We have reported previously on the progress of the Lloyd's Legislative Reform Order (LRO) through Parliament (our most recent post can be found by clicking here). The LRO has now been approved by both Houses of Parliament and is expected to come into force on Wednesday 19 November 2008.
Lloyd's has also issued a market bulletin (Y4204) seeking feedback on its proposed amendments to Lloyd's Byelaws and other rules to address the market related reforms to be made by the LRO.
Where a managing agent wishes to deal with a non-Lloyd's broker, the managing agent will be required to satisfy itself that the broker meets the same standards Lloyd's requires of a Lloyd's broker, including:
- adequate, suitable and compatible systems, protocols and arrangements for the conduct of business; and
- adequate professional indemnity insurance of £3million or four times the annual net retained brokerage.
The Managing Agent must demonstrate to Lloyd's that it has suitable arrangements in place to satisfy itself that any non-Lloyd's broker with which it deals meets those minimum standards.
So far as the abolition of the "divestment" rules (which prohibited most associations between managing agents and Lloyd's brokers) is concerned, HM Treasury has indicated that it considers that the FSA's rules for the handling of conflicts should be supplemented by specific Lloyd's rules. Lloyd's will therefore introduce additional disclosure requirements, including additional information to be included in the syndicate business plan and an annual statement regarding the managing agent's systems and controls.
It is proposed that the new rules come into force in January 2009, until which time the existing Lloyd's rules will continue to apply.
The consultation closes on Friday 12 December 2008. A copy of the market bulletin can be found by clicking here.