COVID-19: Lloyd’s of London market guidance and reporting requirements update
31st March 2020
Lloyd’s oversight and reporting
At the Corporation, we have been working on how we can help reduce the reporting requirements on managing agents, to support your efforts on serving your customers through COVID-19.
- Major Claims Return (MCR)
As you are aware, Lloyd’s Catastrophe Response Steering Group has asked managing agents to provide details of their potential exposure to insurance losses from COVID-19. Given that the situation is rapidly changing, a second MCR will be issued on Friday 17 April, and our plan is to publish a preliminary estimate of the COVID-19 impact for the Lloyd’s market in early May, once we receive that second return.
- Additional reporting
It is not our intention to request additional information, other than the MCR noted above, unless absolutely necessary and there are no current plans for further requests.
- Current returns and reporting
Whilst it is important that we collect essential information from you at this time, we have also taken this opportunity to review our suite of regular market returns, up to the end of the second quarter, to determine which of these can be deferred, stood down and/or completed with less information. The list of those market returns is attached to this letter, and if you have any specific questions then please direct them through your Oversight Manager.
In compiling this list we have taken advantage of the flexibility offered by the PRA to UK insurers in accepting delays to their prudential reporting, and we continue to work with both the PRA and FCA on how we can avoid duplication of regulatory oversight. We will continue to review our short-term and ongoing reporting requirements as the situation develops.
Lloyd’s Business Planning
Our intention is that the annual business planning and capital setting process will run broadly to its current framework and timetable.
However, we are undertaking a review of the end-to-end process to understand how and where we should amend and reduce the requirements, recognising the circumstances in which everyone is working as well as the need to have appropriate business and capital plans in place. Our aim will be to operate a more succinct process.
The market presentations are due to take place on Thursday 4 June. It is at these presentations that we set the direction and priorities for 2021 business plans and capital requirements. Given the ongoing uncertainty, which we expect to be prevalent for some time, we will push back these presentations to a date in July to be confirmed.
Many of you are receiving and asking various questions regarding policy coverage relating to COVID-19 claims. In order to give a timely, consistent and accurate response to such questions, a small combined Corporation / LMA working group was established two weeks ago. This group meets every day to discuss and agree the various questions being raised, and to assist managing agents in answering these queries.
There have been many varied and very specific questions that have been raised and answered, whilst some of the more ‘general’ ones are noted below:
- Pandemic / contagious disease extensions: where such extensions are provided, on business interruption or contingency covers, Lloyd’s would expect this to include losses related to COVID-19
- Retrospective covers: Lloyd’s does not expect covers to be extended retrospectively to cover COVID-19 related losses
- Policy renewals and extensions: we are aware of a number of requests to extend policies given difficulties often being experienced in the short-term. Whilst it is Lloyd’s view that it is preferable that policies should be renewed rather than extended, even if for short periods pending fuller review, it is also our view that extensions should be granted whenever appropriate. We ask that you use your own judgement at portfolio and/or individual policy level, with our commitment to support your decision
- Binding authority contracts, renewals and extensions: a more detailed note will be issued to the market today regarding binding authorities. As with policy renewals, we are aware that there are currently challenges in completing the renewal of binding authority arrangements and we would say again it is preferable that binding authorities are renewed rather than extended. However, where current operational restrictions impede the ability to effect renewal then underwriters should consider an extension to the binding authority. Underwriters may give such an extension even if this extends the overall binder period to more than the current limit of 18 months (or 36 months if a three-year binder).
- Non-payment of premiums: Lloyd’s expects Underwriters to ensure that they do not automatically cancel policies for consumer and SME customers by reason solely of the application of a non-payment of premium clause for a period of non-payment for up to 60 days. In respect of policies for other customers, Lloyd’s expects underwriters to have regard to the suitability and fairness of applying such a provision.
- Overwriting of GWP: where any of the above leads to ‘overwriting’ of agreed GWP levels (most likely for the 2019 year of account) then this will not be cited by Lloyd’s as a reason to prevent you taking this action
Claims handling: a more detailed note will follow that reflects discussions with the LMA Claims Committee. There are a number of initiatives introduced to ensure Lloyd’s claims handling adapts to be as efficient as it possibly can, including:
- Under the Lloyd’s Claims scheme, extending the threshold of claims that can be dealt with as lead only under the scheme, from £250k to £500k (and for Property Treaty and Energy from £500k to £1m)
- Streamlining claims handling decisions on co-lead binders
- Standing down the need for Proof of Loss documents (POLs) in many instances
Market Oversight Plan
In addition to the changes to the market returns noted earlier, we are also revisiting our Market Oversight Plan for 2020 to better represent the current environment and reflect the implications of the COVID-19 outbreak. We will communicate any changes with you in due course, along with any changes to individual oversight plans .
I hope you have found this first weekly update helpful. Future updates will undoubtedly be shorter as we all get into a rhythm, and please do not hesitate to contact me with any suggestions for inclusion in future updates.
Thank you for your continued support during this challenging period.
Please note this message has also been sent to your Chief Risk Officer.
Chief Executive Officer