line slip june 2005

The LMP Lineslip

June 2005

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Table of Contents

1. Introduction 3 2. When are Lineslips used? 3 3. The Franchise Board Mandate 3 4. Enforcing & Monitoring Mandate 4 5. Variation to the LMP Lineslip 4 6. Structure of the LMP Lineslip 4 7. Declarations 6 Appendix A: LMP Lineslip Structure and Example 7 Appendix B: FSA Client Classification definitions 21 Appendix C: Expert Fee Collection 22 Appendix D: Hold Cover Provisions 23

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1. Introduction The LMP slip was introduced in October 2001 and was mandated by the Lloyd’s Franchise Board for open-market business incepting from the 2nd January 2004 (for reference see the LMP Slip (April 2005) at www.lmp-reforms.com/Publications). At this time Lineslips were exempt from the mandate as a consistent format did not exist upon which to apply the London Market Principles. The work to develop a standard format for Lineslips has now been completed with the production of the LMP Lineslip. These guidelines contain details of the structure of the LMP Lineslip, details of the Lloyd’s mandate and provide an example of what a compliant Lineslip might look like. The LMP Lineslip has been agreed for use with Bulking and Non-Bulking Lineslips. This document has been agreed and is supported by Lloyd’s, LMA, IUA and the LMBC.

2. When are Lineslips used?

Lineslips are used by brokers to access a group of insurers who wish to delegate their authority to enter into contracts of insurance to another insurer in respect of business introduced by a broker named in the agreement1.

3. The Franchise Board Mandate

The following part of the Franchise Board Mandate applies to Open Market Slips including Declarations and Offslips: The Franchise Board has prescribed the following standards and arrangements for the conduct and administration of insurance business at Lloyd’s, the authority to enforce compliance being exclusively vested in the Franchise Board –

(a) as from 28 October 2004, a managing agent shall not permit the

syndicate stamp of a syndicate managed by it to be affixed to any slip which relates to a contract or contracts of insurance unless –

(i) the slip is in the format of an LMP slip from time to time issued by

the LMP Programme Office and the information contained in the slip has been properly completed in accordance with the relevant LMP standards;

(ii) the slip is marked “LMP Exempt – Client Requirement”, or

(iii) the slip relates to motor business, personal lines business or term

life insurance business and the slip will not be processed by LPSO Limited;

The following part of the Franchise Board Mandate applies to Lineslips and Binding Authorities:

(b) as from 28 October 2004, a managing agent shall not permit the syndicate

stamp of a syndicate managed by it to be affixed to any slip which relates to a binding authority2 in respect of the 2005 or later year of account unless the

1 Where a Lloyd’s syndicate participates on the lineslip, the business must be introduced by a named Lloyd’s broker. 2 Separate guidelines exist for Binding Authority slip completion, please see www.lmp-reforms.com/Publications

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slip has been completed in accordance with the relevant LMP slip guidelines from time to time issued by the LMP Programme Office.

(c) as from 1st October 2005, a managing agent shall not permit the syndicate

stamp of a syndicate managed by it to be affixed to any slip which relates to a Lineslip unless the slip has been completed in accordance with the relevant LMP Lineslip guidelines from time to time issued by the LMP Programme Office.

N.B. As a clarification of the above this means that:

a) Binding Authorities and Lineslips cannot be marked as “Client Exempt”; and

b) Declarations and Offslips can only be marked as “Client Exempt” if required by the client.

4. Enforcing & monitoring the mandate

The LMP Programme Office, in co-operation with the LMBC, the IUA and the LMA, is in continuous dialogue with firms about improving quality, with the aim of providing education and guidance to improve market standards.

Individual feedback sessions are being held between the Lloyd’s slip audit team and managing agents and brokers. Reports specific to the managing agent or broker are prepared for each feedback session, highlighting the common errors on open market slips, binding authority slips and Lineslips with details given on how to improve slip quality and appropriate remedial actions. To arrange an individual feedback session for your organisation please contact [email protected].

