Managing Agents will need to be satisfied that they will be able to perform the functions normally carried out by a Lloyd’s broker. In particular, Managing Agents need to have regard to the following:
• They will be responsible for making sure that premiums and claims are processed to the following market.
• If the following market includes insurers who are not Lloyd’s syndicates, the Managing Agent will need to have set up appropriate procedures for processing and settling premiums and claims directly with those insurers.
• If the following market includes Lloyd’s syndicates, the Managing Agent will be responsible for providing claims details to Xchanging.
• Premium and claim bordereaux (that is, reports on all premiums, paid claims, outstanding claims and expenses) must be provided to Xchanging at least every three months (except for motor or personal lines business not processed through Xchanging). This also applies where the Managing Agent’s syndicate writes a binding authority 100% and does not use Xchanging to process the premiums and claims.
• Premium and claims bordereaux must contain sufficient information to be reported to regulatory and tax authorities.
Managing Agents will require a Central Settlement Number (“CSN”) – often called a Broker Number – to process premiums and claims written direct.
In order to obtain this, the Managing Agent should contact the Delegated Authority Team at Lloyd’s with details of the business and applicable controls:
1. Rationale for writing the business direct
2. Classes of business involved and domicile of Insureds 3. Premium volumes per class/region
4. Systems and resources (including expertise) responsible for managing this business
The Delegated Authority Team will review this information, and where appropriate may will recommend that the Managing Agent’s personnel receive training from XIS before approval is given. (Note that there is a fee payable for this training to Xchanging).
The Managing Agent and XIS normally liaise regarding the CSN number to be used and XIS will confirm this to Delegated Authority Team, who upload it to the Lloyd’s MED system so that it can be used in premium processing transactions.
Appendix 3: Financial Crime
Managing Agents have a responsibility to ensure that Coverholders have proper and adequate systems and controls in place to ensure AML and international sanctions compliance and to ensure compliance by having specific questions relating to AML/international sanctions as part of the Coverholder audit process. For further information in respect of Financial Crime/Sanctions guidance for Coverholder business please see Market Bulletin Y4727.
Anti-Money Laundering
Definition of Money Laundering
• “The process used by criminals to disguise the origin and ownership of the proceeds of their criminal activities in order to avoid prosecution, conviction and confiscation”.
General Anti-Money Laundering Obligations
In the UK, legislation covers most financial sectors which include:
• Criminal offences around engaging in money laundering and/or assisting others to launder the proceeds of crime;
• Disclosure/reporting requirements in respect of suspicious activities or transactions;
• Tipping off offences: ensuring that law enforcement is not hampered in its investigations by the subject of the suspicion becoming aware of the allegations.
Similar legislation with related requirements and offences will be in force within the jurisdiction that Coverholders operate in but the extent to which AML legislation applies to intermediaries varies. Activities that might trigger suspicion are:
• Difficulty in obtaining information about, or doubts over the bone fide of, the policyholder or other parties involved;
• Transactions set up and then quickly cancelled for no identifiable reason;
• Transactions involving placements from, or the involvement of intermediaries, in different jurisdictions for no discernible purpose;
• Return premiums, overpayments or claim payments where a third party appears to benefit;
• Transactions where insurance does not appear to be the primary object or make no economic sense;
• Over inflated values (e.g. on jewellery/fine art).
This is not an exhaustive list and the Managing Agent which has delegated authority to the Coverholder may have other relevant examples to consider.
Expected minimum standards
Coverholders should adopt written procedures to cover the following:
• Recognition and reporting of suspicious transactions;
• Staff training and awareness; and
In order to devise a suitable policy, Coverholders should identify and record their own business risks by assessing:
• The risks posed by the products they offer;
• The channels through which business is conducted; and
• The countries in which business is done – when relevant i.e. where the cover is multi-jurisdictional. Coverholders should also review their internal money laundering procedures (as applicable) but particularly in relation to:
• The extent of operational changes and their money laundering impact, if any;
• Ensuring recommendations from any previous reviews are implemented;
• Reviewing the level of understanding of, and compliance with, training issued to staff.
Reporting
The following procedures should be regarded as a minimum standard for Coverholders:
• The appointment of a designated person within the company to receive, consider and report to the appropriate authorities any suspicions identified by company employees;
• Report any suspicions to the designated person in your company or the Managing Agents MLRO in London for consideration (subject to compliance with your jurisdiction legislation);
• Document the fact that this has been done;
• Ensure procedures in place for suspicions to be reported to a designated person to consider whether reports need to be made to local authorities and instructions issued to staff;
• Document any decisions made not to report suspicions.