Underwriting - Lloyd's in Australia
Part VII, section 93 of the Insurance Act 1973 ("the Act") authorises Lloyd's Underwriters to write Australian insurance business. Sections 65 to 73 of the Act provide for special Australian policyholder protection provisions associated with Lloyd's. For more information see Lloyd's security trust fund instrument No. 1 of 2017.
Lloyd's underwriting members, whether as individuals or companies, conduct their business in groups known as "syndicates". A member may belong to a number of syndicates, varying in size and underwriting different types of insurance and levels of risk.
The Lloyd's market currently comprises some 84 syndicates (2009). Each syndicate is an annual venture – at the end of each year, the syndicate ceases writing new business and new syndicates are formed for the following year. It is relevant to note that a member underwrites for its own account on a syndicate; it is not in partnership and does not have any joint liability with any other members underwriting on that syndicate.
In practice, the members usually arrange their own participation in a syndicate or syndicates in conjunction with advice they may receive from their registered "members' agent". Each member must appoint a Lloyd's registered members' agent who will select and/or give advice on syndicate participation and generally administer the member's insurance business. Any particular members' agent may look after many members and is paid a fee and commission from each member.
Syndicates are managed by Lloyd's registered "managing agents". A managing agent is responsible for the underwriting and management of each syndicate it establishes. The managing agent does not perform the underwriting role; this role is performed by suitably qualified and experienced underwriters who are appointed to each managed syndicate. It is the syndicate members who undertake liability under the insurance contracts arranged by these underwriters. Syndicates may also issue authorities to certain underwriting agents and brokers (known as coverholders) in Australia to accept business within specified classes on their behalf.
Facilitating the conduct of the insurance business by Lloyd's members is the Corporation of Lloyd's, a non-profit organisation which is financed by subscriptions from underwriting members, and provides the physical infrastructure, the administrative staff, the accounting systems and other services which enable the membership to transact insurance business.