Customer Oversight Referrals

Information on fair value referrals can be found on the fair value page.

Typically, binding authorities provide for notice periods of three months, or longer, if the parties wish to bring the binding authority to an early close. This notice period is important as it allows the coverholder to continue to offer cover to policyholders and maintain continuity while it seeks replacement capacity.

In exceptional circumstances a managing agent may need to require that a coverholder ceases underwriting immediately or on short notice either by removing their underwriting authority or terminating the binder entirely. Any circumstance where underwriting authority is withdrawn without use of the full notice period set out in the binder is considered to be a removal of underwriting authority on short notice. This includes changing the level of authority granted to the coverholder to ‘prior submit’.

Short notice removal of underwriting authority can negatively impact both policyholders who may not be able to obtain renewal terms or have their existing policy serviced and coverholders who may not have the opportunity to find replacement capacity. If not properly justified it can also have a negative reputational impact on Lloyd’s and may draw regulatory investigation. Managing agents should therefore only take steps to remove a coverholder’s authority on short notice where it is able to demonstrate good reason for taking such action.

To monitor the use of short notice removal of underwriting authority managing agents are required to refer binding authority arrangements to Lloyd’s prior to removing underwriting authority on short notice.