Lloyd's has revealed for the first time the criteria brokers and intermediaries will need to fulfil to place business when the 300-year-old market opens its doors next January.
As part of an on-going modernisation programme, these new rules will scrap the closed shop whereby access is officially restricted to the 200 Lloyd's brokerages.
Lloyd's has revealed for the first time the criteria brokers and intermediaries will need to fulfil to place business when the 300-year-old market opens its doors next January.
As part of an on-going modernisation programme, these new rules will scrap the closed shop whereby access is officially restricted to the 200 Lloyd's brokerages.
The accreditation conditions will be formally issued later this month and broker services department head Steve Boucher said there had already been considerable interest from within the UK and overseas.
So far, about 170 brokers have expressed interest in applying for membership.
“We'll start considering applications in January so we can start accrediting new Lloyd's brokers on target,” Boucher said.
“There's been quite a lot of interest and we're building up a mailing list.”
Boucher said the Lloyd's requirements were divided into absolutes, which must be fulfilled, and discretionary, which may be relaxed in individual cases.
The first absolute requirement is that brokers are members of the General Insurance Standards Council (GISC) or, for overseas brokers, a national equivalent.
Lloyd's criteria follows the GISC regulations in the segregation of funds and solvency but differs in professional indemnity (PI) for commercial business.
The GISC requires a minimum of £1m and a maximum of £10m PI, or three times the net retained brokerage, in professional indemnity cover.
Lloyd's will ask for a minimum of £3m and a maximum of £30m PI, or four times the net retained brokerage for UK business and six times the net retained brokerage for overseas business. Brokers dealing in personal lines will only be required to conform to the GISC's lower PI requirements.
Boucher said this kept the new regulations in line with Lloyd's previous professional indemnity requirements for brokers.
Brokers must interface with the Lloyd's Policy Signing Office, sign up to the London Markets Principles 2001 and sign terms of business agreements with each managing agent with whom they deal.
They must ensure they meet the divestment provisions of the Lloyd's Act 1982, and they must also pay an initial accreditation fee of £5,000 and another £5,000 on their first re-accreditation three years' hence.
The discretionary requirements have been designed to help Lloyd's to “build up a mosaic” of information on the broker applying for accreditation.
“We'd expect them to tell us their business intentions, such as the type of business they do, how it will be done and what their client base is like,” Boucher said.
“We'll be looking at knowledge and experience of brokerage at Lloyds.”
Brokers will be expected to have a minimum of £50,000, or their na-tional currency equivalent, in paid-up capital.
Boucher said there would also be an informal “suitability check”.
“We'll try and find out the word on the street about that broker,” he said.
Finally, in rare cases, brokers may be asked to post a bond, but Lloyd's director of development Andrew Duguid said this would be an unlikely step, as Lloyd's would concentrate on attracting quality brokers, rather than building up numbers indiscriminately.
“Market forces will determine how many brokers join, but the emphasis is on quality and worldwide coverage,” Duguid said.
