Members delegate all responsibility for management of the
underwriting business of a syndicate to the managing agent.
Managing agents are usually companies. They employ the
professional insurance underwriter who actually conducts the
underwriting (each syndicate has a lead underwriter), and other
staff who support the professional underwriter and carry out other
services, including handling claims and accountancy. They charge
the members of the syndicate fees for managing the affairs of the
syndicate and a profit commission based on its overall
profitability.
The insurance underwriter may also be a Name (investor) and a
member of the syndicate on which they are the underwriter, and/or
other syndicates, in which case the underwriter is known as a
working name. Members of syndicates other than the active
underwriter do not have any say in the conduct of the
syndicate’s business.
Managing agents may manage more than one syndicate. The
number of managing agents has declined in recent years as the
number of syndicates has reduced. In 2007 there were 42 managing
agents.
The PTF is a regulatory requirement. The business of the
syndicate is conducted through the PTF under a standard Deed
approved by Lloyd's. The trustees of the fund are appointed by
managing agents and approved by Lloyd's.
The PTF is a fund into which all premiums are paid, and from
which all claims and expenses are paid. It is held for the benefit
of policyholders until such time as a profit or loss is declared
(see
LLM4060 and
LLM5290 for more on the
‘declaration basis’). In the case of aligned member
syndicates (see
LLM1060) the PTF may also hold
“member capital”. See
LLM1095.
The member remains the ultimate beneficiary of the
appropriate share of the assets in the fund and is therefore
entitled to receive an appropriate share of the investment income
arising on those assets.
In practice, the PTFs of all syndicate members are managed as
one fund together. The managing agent will generally pool all open
years of account of a syndicate, and is also entitled to pool
assets between syndicates.
US dollar premiums are held in a ‘Lloyd’s Dollar
Trust Fund’ (LDTF). Again, managing agents appoint trustees
for this fund. There may be trust funds for other US and other
territories’ situs business.
Income and profits or losses from assets in the PTF form part
of the syndicate’s overall profit or loss.
The money which represents a member’s distributable
profit from the syndicate is, except possibly for aligned member
syndicates, transferred to the member’s personal reserve fund
(PRF) for which Lloyd’s act as the trustee.
See
LLM1180+ for further details on the
Lloyd’s ‘chain of security’.
