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The CHART Incubator

In the United States, insurance companies sometimes delegate underwriting authorities to insurance agencies through a PA (Program Administrator) Agreement. Entities possessing these authorities are referred to as Managing General Agencies (MGAs) or Managing General Underwriters (MGUs). Similar arrangements can be made through the London market, but the terminology is different. Agents given the power to bind business on behalf of Lloyd’s are called Coverholders.

To become a Coverholder, an agency must first find a sponsoring broker and managing agent willing to support the application. A Managing Agent is a company set up to manage one or more Syndicates on behalf of the members. These firms have the responsibility for employing staff, overseeing results, and supervising day-to-day operations.

Writing business through Lloyd’s is usually done with the assistance of a Broker. This entity becomes the main point of contact for an agency interested in securing underwriting authorities from London. One of the duties of the Broker is to find a managing agent willing to support the application.

One of the most important elements of an agency submission to London is a business plan. Components should include:

  • Overview of the prospect universe. Talk about the preferred risk characteristics of this target audience. How many of them are there? Are there any points of aggregation (associations, organizations, regulatory/oversight agencies, etc.) that you can access to improve your reach? What is the level of competition in the marketplace?

  • Marketing strategies. Demonstrate your expertise by articulating how you intend to solicit business. Provide mock-ups of promotional materials if possible.

  • Model policy wording and underwriting guidelines. No one knows the potential exposures and coverage “hot buttons” of this niche market better than you. Outline the product features and pricing structure needed to make the program successful.

  • Administrative strategies. Explain how you envision handling incoming submissions. Tout the internal controls and workflows that have been implemented within the agency. Now would also be a good time to talk about any systems enhancements you plan on incorporating to make processing more efficient.

  • Projections. Estimate production growth over the next five years. Also include forecasts regarding claim activities.

There’s an old saying that goes “too many cooks spoil the broth”. But when it comes to writing a London submission, our advice is take advantage of all available help. Use industry experts to resolve any deficiencies in the plan.

The CHART Exchange has a network of specialists from a diverse array of disciplines to help agencies in this regard. Services offered through our Vendor Partners include actuarial, claims administration, marketing, systems, legal, and more.

Be prepared to invest a significant amount of time and effort in the process process. In reviewing the application Lloyd’s will pay particular attention to the following areas:

  • Suitability and experience of the individuals
  • Applicant financials
  • Soundness/feasibility of the submitted business plan
  • Licensure (authority to operate in the states/territories targeted)
  • Operations (systems, workflows, adequacy of quality assurance procedures, etc.)

During our time working on CHART, we have met a fair share of specialist clients who have expressed concerns over the length of time it takes to secure Delegated Underwriting Authorities from London. While they understand the need for due diligence, there is a frustration over the delays in getting a potentially great new program idea to market.

CHART can provide a solution to this problem via the Incubation initiative. Under this facility, we can team the new client with a firm already possessing the necessary Underwriting Authorities, state licenses, back-office administrative capabilities, etc. to transact business on behalf of the Lloyd’s. Agreements made between the two parties prior to launch govern such issues as contract duration, duty segregation, revenue sharing, and expiration ownership. This solution inures to everyone’s benefit.