Lloyd’s has issued a further reminder to members that it will punish those who ignore the risks posed by the UK Bribery Act 2010.
According to law firm CMS Cameron McKenna, there is concern that the payment of additional fees, charges or commissions may influence a broker to act otherwise than in the best interests of its client.
On 1 March 2012, additional Lloyd’s requirements came into effect relating to distribution costs, broker remuneration and additional charges.
“The guidance, published in Market Bulletin Y4567, is aimed at Lloyd’s Managing Agents and will affect the brokers they deal with. However it will be of interest to the insurance market in general,” said Alex Denslow, partner at CMS Cameron McKenna.
“The Lloyd’s Bulletin is one more step in a much wider drive to prevent bribery and corruption.”
“Insurance market participants, whether Managing Agents or otherwise, need to be alert to the risks to their business presented by bribery,” he explained. “For regulated firms the issue is not confined to whether acts of bribery have actually taken place. For UK regulated firms there are wider issues of the FSA’s expectations that firms will have organised their businesses to reduce their vulnerability to financial crime. This includes scrutinising all payment arrangements in the underwriting chain. Where this has not taken place, firms are at risk of sanction.”
Lloyd’s has previously provided guidance to the market on the issue of additional broker charges. In light of the Bribery Act 2010, Lloyd’s now states that it expects Managing Agents “to adopt a very cautious and rigorous approach to compliance”.
“The focus is on the underlying commercial reality of any given arrangement,” said Alex. “Lloyd’s states that the way in which any additional payments are represented or described is irrelevant.”
The market has confirmed that ordinary brokerage that falls within the amount typically paid for the type of business and which has been fully disclosed to the client, is unaffected by this guidance.
Reporting
As well as complying with the guidance, Lloyd’s requires that each managing agent must report to the Performance Management Directorate all new arrangements with a broker that involve additional payments before they are entered into. Managing Agents must account for all amounts booked in each quarter under any new or existing arrangements by means of forms appended to Market Bulletin Y4392.
From 1 March 2012 there is a requirement that these reports should include all additional payments (other than ordinary brokerage) however described and whether or not the additional payment is provided for on the slip or on a line slip (previously amounts disclosed on slips did not have to be reported). Reports should also include details of additional payment arrangements which have been entered into by Managing Agents at group level but where some or all of the payment is to be recharged to the syndicate.
Be the first to comment