Blog: Lloyd's Delegated Authority Management Survey – how is the sector performing?

The bi-annual survey is based on responses from 30 managing general agents representing approximately 55% of the Lloyd’s market. Akin to previous years, the aim of the survey was to provide a deeper understanding of governance and reporting, oversight of developments and challenges in the sector and to benefit delegated underwriting managers, delegated audit managers, and Lloyd’s as the regulator. 

Perhaps the most worrying trend exposed in this year’s findings is the percentage of MGAs struggling with resources in their delegated authority teams. Now standing at 53%, this figure has risen 6% when compared with 2017. However, despite historical worries around resourcing, there was an increase in the number of respondents rating their management capability as ‘excellent’, an encouraging caveat in light of this otherwise downward trend. Fortunately, there is further positive news regarding the quality of audit with a 21% increase in the number of Lloyd’s MGAs believing that the 2017 Lloyd’s Market Association scope template introduction has had a positive impact.

Following this thread, it is also worth noting the 19% reduction in the number of Lloyd’s MGAs managing ‘up to 100’ binding authority contracts. Yet, in spite of this, there has been a significant increase in managing agents taking on both ‘between 100 and 200’ and ‘between 200 and 300’.

Other key findings included the disparity in the frequency of reporting to audit committees, with over 60% reporting either monthly or quarterly, compared to the alarming 30% admitting they ‘never’ report. Yet, the reduction in monthly reporting, replaced by quarterly reporting, to risk management departments on delegated authority associated risks suggests greater confidence in the controls.

A highly specialised area of the Lloyd’s insurance market, it’s vital to remember that there is an incredible amount of development and change occurring in the sector. For instance, the introduction of the online system AiMS – which allows the market to manage and monitor the audit of coverholders and claims third party administrators - something 60% of respondents believed to have a positive impact on the audit co-ordination process. Furthermore, the recent implementation of delegated authority Submission, Access and Transformations split opinions, with 66% still unsure about whether it will be an improvement for all stakeholders.

This years’ survey produced an array of insights, both positive and potentially worrying, and underlined crucial challenges for this segment of the Lloyd’s market. While some of these can be identified as on-going trends and good progress is being made to improve the audit and delegated authority systems generally, it is clear that more work needs to be done.

We cannot ignore the large cohort of respondents that are struggling with resourcing their teams, despite the positive increased confidence in management capability. Nevertheless, there remain more positives than negatives and the recent developments of the LMA Scope template and AiMS have the potential to continue their already positive impact.