtain the consent of the Council to any matter provided that the underwriting agent complies with such conditions and requirements as the Council may prescribe in respect of that matter.

^{Underwriting Byelaw, paragraph 33}

4. 6A Subject to the conditions and requirements prescribed, the Council has waived the requirement to obtain the consent of the Council in relation to requirements of the Council as set out in Market Bulletin Y3116 (Advance Consents Regime) as modified by Market Bulletin Y4126 (Streamlining Approval of Appointments to Senior Positions Individual Registration Advance Consents for fully aligned syndicates and Change of Control for Underwriting Agents).

^{Requirements Made Under the Underwriting Byelaw, paragraph 6A}

5. The Council may from time to time prescribe events which an underwriting agent, approved run-off company or substitute agent shall notify to the Council in writing should such an event occur. The Council may prescribe a period or periods in which each such prescribed event must be notified. 

^{Underwriting Byelaw, paragraph 34}

6. An underwriting agent, and in the case of [paragraph (e)], also an approved run-off company, shall without delay notify the Council in writing if any of the following events occur –

(a) an event that must be notified to the Financial Conduct Authority via Lloyd’s in accordance with the Supervision Arrangements for Underwriting Agents between the Financial Conduct Authority and the Society. Namely –

  (i) the appointment of an auditor and information about the auditor in accordance with the Financial Services Authority’s Handbook (SUP 3.3.2 R(2)and (5));

  (ii) the notification of matters raised by an auditor in accordance with the Financial Conduct Authority’s Handbook (SUP 3.7.2 G) and the Prudential Regulation Authority’s Handbook (Auditors 6.1);

  (iii) the termination of an auditor’s term of office in accordance with the Financial Conduct Authority’s Handbook (SUP 3.8.11 R and SUP 3.8.12 R) or if an auditor resigns before the term of office expires in accordance with the Prudential Regulation Authority’s Handbook (Auditors 7.5(3));

 (iv) the general notification requirements in accordance with the Financial Conduct Authority’s Handbook (SUP 15.3) and the Prudential Regulation Authority’s Handbook (Notifications 2.1) including –

    i. matters having serious regulatory impact (FCA, SUP 15.3.1 R and PRA Fundamental Rule 7);

    ii. communication with the FCA in accordance with Principle 11 (SUP 15.3.7 G);

    iii. breaches of rules and other requirements in or under the Financial Services and Markets Act 2000 (FCA, SUP 15.3.11 R and PRA, Notifications 2.3);

    iv. civil, criminal or disciplinary proceedings against a firm (FCA, SUP 15.3.15 R and PRA, Notifications 2.6(1));

    v. fraud, errors or other irregularities (FCA, SUP 15.3.17 R PRA, Notifications 2.6(4));

    vi. insolvency, bankruptcy and winding up (FCA, SUP 15.3.21 R PRA, Notifications 2.9(7));

  (v) the Core information requirements in accordance with the Financial Conduct Authority’s Handbook (FCA, SUP 15.5 and PRA, Notifications 5);

  (vi) where an underwriting agent becomes aware that inaccurate, false or misleading information has previously been provided, in accordance with the Financial Conduct Authority’s Handbook (FCA, SUP 16.3.17 R and PRA, Notifications 5.3A);

  (vii) the change of an accounting reference date in accordance with the Financial Conduct Authority’s Handbook (FCA, SUP 16.3.17 R and PRA, Notifications 5.3A); 

  (viii) annual controllers report in accordance with the Financial Conduct Authority’s Handbook (FCA, SUP 16.4 and PRA, Reporting 2.1, SS34/15 and Fundamental Rule 6); and

  (ix) annual close links report in accordance with the Financial Conduct Authority’s Handbook (FCA, SUP 16.5 and PRA, Close Links 2.1);

(b) [deleted by The Legislative Reform (Lloyd’s) Order (Market Provisions) Byelaw (No.1 of 2009).]

(c) in the case of a managing agent, the death or resignation of, or the occurrence of any notifiable event in relation to any managing agent’s trustee; and

(d) in the case of a managing agent, if at any time the syndicate premium income allocable to any year account of a syndicate managed by it exceeds or appears to have exceeded or likely to exceed the syndicate allocated capacity for that year of account. The notification shall include full particulars of the extent of the excess or expected excess, the reasons why the excess has arisen or is expected to arise and what remedial action the managing agent has taken or proposes to take.

