Or rather, what is a lineslip and how does it differ from a binding authority? If I had a pound for every time I’ve heard “.. it’s a Lineslip, I see all the risks..”; only to discover that it was a Binding Authority I might not be rich, but I would be better off!!
Please don’t get me wrong here. Lineslips are incredibly useful for placing smaller or medium size business cost effectively in Lloyd’s. Without them transaction expenses would be higher and our market would lose business. A broker can place a piece of business with an agreed market by seeing one leader. Secondly, and perhaps more importantly, they are a very important stepping stone or catalyst for a small intermediary to develop their portfolio and relationships on the way to becoming a fully blown coverholder. I have seen many examples of this.
A lineslip is an agreement between a lead syndicate (or insurance company) and follow syndicates and/or insurance companies that allows the leader to quote and bind risks on the followers’ behalf. Each lineslip sets out the parameters often by class of business, territory etc. plus limits and coverage terms and conditions. After the leaders agreement the lineslip broker can either issue an MRC contract by adding the agreed wordings to the slip signed by the leader or get the leader to sign the final policy before sending it on to the client. Where handled properly a lineslip is a delegation agreement between the lead and follow underwriters not the broker.
Lloyd’s and regulators including the FCA are interested in lineslip arrangements for a number of reasons:
- Competition;
- Conduct;
- Commission;
- Contract Certainty – Lineslip and Lineslip Declarations;
- Clear flow of required information to followers;
In Part 2 of this blog we look at examples of lineslip issues that we have seen.
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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