What Lineslip issues have we seen?

FCA Scrutiny
In Part 1 of this blog series “Lineslips – A great tool but open to mis-interpretation?“, we looked at the current state of play with regard to Lineslips in the London market.
Written by Charles Rowley
Charles is the founder and CEO of DA Strategy and has 23 years of Delegated Authority Experience, most recently as Head of Delegated Authority at Catlin.
January 26, 2018
DAS Insight

Reading Progress:

Reading Progress:

In part 2, we examine the issues we have repeatedly seen, which are:

Binding Authorities, Claims delegation, Lack of lead clarity, Hold-covered, No information for followers, Profit Commissions, policies or certificates not signed by Underwriters and Worldwide Lineslips.

Every lineslip review that I have ever been involved in has identified delegation. Generally, between 0.5% and  2% of lineslips are, or should be recorded as Binding Authorities. These fall in to two main categories:

  • Delegation of policy issuance authority, i.e. Prior Submit Binding Authorities; or
  • Delegation of small amounts of claims authority to the lineslip broker, particularly in the Marine field.

Other examples include allowing the lineslip broker to hold covered, which is perfectly fine provided that the parameters are clearly laid out. However, this is not always handled correctly.

When Lloyd’s completed a study on Market Lineslips in April 2016 they identified a number of concerns that managing agents of syndicates are expected to address. These were outlined in Lloyd’s Minimum Standards MS-1.3 , Bulletin Y4991 and most recently the Lloyd’s “Code of Practice – Delegated Authority”. These highlight the importance of ensuring that the MRC standards for lineslips and their declarations are followed.

We see three of the main areas that concern Lloyd’s regarding lineslips as being:

  1. The extent of authority granted under a lineslip, particularly the conditions, scope and limit is often not totally clear especially in relation to multi-lead facilities…
  2. Followers are not provided with sufficient information to be able to understand and monitor how the lineslip is running and being manged;
  3. Document issuance parameters are unclear with reference to BID’s. This is not in compliance with MRC requirements. Of course, EL certificates are a special case and should be specified differently.
lineslip issues

To expand upon point 2 above, probably one of the most frequent failings is in the provision of data to followers on both bulking and non-bulking lineslips. Many have either no bordereaux, “summary bordereaux”, or share very limited risk information. This leaves followers with either very little or no information to effectively manage EPI, aggregates or solvency 2 information.

In our next blog we look at ways of solving these above issues and how to be ahead of the game.
D A Strategy have helped a number of clients with their Lineslips in recent times. Please contact us if you have any questions or would like us to help you.

As always, we welcome your comments and debate.

Charles Rowley

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