On-site slip checking at the respective managing agents is also being carried out by the audit team to provide quality feedback and on-site training sessions.

5. Variation to the LMP Lineslip

The following are valid variations to the LMP Lineslip as incorporated into this document. • The order of slip headings in the CONTRACT DETAILS is not fixed although it is

likely that future standardisation will seek to do so. • There will be contract specific slip headings that will need to be incorporated into

the LMP Lineslip to allow for any unusual or additional CONTRACT DETAILS as deemed necessary.

6. Structure of the LMP Lineslip

All LMP Lineslips are required to apply the following rules:

• A UMR (Unique Market Reference) in the correct format: (i) All UMRs must start “B” which must be followed by the Lloyd’s broker

number. If the broker number is three digits long it should be prefixed by a zero. If the broker number is “123” your UMR would therefore start “B0123”. If the broker has a four digit broker number such as “4567” it would be “B4567”.

(ii) After the broker number up to 12 alphanumeric characters must be provided. There is no prescribed standard for this, although most brokers tend to use their policy number.

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(iii) The UMR as a whole must be unique. This means that when a contract is renewed it cannot keep the same UMR.

(iv) The UMR must not contain any spaces, hyphens, slashes or other punctuation. Only numbers 0-9 and letters A-Z may be used.

(v) The UMR is not case sensitive. Whether it is provided as upper case or lower case, many of the systems and current EDI messages used in the market will convert it to upper case.

(vi) In respect of mid term market changes, where the handling broker changes, the new broker must keep and use the old broker’s UMR. When the contract renews the handling broker can amend the UMR.

• Four separate sections called Contract Details, Subscription Agreement, Information and Fiscal and Regulatory. The inclusion of the Contract Details heading in the Lineslip is optional but the other three must be included.

• Standard headings for the Contract Details, Subscription Agreement, Fiscal and Regulatory and Information sections. The Subscription Agreement section headings must not be changed, deleted, reordered or added to in any way. Furthermore the Subscription agreement section must not include any additional headings.

• All monetary amounts shown as three letter ISO Currency codes rather than symbols e.g. USD rather than “$”. However where policy forms include such symbols the slip must reflect the policy.

• A LMP Lineslip must not include any terms which are unspecific or create ambiguities, for example Broker small print and any TBA’s (To Be Agreed / Advised) that do not indicate the appropriate action to be taken by whom and by a specific date. However if declarations are likely to differ greatly from each other and therefore terms cannot easily be specified on the Lineslip it is permissible to put words similar to “to be agreed each and every insurance bound”.

• Any stamp conditions applied by underwriters must not use acronyms or abbreviations but rather state the condition in full, for example “SNKORL” should be stated “Subject to No Known or Reported Losses at …….”.

• Underwriters who incorporate stamp conditions as standard must ensure they are relevant to each risk they write. If the condition is not relevant it must be removed. For example stamp conditions relating to Letters of Credit must be removed if the contract in question does not incorporate any Letters of Credit.

• Standard slip provisions must be relevant to the risk or the administration of that risk.

• Underwriters must not delete the Subscription Agreement section of the slip or write stamp conditions that specify “No Subscription Agreement” or “Ex Subscription Agreement” or similar. If there are particular provisions underwriters do not wish to apply to them, these can be explicitly stated against the relevant Subscription Agreement heading or specified as stamp conditions.

• The General Underwriters Agreement (GUA) must not be used on lineslips. • Where a non-registered/ non-standard wording is agreed in the lineslip a copy of

the agreed wording must be submitted to Xchanging Ins-sure Services with each insurance bound.

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7. Declarations Declarations placed using “off-slips” must follow the LMP Slip guidelines for open market (refer to www.lmp-reforms.com/Publications). In addition: • The General Underwriters Agreement does not apply to declarations.

Endorsements should be agreed by the same agreement parties that agreed the declaration. Where an endorsement makes a change that, in the opinion of the agreement parties, may impact all insurers the agreement parties should refer the endorsement to all insurers. For example an endorsement may add an additional class of business which some underwriters may not be able to or wish to underwrite.