 (e) in the case of an underwriting agent or approved run-off company, there are any changes of a kind prescribed from time to time by the Council relating to the appointment of directors (and in the case of an approved run-off company, partners), active underwriters or run-off managers. The detailed requirements prescribed by the Council for the provision of information are set out in Market Bulletin Y4126 (Streamlining Approval of Appointments to Senior Positions (Individual Registration), Advance Consents for fully-aligned syndicates and Change of Control for Underwriting Agents) issued on 22 February 2008.

^{Requirements Made Under the Underwriting Byelaw, paragraph 7}

1. The Council may prescribe details of hypothetical events and disaster scenarios that could give rise to claims being made on contracts of insurance underwritten at Lloyd’s. Every managing agent shall calculate, prepare and submit to the Council a report setting out the effect that such hypothetical events or disaster scenarios would have on the underwriting results of each syndicate managed by it if such events happened. The Council may for the purposes of this paragraph prescribe –

(a) the period or periods to which each report is to relate;

(b) the form and content of each report;

(c) the methods and assumptions to be used in the calculation and preparation of each report; and

(d) the date or dates on which each report is to be submitted to the Council.

^{Underwriting Byelaw, paragraph 35}

2. Details of the disaster scenarios prescribed by the Council and the requirements relating to the realistic disaster reports are set out at www.lloyds.com/rds.

^{Requirements made under the Underwriting Byelaw, paragraph 8}

1. The Council may from time to time prescribe requirements setting out the manner in which syndicate premium income is to be calculated by managing agents. The requirements may include –

(a) how premiums are to be allocated to years of account;

(b) when premiums are to be credited to a member; and

(c) how premiums are to be converted into different currencies.

^{Requirements made under the Underwriting Byelaw, paragraph 36}

2. When calculating syndicate premium income, managing agents shall –

(a) allocate insurance business underwritten through a syndicate to a year of account in accordance with the accounting policies adopted in respect of that syndicate;

(b) allocate premium income to the same year of account as the insurance business out of which it arises unless that year of account of the syndicate has been reinsured to close in which case any payments subsequently received or made by way of additional premiums or returns in respect of such business shall be allocated to the reinsuring syndicate;

(c) where a year of account of a syndicate is closed by reinsuring all liabilities outstanding in respect of insurance business allocated to it into a later year of account of –

  (i) the same syndicate, the premium in respect of such reinsurance to close shall not itself be treated as premium income allocable to the later year of that syndicate;

  (ii) another syndicate, the premium in respect of such reinsurance to close shall, unless the Council otherwise directs, be treated as premium income allocable to the later year of that syndicate;

(d) treat premium income as being credited to a member –

  (i) where it arises out of insurance business processed through the central accounting system, in accordance with the central accounting system;

  (ii) where it arises out of other insurance business, in accordance with the accounting policies adopted by the managing agent of the syndicate through which that business is underwritten.

(e) convert premium income which is credited in a currency other than sterling in accordance with the rates set by the Council from time to time for a year of account and shown on the Lloyd’s Core Market Return system.

(f) treat premiums paid by a member of a syndicate under a reinsurance contract which satisfies the requirements for qualifying quota share contracts set out in Market Bulletin Y3024 (Qualifying Quota Share Reinsurance Arrangements For The 2003 Year Of Account) issued on 2 April 2003 as qualifying reinsurance premiums.

^{Requirements made under the Underwriting Byelaw, paragraph 9}

3. Every managing agent shall, in respect of every syndicate managed by it –

(a) take reasonable steps to ensure that the syndicate premium income allocable to that year of account does not exceed (other than with the agreement of Council) the syndicate allocated capacity for that year of account;

(b) establish and maintain effective systems for monitoring syndicate premium income; and

(c) keep the actual and forecast syndicate premium income allocable to every year of account under active review at all times.

^{Underwriting Byelaw, paragraph 37}

4. Every members’ agent shall take all reasonable steps to ensure that no member’s syndicate premium limit for the time being applicable to any member for whom it acts is exceeded.

^{Underwriting Byelaw, paragraph 38}

A managing agent shall prepare and submit to the Council reports relating to syndicate premium income forecasts and syndicate premium income monitoring. The Council may from time to time prescribe requirements relating to each type of report. The requirements may include – 

(a) the period or periods to which each report is to relate

(b) the format and content of each report; 

(c) the methods and assumptions to be used in the preparation of each report; and

(d) the date or dates on which each report is to be submitted to the Council.

