Lloyd’s requires managing agents to disclose details relating to any association or current or proposed underwriting transaction which may give rise to a conflict of interest. These requirements derive from paragraph 14A of the Underwriting Byelaw [see paragraph 1 in Consolidated Requirements Part 2 > Core Activities and Roles > Underwriting > Business plans and performance monitoring].
Since the Legislative Reform (Lloyd’s) Order 2008, which repealed the divestment provisions in Lloyd’s Act 1982 prohibiting associations between managing agents and brokers, the disclosure requirements in respect of such transactions have been extended to transactions that are placed with or through an intermediary that is a member of the managing agent’s own group.
A disclosable insurance transaction will include one where the syndicate will either:
- insure, reinsure or place reinsurance with or through a related party; or
- insure, reinsure or place reinsurance with or through any person other than on an arms-length basis on ordinary commercial terms.
“Through” for these purposes means through any person acting as an insurance intermediary or broker.
Each managing agent is further required as part of the business planning process to provide a statement confirming that it has systems and controls in place for dealing with related parties in order to ensure any conflicts of interest are managed fairly in accordance with the applicable Lloyd’s, PRA or FCA rules.
The required transaction details, and information providing details of controls for managing conflicts of interest are collected by Lloyd’s through market returns. The market returns include the definitions of related parties to be adopted for the purposes of completing the returns[.]
Managing agents should note that in addition to the specific requirements for disclosure set out above there is a general requirement in paragraph 14A of the Underwriting Byelaw [see paragraph 1 in Consolidated Requirements Part 2 > Core Activities and Roles > Underwriting > Business plans and performance monitoring] to disclose information relating to any association or current or proposed underwriting transaction which may give rise to a conflict of interest. Any such disclosure should be made to the managing agent’s Syndicate Performance Manager.
Managing agents are required to make available to members of the relevant syndicate (or their members’ agents) the information referred to above. Members’ agents are required to make sure this information is drawn to the attention of their members (paragraph 23A) [see paragraph 12 in Consolidated Requirements Part 2 > Core Activities and Roles > Underwriting > Business plans and performance monitoring].
Managing agents will be aware that there are separate obligations to disclose related party transactions when preparing syndicate annual accounts. So that it can prepare the Aggregate Accounts, Lloyd’s also requires managing agents annually to provide details of related party transactions where the transactions are material and have not been concluded under normal market conditions. This is coordinated by the Market Finance team as part of the annual syndicate report and accounts process.