Brexit Binding Authority Sunset Endorsement
The LMA has now drafted the below model clause to assist in managing the transition of binding authority business to Lloyd’s Brussels Subsidiary (LBS) in respect of Brexit.
The model clause prohibits the binding of business with an EEA regulatory risk location after 31 December 2018, in line with recent Lloyd’s guidance published in market bulletin Y5166. A regulatory risk location can be derived from a number of factors, and we would recommend use of Lloyd’s Risk Locator Tool to ensure that risks are correctly underwritten by Lloyd’s underwriters or LBS.
The model clause may be used on any binding authority agreement terminating after 31 December 2018, which has a territorial scope encompassing EEA business. However, we would like to remind managing agents that there are multiple ways to manage the transition to LBS:
- Ensure that the expiry date of the binding authority agreement is on or before 31/12/18 at the point of placing;
- Ensure that cancellation provisions are flexible enough to enable cancellation of the binding authority agreement with notice mid term;
- Use of the Brexit Binding Authority Sunset Endorsement.
Option 1 is likely to be the cleanest option available to managing agents in administering their binding authority portfolio, although options 2 & 3 may provide greater commercial flexibility as Brexit negotiations continue.
The Sunset Endorsement may also be used on any binding authority which has a territorial scope including both EEA and non EEA risks.
Any queries regarding this bulletin and the Endorsement should be addressed to Tom Hamill: tom.hamill@lmalloyds.com or 020 7327 8377.
General Brexit queries should be addressed to Brexit@lloyds.com.
Tom Hamill
Manager, Claims and DA Operations
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