After 300 Years, Lloyd’s Opens Its Doors to Brokers Worldwide

Confirming plans announced in a “Discussion Document” in October 1999, Lloyd’s officially opened its doors to brokers from outside the London community for the first time in its 300-year history. Lloyds’ “Broker Accreditation Application Form” and its accompanying 28-page guide offer any interested broker a comprehensive blueprint for becoming an official “Lloyd’s Broker.”

The initiative is an important step in Lloyds’ efforts, made in cooperation with the International Underwriters Association, to harmonize, streamline and simplify business procedures. Their goals are to make the London insurance market more efficient, attractive and easier to use, and to assure the city’s future role in the industry.

“Our basic aim is to increase the amount of access brokers can have to this market,” said Steve Boucher, head of Lloyd’s Broker Services. He stressed the advantages that both brokers and clients enjoy by being able to directly contact Lloyd’s managing agents and the underwriting syndicates they represent.

More than 150 brokers who had expressed interest in Lloyd’s accreditation received the initial application packages. Julian James, recently appointed director of worldwide markets, who formerly headed Lloyd’s North American operations, said “This is an outstanding opportunity for brokers in the United States to take part in the Lloyd’s market. There has been a lot of demand for this in the past. Now it’s finally happening. It’s exciting for everyone.”

As of Jan. 3, Lloyd’s had already received three applications and additional forms were being sent, as large numbers of brokers had requested them. “Lloyd’s has no preconceived profile for the brokers it will accredit, provided they meet the established standards,” Boucher said. “We’ll take a look at each applicant on the merits; there’s no specific type of broker we’d like to have. Our aim is to have a number of quality brokers from around the world.”

The requirements an applicant has to meet are exacting. They’re designed to assure the continued high quality and financial strength that Lloyd’s brokers must possess. While business can come from anywhere in the world, an applicant broker must either be a member of the U.K.’s General Insurance Standards Council, or be located in a jurisdiction that requires insurance brokers to observe essentially the same regulations.

GISC standards are rules and norms similar to those set by the states and administered by insurance regulators. The guide emphasizes the three most important areas, stating: “An Overseas Applicant will need to demonstrate to Lloyd’s that it meets requirements that are equivalent or comparable to the GISC’s membership requirements for: insurance money segregation; solvency; [and] professional indemnity insurance (see also section 2 in this booklet).”

Section 2 summarizes the indemnity requirements: “…the greater of £1,000,000 ($1.5 million) or local currency equivalent and three times annual net retained brokerage,” up to £10 million ($15 million) for personal lines brokers. There are higher levels for commercial business: £3 million ($4.5 million) or four times’ annual net retained brokerage in the E.U. and six times outside of it.

Boucher indicated that while a minimum £50,000 ($75,000) of paid up capital was also a general requirement, “we’d be flexible about this and examine the particular circumstances. Mainly they need to show profits over the period of the two-year audit we require.”

As far as the existing 128 Lloyd’s brokers are concerned, they’ll be required to seek reaccredidation, but not before 2002, when Lloyd’s will begin reviewing each firm. Boucher indicated that, as existing brokers are already GISC members and must also meet Lloyd’s standards, they should have no difficulties.

New accreditation won’t be given immediately. An accepted broker can use the term “Provisionally Accredited Lloyd’s Broker,” but must continue to comply with all the regulations for three years before being eligible to use the unqualified title “Lloyd’s Broker.” Complete copies of the application form and guide can be downloaded at Lloyd’s website: http://www.lloyds.com under the sub-heading “Informative Publications.”

Lloyd’s accreditation of non-U.K.-based brokers after 300 years reaffirms the global nature of the changes affecting the insurance industry. Asked if a London office was a necessary prerequisite for accreditation, Boucher laughed and replied: “Certainly notÐwe expect most access to the London market to be through e-mail and the Internet.”