• The UMR and Lloyd’s Signing number and date for the Lineslip must be shown clearly on the Declarations.

• Each declaration must have a separate UMR. • Where a declaration contains open market lines the additional subscribing

insurers should review the Subscription Agreement of the declaration to ensure they are happy with the provisions contained therein and update as necessary.

• All declarations with one or more subscribing Lloyd’s underwriter(s) must be submitted to XIS for stage 2 signing. Non bulking declarations with one or more subscribing Lloyd’s underwriters must also be submitted to XIS for Stage 1 checking.

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Appendix A: LMP Lineslip Structure and Example

SLIP STRUCTURE

SLIP EXAMPLE

TYPE: The type of lineslip, either Bulking or Non-Bulking.

TYPE: Non-Bulking Lineslip/ Bulking Lineslip* (* Delete as applicable).

FORM FOR EACH INSURANCE BOUND:

The NMA reference or other identification of the policy jacket. Where this is the same on each insurance bound it can be specified here. Where it is likely to vary by declaration “As agreed by the agreement parties for each insurance bound” should be stated.

FORM FOR EACH INSURANCE BOUND:

As agreed by the agreement parties for each insurance bound.

UMR: The Unique Market Reference allocated to the lineslip by the broker.

UMR: B0123ABC1234

LINESLIP REFERENCE:

The lineslip reference used by the broker to identify the lineslip. This can be a number or a name. If this is the same as the UMR then this heading may be omitted.

LINESLIP REFERENCE:

DEF1

BROKER: The name and address of the broker responsible for placing the lineslip and administering the lineslip. Where the lineslip may be used by other brokers this should be specified.

BROKER: XYZ Broker Ltd 123 Wickley Road London L20 1MP

CONTRACT DETAILS

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SLIP STRUCTURE

SLIP EXAMPLE

AUTHORISED CLASSES OF BUSINESS AND COVERAGES:

The authorised classes of business and coverages that may be covered under the lineslip.

AUTHORISED CLASSES OF BUSINESS AND COVERAGES:

Commercial Property

EXCLUSIONS WITHIN THE AUTHORISED CLASSES OF BUSINESS AND COVERAGES:

Any exclusions that apply to the classes of business and coverages specified in the previous heading.

EXCLUSIONS WITHIN THE AUTHORISED CLASSES OF BUSINESS AND COVERAGES:

Excluding terrorism perils.

PERIOD: The Period of the lineslip. This should be specified on a “risks attaching basis” and must include the inception date and time of day, expiry date and time of day and the time zone. As an alternative to specifying the time of day it is acceptable to specify both days inclusive, although the time zone is still required. Lineslips should be for no more than 12 months from inception. However, subject to the agreement of the agreement parties specified under “Basis of Agreement to Lineslip changes”, it is possible to extend the period of the lineslip, but in no event should it exceed 18 months from inception. For lineslips where specific dates of inception or expiry are not known, for example voyages, constructions and sporting events, the specific events dictating the period must be stated.

PERIOD: Risks attaching during the period: From: 1st June 2005 To: 31st May 2006 Both days inclusive Greenwich Mean Time.

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SLIP STRUCTURE

SLIP EXAMPLE

EXTENSIONS OF PERIOD OF LINESLIP:

The extent and duration of any extensions to the period of the lineslip that may be given and who needs to agree such extensions. The agreement parties for such extensions in period are to be shown under the “Basis Of Agreement To Lineslip Changes” heading in the Subscription Agreement section.

EXTENSIONS OF PERIOD OF LINESLIP:

This lineslip may be extended for a period of up to XX months subject to the agreement of the agreement parties specified under Basis Of Agreement To Lineslip Changes.

MAXIMUM PERIOD OF EACH INSURANCE BOUND:

The maximum duration of any insurance bound under the lineslip including any provisions for odd time and extensions. The agreement parties for such extensions must be shown under the “Agreement Parties for Each Insurance Bound” heading in the Subscription Agreement section.

