Market Reform Contract Endorsement (MRCE) Guidance v1.3
Following the publication of the revised (Open Market) Market Reform Contract (MRC) Guidance v1.9 in September 2018 (refer LMA Bulletin LMA18-040-AC dated 06 September 2018) the cross-market group has now carried out a review of the associated Market Reform Contract Endorsement (MRCE) Guidance, which deals with contract changes. This has resulted in the publication of an updated version (v 1.3) of the Open Market MRCE Guidance, containing a limited number of changes.
MRC Guidance – Lloyd's Brussels Supplementary Addendum v1.1
In addition, Lloyd’s, in conjunction with the Lloyd’s Market Association (LMA), has reviewed and updated the Lloyd’s Brussels Supplementary Addendum to the MRC Guidance (v1.0), which was originally released in September 2018, to assist the market with the creation of split/sectionalised Open Market MRCs in respect of risks located in the EEA (underwritten by Lloyd’s Brussels) and non-EEA countries, with effect from 01 January 2019. The new version (v 1.1) contains a number of changes, as the Brussels Supplementary Guidance has been updated to:
- reflect the fact that Lloyd’s Brussels is now able to underwrite non-proportional excess of loss reinsurance, in addition to direct and facultative reinsurance, and inclusion (at Appendix H) of the “jacket” to be used on non-proportional excess of loss reinsurance business which is currently “MRC exempt” and cannot be altered to make it MRC compliant;
- clarify/reflect the preservation of the GUA for Lloyd’s Brussels risks, following the amended stance adopted by Lloyd’s Brussels (which also necessitated a change to the MRCE guidance for Lloyd’s Brussels);
- reflect the fact Lloyd’s Brussels has not yet been granted regulatory approval to underwrite Monaco risks;
- clarify the use of LSW1001 for Lloyd’s Brussels risks (where Lloyd’s Brussels is not the sole subscribing insurer, i.e. if the risk is not placed 100% with Lloyd’s Brussels, as this is the clause that must be incorporated in Lloyd’s Brussels policy documentation) as opposed to LMA3333, which has been retained for use on MRCs for placements which are written by more than one insurer (e.g. a mixed market where both Lloyd’s Brussels and Lloyd’s Syndicates participate) or by a Lloyd’s syndicate.
Whilst this amended MRC Guidance can be adopted for immediate use, it will become the required standard for new and renewal business incepting from 1st January 2019. Lloyd’s Brussels recognises, however, that there may be a number of “in flight” MRCs which have already been agreed. It is left for underwriters/brokers to decide whether these will require endorsement to reflect revised “agreement parties”.
MRCE Guidance - Lloyd's Brussels Supplementary Addendum v1.0
The Lloyd’s Brussels MRC guidance (v1.0) under ‘Basis of Agreement to Contract Changes’ (heading D2.3) stated, in relation to EEA risks, that “the lead managing agent would bind other managing agents on behalf of Lloyd’s Brussels”. After further discussion, Lloyd’s Brussels has acknowledged that the working of GUA in the market is not changed by the use of the Lloyd’s Brussels stamp. However, underwriters are reminded that as Lloyd’s Brussels is a single carrier, different positions to the leader cannot be adopted by the following market using the existing UMR and MRC.
In respect of EEA risks, whilst subscribing outsourced managing agents are all agreeing on behalf of the single legal entity that is Lloyd’s Brussels, as EEA risks will be automatically 100% reinsured back to Lloyd’s Underwriters, managing agents may wish to insert their details as an agreement party within the MRC, and this has been reflected within the updated Lloyd’s Brussels MRC Guidance (v1.1).
Overall, existing market practices for processing a change to the terms or scope of a Lloyd’s Brussels risk will remain unchanged and brokers will continue to negotiate and agree endorsements (MRCE) with the contract agreement parties (as specified in the underlying MRC) as they do today. The preservation of the GUA has, however, prompted the need to produce Lloyd’s Brussels Supplementary MRCE guidance (v1.0) to sit alongside the updated market MRCE Guidance (v1.3) mentioned above.
The Lloyd’s Brussels MRCE Supplementary Addendum (v1.0) does not seek to repeat the content of the MRCE Guidance (v1.3), which defines the MRCE standard, including the layout and the content, but should be read alongside it.
All MRC publications (including marked-up versions highlighting significant changes from the previous versions) are available to access on the LMG website under Documentation & Infrastructure.
If you have any queries arising from these documents, please do not hesitate to contact Alison Colver (firstname.lastname@example.org, 020 7327 8370).
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