Establish a Business Plan
Initially a Managing Agent looking to establish a Service Company must make their SUP (Syndicate Underwriting Performance) Executive, and concurrently, the Lloyd’s Representative if one is present in the applicable territory, aware of their intention. Discussions will be held in respect of the classes of business to be underwritten, the experience of underwriters and the entity’s business strategy, amongst other things.
Following discussions with the Managing Agent and general agreement by Lloyd’s over the proposal i.e. that it is realistic and achievable, the next step is for the Managing Agent to submit a business plan (SBF) via the core market return system specifically for this prospective establishment with the corresponding supporting narrative attached. No underwriting or operational set up can occur without the Capital and Planning Group’s (CPG) approval of the business plan, nor without the approval by Delegated Authority.
If a Service Company intends to operate with ‘flexible use’ (i.e. an underwriter has the ability to underwrite on behalf of both the syndicate and company paper), the Managing Agent must also submit a completed flexible use form to London for approval, prior to any underwriting taking place. Lloyd’s London will check the information matches the SBF and will monitor this annually.
Managing Agents are reminded that all Lloyd’s Service Companies globally must adhere to the Best Practice of Minimum Standards, and the Underwriting Minimum Standards form part of the Underwriting Performance Annual Review.
Once the Managing Agent has submitted an application to DA for review it will be sent to Underwriting Performance for review who will check that the classes of business are already written by the MA . This is to ensure that the MA has the necessary experience to review and oversee the underwriting of this business.
Underwriting Performance will check that the line sizes requested are aligned with their SBF. If it is larger than that approved for London we will need an explanation as to why this is so. We will need income estimates and loss ratio estimates both on a gross basis. The loss ratio estimates for each class should not be less than that approved for London – if they are we will need an explanation as to why. These discussions will have taken place through the initial business planning process.