Lloyd’s and Lloyd’s IFSC |

Lloyd’s and Lloyd’s IFSC

Introduction

In this article, we will cover the definitions applicable to Lloyd's and Lloyd's IFSC (International Financial Services Centre). It is important to understand these terms in order to navigate the regulations governing Insurance Intermediary Office in IFSC.

Definitions

Below are the key definitions crucial for comprehending the regulations:

(a) Administrator

For the purposes of these Regulations, "administrator" refers to Lloyd's IFSC, excluding "members of Lloyd's."

(b) Binding Authority

"Binding authority" denotes an agreement between a Service Company and a coverholder. Under this agreement, the Service Company authorizes the coverholder to enter into an insurance contract on behalf of the members of a syndicate for whom the Service Company acts as an agent.

(c) Chain of Security

In relation to a member of Lloyd's, "Chain of Security" encompasses the member's premiums trust fund, funds at Lloyd's as defined in paragraph 17 of the Lloyd's Membership Byelaw (No. 5 of 2005), other personal wealth of the member, and the New Central Fund.

(d) Council of Lloyd's

"Council of Lloyd's" refers to the entity established by the Lloyd's Act 1982 of the United Kingdom.

(e) Coverholder

In relation to a Service Company, "coverholder" refers to a person authorized by the Service Company under a binding authority to enter into an insurance contract on behalf of the members of a syndicate. This authorization is given by the members who have authorized the Service Company to enter into such a binding authority with the person.

(f) Principal Officer

"Principal officer" pertains to any person, regardless of designation, who is directly employed by the administrator or the Service Company. Additionally, it includes individuals acting for or on behalf of the administrator or the Service Company, as well as those with arrangements to act on a day-to-day basis in the management of the administrator or the Service Company.

(g) Managing Agent

"Managing agent" can be one of two types:

(i) a person listed as a managing agent on the register of underwriting agents, maintained under the Lloyd's Underwriting Byelaw (No. 2 of 2003); or

(ii) a person appointed to perform the functions of a managing agent under Part K of the Lloyd's Underwriting Byelaw (No. 2 of 2003).

(h) Members of Lloyd's

"Members of Lloyd's" denotes individuals admitted to membership of Lloyd's as underwriting members who wish to participate in Lloyd's at the IFSC.

(i) Service Companies of Lloyd's IFSC

"Service Companies of Lloyd's IFSC" or simply "Service Companies" include:

(i) Service Companies promoted by Managing Agents of Lloyd's; and

(ii) Service Companies promoted by Companies registered in India under the Companies Act, 2013, and meeting the specified criteria.

(j) Syndicate

"Syndicate" refers to a member or group of members underwriting insurance business at Lloyd's through the agency of a managing agent or a substitute agent. The Council of Lloyd's assigns a syndicate number to these syndicates.

(k) Syndicates of Lloyd's IFSC

"Syndicates of Lloyd's IFSC" specifically applies to Syndicates of Lloyd's wishing to participate in Lloyd's IFSC through a service company or coverholder delegated authority arrangement.

A Comprehensive Guide to Lloyd's IFSC and its Constituents

Constituents of Lloyd's IFSC

Lloyd's IFSC comprises three primary constituents:

1. Members of Lloyd's

Members of Lloyd's are individuals who have been admitted to membership and wish to participate in Lloyd's at the IFSC. These members play a crucial role in underwriting insurance business.

2. Syndicates

Syndicates represent a group of members at Lloyd's who underwrite insurance business through the agency of a managing agent or a substitute agent. Each syndicate is assigned a unique syndicate number by the Council of Lloyd's.

3. Service Companies

Service companies are entities that engage in underwriting re-insurance business on behalf of syndicates. These companies are authorized to act as intermediaries between the syndicates and the Lloyd's IFSC market.

Housing Requirements of Lloyd's IFSC

To ensure the proper conduct of insurance and re-insurance business, Lloyd's IFSC mandates that the market, along with its constituents, be housed within an office location designated as Lloyd's IFSC.