MAXIMUM PERIOD OF EACH INSURANCE BOUND:

No insurance shall be bound for a period greater than XX months plus odd time, not exceeding XX months in all plus any extensions as may be agreed by the agreement parties for each insurance bound.

MAXIMUM LIMITS OF LIABILITY/ SUMS INSURED FOR EACH INSURANCE BOUND:

The maximum limits of Liability/Sums Insured for each insurance bound.

MAXIMUM LIMITS OF LIABILITY/ SUMS INSURED FOR EACH INSURANCE BOUND:

Maximum GBP XX,XXX,XXX each and every loss any insurance bound.

MAXIMUM AGGREGATE LIMITS OF LIABILITY/SUMS INSURED FOR THE LINESLIP

The maximum limits of Liability/Sums Insure for the Lineslip.

MAXIMUM AGGREGATE LIMITS OF LIABILITY/SUMS INSURED FOR THE LINESLIP

Maximum GBP XX,XXX,XXX

TERRITORIES FROM WHICH EACH INSURANCE MAY BE BOUND:

The country of domicile of the insureds that may be bound.

TERRITORIES FROM WHICH EACH INSURANCE MAY BE BOUND:

Anywhere in the world.

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SLIP STRUCTURE

SLIP EXAMPLE

TERRITORIAL LIMITS OF EACH INSURANCE BOUND:

The territories and geographical limits of each insurance bound.

TERRITIORIAL LIMITS OF EACH INSURANCE BOUND:

Anywhere in the world.

CONDITIONS OF EACH INSURANCE BOUND:

Identification, qualification or variation in perils including the wording, clauses, conditions and amendments to any clauses in basic form including any applicable territorial wordings. All standard wordings and clauses must be clearly identified by name and reference. Any non-standard wording or clauses must be referred to here and attached to the lineslip.

CONDITIONS OF EACH INSURANCE BOUND:

(Operative clauses to be specified here) And as may be agreed by the agreement parties for each insurance bound.

EXPRESS WARRANTIES OF EACH INSURANCE BOUND:

Any express warranties that apply to each insurance bound, over and above any that may be incorporated in the Policy Form or implied warranties from legislation such as the Marine Insurance Act 1906, including the consequences of non-compliance. If there are no express warranties this heading would not be included.

EXPRESS WARRANTIES OF EACH INSURANCE BOUND:

(To be inserted if any).

CONDITIONS PRECEDENT OF EACH INSURANCE BOUND:

Any conditions precedent that apply to each insurance bound, over and above any that may be incorporated in the Policy Form or legislation, including the consequences of non-compliance. If there is no conditions precedent this heading would not be included.

CONDITIONS PRECEDENT OF EACH INSURANCE BOUND:


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SLIP STRUCTURE

SLIP EXAMPLE

SEVERAL LIABILITY:

The several liability notice that applies to the lineslip. This should be either the Insurance or Reinsurance version of LSW1001, and should be included in full. The example shown here is the Insurance version of the notice.

SEVERAL LIABILITY:

The subscribing insurers’ obligations under contracts of insurance to which they subscribe are several and not joint and are limited solely to the extent of their individual subscriptions. The subscribing insurers’ are not responsible for the subscription of any co-subscribing insurer who for any reason does not satisfy all or parts of its obligations.

CHOICE OF LAW & JURISDICTION OF THE LINESLIP:

The court that will have jurisdiction in the event of a dispute between the broker and underwriters over the terms of the lineslip, and the law that will apply.

CHOICE OF LAW & JURISDICTION OF THE LINESLIP:

This lineslip shall be governed by the laws of England and Wales and subject to the exclusive jurisdiction of the courts of England and Wales.

CHOICE OF LAW & JURISDICTION OF EACH INSURANCE BOUND:

The court that will have jurisdiction in the event of a dispute between the Insured and Underwriters over the terms of the insurance bound, and the law that will apply.

