LLOYD’S FRANCHISE DIRECTORATE RETHINKS GUIDELINES FOR 2004

The franchise directorate of Lloyd’s has issued new notes on interpreting its franchise performance guidelines for 2004 in a bid to prevent a repeat of “some significant and not always fully justified variances” that have occurred so far this year. Most of the variances seem to relate to market syndicates’ use of reinsurance. The directorate enforces its performance guidelines in a flexible way, and variances are allowed if a managing agent can show that the rules are not appropriate for a particular syndicate or a particular line of business. Reinsurance leverage is one area of potential concern, with the directorate keen to make sure syndicates avoid “aggressive arbitrage” or reliance on reinsurance or retrocession to compete at uneconomically low premiums. The guidelines state that syndicates are not expected to write lines of business where there is no reasonable expectation of making a gross underwriting profit. Members of the franchise performance team are now due to meet managing agency staff to discuss business plans in advance of the submission of formal plans. Full plans need to be submitted by September 12 for non-aligned syndicates and by October 15 for aligned syndicates.