The specialist Lloyd’s of London insurance and reinsurance marketplace has announced changes to the Lloyd’s Claims Scheme to help managing agents respond effectively during the global coronavirus pandemic.
Lloyd’s, the oldest insurance market in the world, explains that the changes, which are effective immediately, amend the Claims Scheme requirements to empower the lead managing agent to handle a larger amount of claims as a single agreement party.
Specifically, Lloyd’s has doubled the financial thresholds for when a ‘standard claim’ becomes a ‘complex claim’ that apply to each risk code.
This means that all risk codes within the Property Treaty and Energy classes have seen their financial threshold move from £0.5 million to £1 million, while the All Other Classes financial threshold has been revised from £0.25 million to £0.5 million.
Additionally, Lloyd’s explains that it’s allowing the lead managing agent to be solely responsible for reassigning complex claims as standard claims in accordance with paragraph 4 of the Claims Scheme. Further, the lead managing agent is not required to obtain prior agreement of the second lead managing agent.
Ultimately, the marketplace feels that these amendments will benefit policyholders, managing agents, brokers, and delegated agents. The market recently announced that it had narrowed the focus of its Future at Lloyd’s strategy in response to challenges caused by the ongoing COVID-19 pandemic, but said that claims work is one of the areas it will remain focused on in the near-term.
The changes announced today apply to all new claims and subsequent transactions for existing open claims, and will apply until December 31st, 2020, when they will be reviewed. Lloyd’s continues to explain that these changes do not vary the application of the Single Claims Agreement Party (SCAP) arrangements.
Both the LMA’s Claims Committee and LIIBA have confirmed their support for the changes following consultation with Lloyd’s.
It remains unclear exactly how impactful the ongoing pandemic will be for the insurance and reinsurance industry, but the breadth and depth of the specialist Lloyd’s market suggests that there’s potential for a significant volume of claims experience from across various business lines.
The market announced its full year 2019 results recently, which revealed an improved, albeit still negative underwriting result, as well as a negative impact to its solvency ratio driven by COVID-19-related financial market volatility.
As a result of the uncertainty and challenges facing the Lloyd’s market, Fitch Ratings recently placed the marketplace and its operating entities on Rating Watch Negative (RWN).