CHOICE OF LAW & JURISDICTION OF EACH INSURANCE BOUND:


PREMIUM:

The basis of any premium calculations that will be used on each insurance bound.

PREMIUM:


MAXIMUM AGGREGATE PREMIUM INCOME LIMIT:

The maximum aggregate premium income limit that the agreement parties may enter into under the lineslip.

MAXIMUM AGGREGATE PREMIUM INCOME LIMIT:

GBP XX XXX XXX

NOTIFIABLE PERCENTAGE OF THE LIMIT NOT TO EXCEED:

The broker shall monitor the total gross premium income bound and notify the underwriters immediately if it becomes apparent that the total gross premium income is likely to exceed the percentage of the limit stated.

NOTIFIABLE PERCENTAGE OF THE LIMIT NOT TO EXCEED:

75%

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SLIP STRUCTURE

SLIP EXAMPLE

PAYMENT TERMS:

Non-Bulking Lineslips Only The Premium Payment Terms applied to each insurance bound. Should include Premium Payment Clauses, Warranties and Conditions. N.B. if there are no payment terms then this can be left blank.

OR

PAYMENT TERMS: 60 day premium payment condition to be applied to each insurance bound– LSW3000.

OR

PREMIUM BORDEREAU(X):

Bulking Lineslips Only This heading only applies to Bulking Lineslips where bulk premium settlements are to be made to Underwriters via a premium bordereau. This shows the applicable Payment Terms for settlement of the premium bordereau(x) to Underwriters including how often such payments are to be made, e.g. monthly.

PREMIUM BORDEREAU(X):

Premium bordereau(x) are to be paid monthly to Underwriters within XX days of the end of the applicable bordereau month.

BROKERAGE: The brokerage allowance, or equivalent details for each insurance bound. If this is paid as a fee rather than a percentage of the premium this is a private arrangement between broker and client and the brokerage must be specified as zero or not applicable in the slip.

BROKERAGE: Up to a maximum of XX% of gross premium for each insurance bound.

OTHER DEDUCTIONS FROM PREMIUM:

Any additional deductions from premium e.g. administration fees, sundry payments..

OTHER DEDUCTIONS FROM PREMIUM:

None.

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SLIP STRUCTURE

SLIP EXAMPLE

TAX PAYABLE BY THE INSURED AND ADMINISTERED BY UNDERWRITERS FOR EACH INSURANCE BOUND:

Any premium taxes and charges payable by the (re)insured in addition to the premium stated above, which are collected and/or administered by underwriters for each insurance bound e.g. UK IPT. Any premium taxes and charges payable by underwriters should be shown in the Fiscal & Regulatory section.

TAX PAYABLE BY THE INSURED AND ADMINISTERED BY UNDERWRITERS FOR EACH INSURANCE BOUND:


PROFIT COMMISSION:

Details of any contingent or profit commission that may apply to the lineslip.

PROFIT COMMISSION:

None.

CANCELLATION NOTICE OF THE LINESLIP:

The number of days notice that broker/underwriter must give in order for the lineslip to be cancelled.

CANCELLATION NOTICE OF THE LINESLIP:

This lineslip is subject to XX days notice of cancellation from either the Slip Leader or the broker.

RECORDING, TRANSMITTING & STORING INFORMATION:

Details of procedures for storage of data, documents and other information. This heading is optional.

RECORDING, TRANSMITTING & STORING INFORMATION:

Where the broker maintains risk and claim data/information/documents the broker may hold data/information/documents electronically.

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SLIP STRUCTURE

SLIP EXAMPLE

SLIP LEADER OF THE LINESLIP:

State who is the Slip Leader for the lineslip. The Slip Leader for each insurance bound will be specified in each declaration. If this is known when the slip is produced it must be added by the broker. If it is not known when the slip is produced the Slip Leader inserts their name here when they write their line. It is only possible to have one Slip Leader for London (Bureau) Market business; however in situations where a non-bureau lead exists on the same slip it is possible to annotate the right hand side of the slip with the headings OVERALL SLIP LEADER and LONDON MARKET SLIP LEADER. In such cases subsequent provisions will need to be specific with regard to any Slip Leader agreements.

