Coverholder audit is a key component of the monitoring process of delegated authorities. The Lloyd’s market has been moving towards more common audit practices across managing agents since 2010, firstly with the creation of versions 1 and 2 of the Lloyd’s Common Audit Scope, then with increased coordination of the audit process itself.
Coverholder Audit Scope:
A new audit scope has been designed to build on the work undertaken by Lloyd’s in this arena. LMA members in conjunction with the LMA executive and Lloyd’s have drafted the scope to ensure that risks are reviewed and assessed in a way that is proportionate to the nature of the coverholder and the portfolio of business that they are underwriting.
The scope has now completed a pilot phase, following an extensive consultation with the market.
Following consultation with the market and pilot phase, the scope has now been released as a final version.
It is intended that the scope will be updated on an annual basis, with additional appendices also to be added over time.
This audit scope is purely illustrative and distributed for the guidance of members, who are free to use any audit scope to oversee their coverholders. The LMA accepts no responsibility for any loss occasioned to any person acting or refraining from acting as a result of material contained in these documents.
Where managing agents have questions regarding the scope please contact the LMA or the coverholder audit team at Lloyd’s. Auditors and other market participants with questions regarding the scope should route any questions through the instructing managing agent.
The below testing appendices are provided as examples. Auditors should confirm with managing agents how testing is to be undertaken prior to an audit taking place, and whether specific testing appendices are to be used.