Conditions for Transacting Insurance Business

Members of Lloyd's are eligible to transact insurance business within Lloyd's IFSC if they meet the following conditions:

Registration: The member must register with the administrator in accordance with regulation 5 of the SECOND SCHEDULE.
Service Company Engagement: The member must carry out insurance business and enter into contracts of insurance within Lloyd's IFSC through a Service Company.
Authorization: The member must authorize the Service Company to act on their behalf for the purpose of accepting notices and legal processes related to the insurance business in the IFSC. This includes any notices or directions issued by the Authority to the member.
Chain of Security: Lloyd's must provide an undertaking to the Authority, ensuring that holders of insurance policies issued by the member under these regulations have recourse to the Chain of Security. The terms and conditions of the relevant Lloyd's trust deeds and byelaws govern the extent to which these policies are protected. This protection is at par with that provided to holders of general business policies issued by the same member of Lloyd's in London.

Registering and Establishing Service Companies at Lloyd's IFSC

Lloyd's IFSC (International Financial Services Centre) is a renowned market for insurance and reinsurance business. This comprehensive guide aims to provide clarity on the registration process for members of Lloyd's who wish to transact insurance business in an IFSC, as well as the establishment of service companies at Lloyd's IFSC. By following these guidelines, individuals and companies can navigate the registration process and set up service companies effectively.

Registration Process for Members of Lloyd’s

1. Application for Registration

Members of Lloyd's who wish to conduct insurance business in an IFSC under the specified Regulations must apply for registration with the administrator. The application should follow the format and include the particulars determined by the administrator.

2. Eligibility for Registration

The administrator will only register applicants if it is satisfied that:

The applicant is a member of Lloyd's.
The applicant has appointed one or more service companies through which it intends to transact insurance or re-insurance business in an IFSC.

3. Reporting to the Authority

Lloyd's IFSC, according to the specified format, will inform the Authority about the details of members of Lloyd's who wish to participate in an IFSC. Additionally, the list of members of Lloyd's underwriting through Service Companies of Lloyd's IFSC will be furnished to the Authority on an annual basis.

Norms for Establishing Service Companies of Lloyd’s IFSC

1. Nature of Service Companies

Managing Agents of Lloyd's and companies registered under the Companies Act, 2013 who wish to participate in Lloyd's IFSC must establish a service company. The following norms apply:

The service company can be a private or public company registered with the Registrar of Companies in India, with a minimum paid-up capital of INR five lakh.
The company's Memorandum of Association and Article of Association must outline its main objects, which include providing technical, underwriting, risk binding, claims settlement, administrative, accounting, investment, regulatory, and other assistance to the syndicate(s) it represents.
The service company is responsible for all statutory and regulatory filings and compliances on behalf of the syndicate(s) it represents.
Any other requirements specified by the Authority from time to time must be met.

Registration of Service Companies at Lloyd’s IFSC

1. Application for Registration

Managing Agents of Lloyd's who wish to establish a service company on behalf of members of Lloyd's under the specified Regulations must submit an application for registration to the administrator. The application should follow the determined format and include the required particulars.

2. Administrator's Role

Upon receiving an application, the administrator shall:

(i) Inform the Authority in writing about the receipt of the application and provide the particulars specified by the Authority, along with any other requested information.
(ii) Register the applicant unless the Authority objects to the registration.

3. Syndicate Representation

The service company must indicate the syndicate(s) that it represents at Lloyd's IFSC.

Understanding the registration process and establishment of service companies at Lloyd's IFSC is crucial for members of Lloyd's who wish to transact insurance business in an IFSC. By following the guidelines outlined in this comprehensive guide, individuals and companies can successfully navigate the process and participate in the Lloyd's IFSC market.

Undertakings to be submitted by a service company to Lloyd's IFSC

Undertakings

1. Lloyd's Service Company Coverholder Undertaking

The service company must submit the Lloyd's Service Company Coverholder Undertaking, which outlines the company's agreement to comply with all relevant rules and requirements of Lloyd's, as well as local legal, fiscal, taxation, and regulatory authorities.