SLIP LEADER OF THE LINESLIP:

ABC Syndicate

AGREEMENT PARTIES FOR EACH INSURANCE BOUND AND ALTERATIONS THERETO:

State those underwriters who will bind insurances and any alterations thereto on behalf of the subscribing underwriters and the method by which reporting to followers is undertaken, if any.

AGREEMENT PARTIES FOR EACH INSURANCE BOUND AND ALTERATIONS THERETO:

Slip Leader GHI Company Ltd

SUBSCRIPTION AGREEMENT

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SLIP STRUCTURE

SLIP EXAMPLE

BASIS OF AGREEMENT TO LINESLIP CHANGES:

Specify which underwriters will agree changes to the lineslip. N.B. The GUA must not be used on lineslips. For classes of business where it is market practice to list a copy of endorsements to the following market, the method/media should be specified here e.g. email, paper or repository.

BASIS OF AGREEMENT TO LINESLIP CHANGES:

All changes to this lineslip to be agreed by (specify Agreement Party(ies) here).

RULES AND EXTENT OF ANY AUTHORITY DELEGATED TO THE BROKER:

What authority, if any, the underwriters have delegated to the broker in relation to the lineslip including any Hold Cover provisions. This should show the limit of the broker’s authority.

RULES AND EXTENT OF ANY AUTHORITY DELEGATED TO THE BROKER:

(for further information please see appendix D)

LINESLIP ADMINISTRATION:

The procedures and arrangements agreed between the broker and underwriters relevant to the ongoing administration of the lineslip.

LINESLIP ADMINISTRATION:

In the event of non-renewal or cancellation of this lineslip, all declarations shall run to their natural expiry date (including any extension of individual Policy periods as may be agreed by the agreement parties for each insurance bound), unless cancelled in accordance with the individual Policy terms and conditions. Premiums for all declarations shall be allocated and paid in to the year of account in which this lineslip incepts.

CLAIMS AGREEMENT PARTIES:

Identity of the claims agreement parties for each insurance bound e.g. Slip Leader, plus the first IUA company and Xchanging Claims Services.

CLAIMS AGREEMENT PARTIES:

Slip Leader for each insurance bound plus Xchanging Claims Services.

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SLIP STRUCTURE

SLIP EXAMPLE

BASIS OF CLAIMS AGREEMENT:

Specify the basis of the claims procedure(s) such as the Lloyd’s 1999 claims scheme, IUA claims agreement practices or any other risk specific arrangements.

BASIS OF CLAIMS AGREEMENT:

Claims to be managed in accordance with the Lloyd’s 1999 Claims Scheme3 and IUA claims agreement practices.

CLAIMS ADMINISTRATION:

All claims related information with the exception of identification of agreement parties and the basis of claims agreement should be included here.

CLAIMS ADMINISTRATION:

Broker to enter claim advices into CLASS. All company market bureaux underwriters(s) to use CLASS for claims agreement.

RULES AND EXTENT OF ANY OTHER DELEGATED CLAIMS AUTHORITY:

If any of the claims agreement parties specified above have delegated their claims processing and agreement to any other party this should be specified here including any limits that may apply, e.g. all claims less than GBP XXXX or experts fees GBP XXXX. It is unlikely that the broker will be aware of any such arrangements that underwriters may have, so the underwriters who are the claims agreement parties must amend this as necessary.

RULES AND EXTENT OF ANY OTHER DELEGATED CLAIMS AUTHORITY:

ABC Syndicate delegates the management of all claims under GBP XX,XXX to Xchanging Claims Services.

3 Please note that the Lloyd’s 1999 Claims Scheme is due to be replaced by a revised scheme.

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SLIP STRUCTURE

SLIP EXAMPLE

EXPERT(S) FEES COLLECTION:

The party(ies) responsible for the collection of experts fees. Where this is the same on each insurance bound it can be specified here. Where it is likely to vary by declaration “As agreed by the agreement parties for each insurance bound” should be stated

There are six options available under the experts fees collection arrangements. These options can be found in Appendix C of this document. N.B. this heading is optional on Reinsurance business.

