How Lloyd’s is addressing MGA pain points

Lloyd’s is looking to address a major pain point for MGAs — duplication of compliance requests from syndicates.

The insurance marketplace is looking to kickstart and facilitate conversations with syndicates on compliance and due diligence, Jane Harley, head of delegated authorities oversight at Lloyd’s, told the Canadian Association of Managing General Agents (CAMGA) conference last week.

“I’m not standing here saying that we are going to solve everything this year. And we can’t, that’s an impossible task,” Harley said during a Lloyd’s update presentation. “It has to be driven by [syndicates]; our role at Lloyd’s is to facilitate those conversations… just like we do for the coordinated audit approach.

“If we do this from a compliance side, it should save a lot of headaches that you might face,” she said, adding Lloyd’s has 76 coordinated audits scheduled for Canada this year, covering 234 managing agent relationships.

Duplication of work has long been a concern in the industry, especially in the broker channel.

A few years ago, Lloyd’s began running a new annual compliance process for coverholders (MGAs). Under that process, “coverholders should no longer receive repetitive requests for the same types of generic core compliance information from different Lloyd’s carriers,” Lloyd’s said. “Instead, coverholders will only have to provide core information, such as the professional indemnity certificate and financial statements, once a year to Lloyd’s.”

Lloyd’s then loads them into the coverholder system of record. “This allows carriers to complete any due diligence they need to, and means that the coverholder should no longer receive duplicate requests, reducing the administrative work.”

In other priorities, Lloyd’s is developing an underwriting performance management framework, Harley reported during the conference. This will assess syndicates’ ability to underwrite performance management in key business portfolios.

“Before now, syndicates would do their business returns into Lloyd’s… and we’d never ask for the focus performance information,” Harley said. “That’s about to change, and they’re going to have to do that for us.”

Lloyd’s is also looking to drive transparency around acquisition costs, and is looking at performance oversight of evolving delegated authority models.

“It’s just having the right governance in place and the right oversight and transparency with the appetite we want, and what business we want placed in the Lloyd’s market,” Harley said. “It’s really to be able to demonstrate to [MGAs] and be quite clear in what our overall appetite is in the marketplace for certain products that we place.”

Finally, Lloyd’s has “been trying to get everybody to use the same technology,” Harley reported, noting that MGAs and syndicates often want to use their own tech vendors.

From a financial results perspective, Lloyd’s saw an underwriting profit of about £2.6 billion (approximately Cdn$4.3 billion) for the full year in 2022, with a combined ratio of 91.9%. That’s a 1.6% percentage point improvement year-over-year and the strongest result since 2015.

Lloyd’s Canada saw a 15% to 16% growth year-over-year, similar to the 17% for the market as a whole.

Lloyd’s took a number of remedial actions in recent years, focusing on the market’s worst-performing syndicates and business lines. In 2018, eight Lloyd’s syndicates closed and there were more than 70 different announcements of exits or significant reductions in lines of business.

 

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