^{Underwriting Byelaw, paragraph 39}

The requirements prescribed by the Council regarding syndicate premium income forecasts and syndicate premium income monitoring are set out in the Lloyd’s Core Market Return system.

^{Requirements Made Under the Underwriting Byelaw, paragraph 10}

1. Every managing agent shall ensure that –

(a) the reinsurance programme for each syndicate managed by it is effected having regard to the best interests of the members of that syndicate;

(b) reinsurance premiums for each syndicate managed by it are charged to it and paid out of funds held, controlled or managed in respect of insurance business carried on by the members of that syndicate as members thereof; and

(c) recoveries under any syndicate reinsurance effected for the benefit of any syndicate managed by it are credited only to that syndicate.

^{Underwriting Byelaw, paragraph 39A}

1. Every underwriting agent and approved run-off company shall appoint a compliance officer who shall be a director or a company secretary of that underwriting agent or approved run-off company and who, without prejudice to the responsibilities and duties of the directors generally, shall be responsible for compliance with –

(a) Lloyd’s Acts 1871 to 1982 and the requirements of the Council; and

(b) in the case of an underwriting agent, its duties to the members for whom it acts.

^{Underwriting Byelaw, paragraph 40}

2. Every managing agent shall appoint an individual as an active underwriter in respect of each syndicate managed by it other than a run-off syndicate.

^{Underwriting Byelaw, paragraph 41}

3. Every managing agent shall appoint an individual as a run-off manager in respect of each run-off syndicate managed by it.

^{Underwriting Byelaw, paragraph 42}

4. No underwriting agent or approved run-off company shall permit, as applicable, any person to act –

(a) as a director of that underwriting agent or as a director or partner of that approved run-off company;

(b) as an active underwriter of a syndicate managed by that underwriting agent; or

(c) as a run-off manager of that run-off company;

if the Council decides that the person is not fit and proper or otherwise suitable to act in that capacity. In deciding whether a person is fit and proper or otherwise suitable the Council shall have regard to such criteria as it may from time to time prescribe.

^{Underwriting Byelaw, paragraph 42A}

5. In determining whether a person is fit and proper or otherwise suitable to act as a director of an underwriting agent, director or partner of an approved run-off company, as an active underwriter or run-off manager, the Council may take into account any consideration it thinks fit including but not limited to:

(a) the person’s integrity;

(b) the person’s professional competence;

(c) the person’s compliance with any regulatory requirements or any requirements of the Council;

(d) the person’s business conduct;

(e) the professional and administrative support to be provided to the person;

(f) whether the person has passed or secured exemption from any examinations required by the Council.

^{Requirements Made Under the Underwriting Byelaw, paragraph 10A}

6. No person shall, without the prior written consent of the Council, be a controller of an underwriting agent.

^{Underwriting Byelaw, paragraph 43}

7. The Council may at any time require the controller of an underwriting agent or approved run-off company to execute and deliver or otherwise become a party to such deeds, contracts, bonds, guarantees, undertakings and other documents as the Council may specify.

^{Underwriting Byelaw, paragraph 44}

8. An underwriting agent’s business shall consist only of (i) its business as such at Lloyd’s, (ii) in the case of a managing agent, acting as an outsourced service provider to Lloyd’s Insurance Company S.A. pursuant to an outsourcing agreement with Lloyd’s Insurance Company S.A., and (iii) any other business which the Council may permit.

^{Underwriting Byelaw, paragraph 45}

9. No underwriting agent, substitute agent or approved run-off company shall, without the prior consent of the Council disclose, or permit to be disclosed, to any person other than the directors, officers, employees or legal advisers of that person or the Prudential Regulation Authority or Financial Conduct Authority, any information, document or material provided to it by Lloyd’s where that information, document or material is stated to be confidential and does not otherwise provide or set out the terms on which it may be disclosed.

^{Underwriting Byelaw, paragraph 46}

10. An underwriting agent, substitute agent or approved run-off company shall indemnify and hold harmless the Society for and against any and all claims, damages, losses, costs and expenses arising out of its breach or the breach of any of its directors, officers, employees, agents or advisers of paragraph [9. above].

^{Underwriting Byelaw, paragraph 47}

11. Every underwriting agent and approved run-off company shall establish and maintain an adequate system of control over its transactions and records.

^{Underwriting Byelaw, paragraph 48}

The following Codes have been issued under paragraph 31 of the Underwriting Byelaw.