Lloyd's Brussels: open for business

Alison Colver
Head of Contract Wordings

It has been a busy few months for the LMA wordings team as we prepare for 01 January 2019, the date when Lloyd’s Brussels Insurance Company S.A. will begin underwriting.

Lloyd’s Brussels has been set up to enable the market to continue underwriting European Economic Area (EEA) risks once the UK leaves the EU in March 2019.

Simply put, the Brussels subsidiary company will be able, from 01 January, to underwrite risks from all EEA countries that will then be reinsured back to syndicates in London.

There has been a great deal of work done to help the market ensure that wordings are clear and fit for purpose once Lloyd’s Brussels begins underwriting from 01 January 2019.

We have been working closely with Lloyd’s Brexit and legal teams to prepare various guidance, clauses and endorsements, and have created a specific Lloyd’s Brussels section of the Lloyd’s Wording Repository (LWR).

Our work on this continues, but the LMA, in conjunction with Lloyd’s, has now produced a suite of policy documentation to support the underwriting of EEA risks by Lloyd’s Brussels.

For example, we have produced generic certificates, jackets and schedules, and country-specific variations where required. We have also published generic open-market policy documents and ancillary clauses - such as data protection notices and an Insurance Product Information Document template. We have also produced complaints notices for individual countries, among other things. These documents can all be found in the dedicated Lloyd’s Brussels section of the LWR.

This summer, a cross-market group carried out the annual review of the Market Reform Contract (Open Market) Guidance. As a result of that review, a small number of amendments were made and a Lloyd’s Brussels Supplementary Addendum created. This addendum does not replace the existing MRC, but is intended to be read alongside it.

The addendum is needed because, once Lloyd’s Brussels begins underwriting risks located in EEA countries, placements under syndicate and Lloyd’s Brussels stamps will need to be priced separately, meaning the MRC will need to be split or have separate sections for non-EEA and EEA risks.

The issue of risk location is one that underwriters will need to be acutely aware of once Lloyd’s Brussels begins underwriting. To assist the market with the issue of ‘interlocking’ of policy limits and aggregate deductibles across split or sectionalised MRCs, the LMA and Lloyd’s have produced language in the form of model clauses. These model clauses are LMA5333 - Shared Limits Endorsement and LMA5334 - Shared Aggregate Deductible Endorsement.

In addition, the LMA and Lloyd’s have produced model language to endorse policies affected by Brexit. This is relevant in cases where coverage provided is defined in reference to EU law or regulation, for example, or in reference to EU territorial scope. These clauses - LMA5335, LMA5336 and LMA5337 - clarify the position on automatic coverages that, post-Brexit, an insurer will no longer be permitted to provide.

Another area in which we have offered guidance to the market was on the issue of reinsurance treaties. Typically, reinsurance treaties are bespoke to the direct and facultative accounts they are protecting and so it is currently common for syndicates’ outwards reinsurances to contain a general exclusion for treaty business. This situation, however, will need clarification once Lloyd’s Brussels begins writing business that is then reinsured back to syndicates in London.

To assist the market, the LMA has produced model language - LMA5338 - for syndicates to use on their outwards reinsurance to amend the treaty exclusion and clarify the treatment of business underwritten by Lloyd’s Brussels that is simultaneously reinsured back to the syndicate.

We have also, in conjunction with Lloyd’s, worked on supplementary guidance for delegated authority business and produced a Twin Binding Authority MRC to allow one schedule to cover both EEA and non-EEA risks. For Coverholder Appointment Agreements, we have drafted an interpretation clause to align the language used to refer to parties in the Coverholder Appointment Agreement.

A great deal of work has been done to assist the market for when we enter the new phase on 01 January 2019, and we continue to work closely with Lloyd’s to assist our members as they prepare for the commencement of underwriting by Lloyd’s Brussels.