2. Lloyd's Coverholder Decision Paper

The service company must also submit the Lloyd's Coverholder Decision Paper, which provides detailed information on the proposed Service Company. This includes:

The level of underwriting and claims authority granted to the Service Company
The business strategy for the Service Company
Details relating to the principal staff operating in the Service Company
Financial information
Professional indemnity details
Classes of business to be underwritten by the Service Company
The approach the Service Company will take to ensure compliance with registration requirements
Other requirements as specified by Lloyd's, subject to approval of the Authority

3. Lloyd's Service Company Self-Assessment

After submitting the decision paper, the service company will perform a Lloyd's Service Company Self-Assessment against the Lloyd's Minimum Standards. This assessment includes information such as any internal audit carried out on the Service Company.

4. Additional Requirements

The service company must comply with any other requirements that may be specified by the Authority from time to time.

Conditions governing service companies of Lloyd's IFSC

1. Compliance with Lloyd's or Lloyd's IFSC

Service companies of Lloyd's IFSC must comply with the conditions laid down by either Lloyd's or Lloyd's IFSC.

2. Service Company Underwriting Agreement

Service companies are required to enter into a Service Company Underwriting Agreement. This contract delegates authority to the service company from members of the relevant syndicates.

3. Responsibilities

Under the Service Company Underwriting Agreement, the service company of Lloyd's IFSC will be responsible for the following:

Binding insurances and amendments on behalf of members of Lloyd's
Acting on behalf of members of Lloyd's for the purpose of receiving premiums from insured and reinsured parties, settling refunds, and receiving claims money prior to onward transmission to insured and reinsured parties
Management and control of expenses
Employment of underwriting staff
Carrying out any other tasks entrusted by the Managing Agent to efficiently conduct the business of re-insurance

4. Responsibilities of the service company or authorized coverholder

The service company or any coverholder authorized by the Service Company shall undertake the following:

Issuance of documents evidencing the contracts of insurance, endorsements, and other such documents evidencing cover as agreed upon in writing by the underwriters
Collection and processing of premiums and return premiums on behalf of the underwriters
Handling and settlement of claims, if authorized
Prominently using the name of the Syndicates they represent, thereby clarifying that they are writing on Syndicates capacity and not acting as insurers themselves
Compliance with the conditions laid down by Lloyd's IFSC
Compliance with the Act, regulations, guidelines, and circulars issued by the Authority
Compliance with any other requirements specified by the Authority from time to time

5. Responsibilities of the Service Company for Notice Acceptance and Legal Processes

A Service Company shall be responsible for accepting and responding to notices and legal processes concerning members of Lloyd's conducting insurance business in an IFSC under these Regulations.

By adhering to these guidelines, service companies operating under Lloyd's IFSC can ensure compliance, streamline operations, and enhance their services to clients.

Cancellation of Registration of Service Company

Cancellation of Registration

(1) Grounds for Cancellation

The Authority has the power, on any of the grounds mentioned in sub-regulation (2), to direct the cancellation of the registration of any Service Company.

(2) Grounds for Cancellation

The grounds for cancellation as specified in sub-regulation (1) are as follows:

a. Non-commencement of Business within 12 Months

If the Service Company fails to commence its business within 12 months of being registered under Regulation 7 of the Second Schedule.

b. Cessation of Acting as an Agent in an IFSC

If the Service Company ceases to act as an agent in an International Financial Services Centre (IFSC) for any member of Lloyd's.

c. Failure to Satisfy Obligations

If it appears to the Authority that the Service Company has failed to satisfy any obligation to which it is subject under the Regulations.

d. Detrimental Business Practices

If the Service Company is conducting its business in a manner that is likely to be detrimental to the interests of policyholders or the insurance market.

e. Contravention of Insurance Act and Regulations

If the Service Company breaches any provisions of the Insurance Act, 1938, regulations made thereunder, or any directions issued by the Authority under the Act or regulations.

f. Conviction of Officers

If any officer holding a managerial or executive position within the Service Company has been convicted of an offense under the Insurance Act, 1938, or the regulations made thereunder.

g. False or Misleading Information in Registration Application

If the Service Company has provided false, misleading, or inaccurate information, or has concealed or failed to disclose material facts in its application for registration under Regulation 7(1) of the Second Schedule.

The cancellation of registration of a Service Company by the Authority is governed by various grounds as specified in the sub-regulations. It is important for Service Companies to adhere to these grounds and ensure compliance with the obligations set out in the Regulations to maintain their registration and operate in the interests of policyholders and the insurance market.

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