EXPERT(S) FEES COLLECTION:

XIS ‘Experts Fees Scheme’ (EFS) to be service provider for all lineslip security.

BUREAUX ARRANGEMENTS:

Any specific arrangements relating to the bureaux including administrative arrangements for premium settlement, delinked accounting, and policy signing or basis of policy agreement clauses.

BUREAUX ARRANGEMENTS:

Delinked accounts for each insurance bound to be presented by broker to XIS.

NON BUREAUX ARRANGEMENTS:

Any specific arrangements relating to the administrative arrangements for premium settlement, and policy signing or basis of policy agreement clauses that apply to underwriters that are not Lloyd’s or IUA underwriters and do not process via XIS.

NON BUREAUX ARRANGEMENTS:

All non-bureau underwriters agree to issue a follow form policy following the leading bureau insurer.

SPECIAL ARRANGEMENTS:

Any other arrangements affecting the contract which cannot be more specifically accommodated in the preceding headings.

SPECIAL ARRANGEMENTS:


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SLIP STRUCTURE

SLIP EXAMPLE

SIGNING PROVISIONS:

Any signing arrangements relating specifically to underwriters’ participation. Only to be completed if there is a requirement for disproportional signing or a variation to current market practice.

SIGNING PROVISIONS:


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Details of any information provided to underwriters to support the assessment of the risk at the time of placement. Where the information is appropriate for inclusion in the lineslip it should be shown here. Where the size or format of the information is not suitable for inclusion the location of the information should be clearly referenced from this section and should be made available to all underwriters during placing.

Loss History as advised to broker at 1st May 2005:

Year Net Absolute Premium Incurred Losses 2000/01: GBP 6,000,000 GBP 4,000,000 2001/02: GBP 6,500,000 GBP 3,232,897 2002/03: GBP 8,786,234 GBP 5,675,987 2003/04: GBP 3,000,987 GBP 2,987,564 2004/05 GBP 5,000,000 GBP 3,200,000

INFORMATION

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SLIP STRUCTURE SLIP EXAMPLE

TAX PAYABLE BY UNDERWRITER(S):

Any premium taxes and charges payable by underwriters from the premium paid to them e.g. Australian Income Tax. Any premium taxes and charges payable by the Insured in addition to the premium which are collected or administered by underwriters should be shown in the “Taxes Payable by (Re) Insured and administered by underwriters” heading of the Contract Details section.

TAX PAYABLE BY UNDERWRITER(S):

None.

US CLASSIFICATION: To be entered as appropriate – e.g. if Risk is

in US Dollars.

US CLASSIFICATION:

Various as per each insurance bound.

NAIC CODES: To be included if the US classification states US Reinsurance.

FSA CLIENT CLASSIFICATION

To be included on all business. There are 6 possible options, please refer to the Appendix B of this document for further information.

FSA CLIENT CLASSIFICATION

Various as per each insurance bound.

IS BUSINESS SUBJECT TO DISTANCE MARKETING DIRECTIVE RULES?

This heading must be included if the FSA Client Classification heading specifies "Retail" or "Retail Exempt". If the FSA Client Classification heading specifies "Commercial", "Large Risk", “Group Risks" or "Reinsurance" it should be omitted. Where it appears the only applicable answers are "yes" or "no".

FISCAL AND REGULATORY

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Appendix B – FSA Client Classification definitions

Please note if the FSA Client Classification heading is completed “Retail” or “Retail Exempt” the heading “Is Business subject to Distance Marketing Directive Rules?” must be included and answered either “Yes” or “No”.

Classification FSA Classification description Retail Dealing with a retail (private) customer acting outside of their

trade or profession. Includes sole trader/partnership, where insurance includes elements of retail risk. [Includes private large risks within EEA, see Large Risk].

Retail Exempt Exempt insurance warranty risks relating to breakdown, loss of, or damage to non-motor goods supplied, or travel insurance for damage to, or loss of, baggage and other risks linked to travel booked with a travel agent.

Commercial Dealing with a commercial customer. Large Risk Dealing with a commercial customer (Marine, Aviation, or

Transport (MAT), Credit and Suretyship, or Property & Liability risks (based on meeting two of the following criteria:- balance sheet size of 6.2m euro, net turnover of 12.8m euro or have more than 250 employees)). Excludes any large risk insured in name of a retail customer.

Group Risks A group policy sold to a customer (retail, commercial or large risk) for the benefit of policyholders in relation to their common employment occupation or activity where some or all are capable of being a retail customer (with requirement to provide a policy summary for policyholders, with policy available on request).

Reinsurance Reinsurance worldwide.

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Appendix C – Expert Fee Collection Context As part of the market’s desire for flexibility in the way insurance contracts are processed, an experts’ fees collection scheme has been agreed as one of the LMP reforms. This scheme allows affected parties to choose a collection process best suited to the particular circumstances of the individual policy. The LMP Slip includes a slip heading of “Expert(s) Fees Collection” within the “Subscription Agreement” section. This is where the particular option chosen from the list below must be recorded. Options The options must be selected from and agreed upon by brokers and Underwriters at the time of placement along with any other qualifications or provisions deemed necessary by any of the affected parties. 1. Named service provider to collect London market share only. 2. Named service provider to collect all slip security, including overseas. 3. Named service provider to collect only overseas percentages in conjunction with Option One

above. 4. Brokers to collect fees. 5. Broker to collect experts' fees, to be remunerated on a financial basis agreed between the

underwriters and broker at time of placement. 6. Any other agreement that can be determined between affected parties at time of slip placement. N.B. The Slip Leader must ensure that any special fee bill collection arrangements with third party service providers which the expert in question has in place are not prohibited or adversely affected by the selection process above. Scope The options for fee collection recorded in this document may be used with all London market slips. If an LMP slip is used then the slip heading will be available to record the necessary information. If the slip is not produced to the LMP structure then it is recommended that a slip heading of “Expert(s) Fees Collection” be inserted to record this information. The “Expert(s) Fees Collection” heading is optional on reinsurance business but due consideration should be given to facultative reinsurances where claims control or co-operation clauses may exist with fees payable by London reinsurers.

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Appendix D – Hold Cover Provisions Where the lead underwriter has quoted a premium for a specific risk and has finalised all contractual terms and conditions for that risk, OR where the lead underwriter has quoted a premium for a specific risk and has finalised all contractual terms and conditions for that risk and has required the Lloyd's broker to resolve a list of pre-conditions, the Lloyd's broker can confirm cover to the policyholder upon confirmation that the pre-conditions have been met.

The Lloyd's broker in such arrangements cannot vary: A) the premium or contractual terms and conditions quoted by the lead underwriter; and/or B) the pre-conditions.

For the avoidance of doubt where one or more of the agreement parties for each insurance bound have set a pre-condition for the supply of information pertaining to the contract within a defined time period, then that agreement party may at the time of setting that pre-condition, permit the broker to extend that defined time period by a reasonable amount of time. Any such permission extended to the broker must be stated on the declaration slip and it is recommended that a maximum period of extension is shown.

Lloyd’s will add new guidance to the Code of Practice explaining that such arrangements are not delegated underwriting because the underwriters have not delegated underwriting, they have delegated to the broker, the responsibility for clearing and resolving their pre-conditions. All other arrangements DO delegate underwriting under the Delegated Underwriting Byelaw therefore: It is up to the lead underwriter to decide if such arrangements should continue. But if they do, the easiest way to put them on a correct footing is to create a binding authority using a model wording which sets out the underwriting authority delegated to the Lloyd's broker.

All such binding authorities should be treated exactly the same as any other binding authority at Lloyd's and will therefore need to be registered and subject to XIS checking etc.

line slip june 2005

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