The Lloyd’s market is seeing growing risks associated with plastics beyond PFAS, particularly single-use plastics.

In a new article for Emerging Risks, Chris Mather, Senior Executive, Technical Underwriting, and Alex Koukoudis, Senior Executive, Finance and Risk, outline how plastics litigation is expanding across liability lines and why insurers need to embed environmental considerations into their risk frameworks.

Read the full article in Emerging Risks magazine.

At the LMA’s recent event, highly experienced legal professionals explored critical questions regarding the remuneration of insurance intermediaries and highlighted points insurers should consider from a legal perspective when presented with such an arrangement (such as subscription market brokerage (SMB)).

Chris Paparella, a partner at Steptoe LLP, discussed a pivotal moment in the insurance sector – the Spitzer investigation of contingent commission payments in New York, which triggered a global chain of events that brought intense focus to broker fees.

Aidan Christie KC outlined the general legal position in the UK, emphasising that brokers are agents of the insured, with associated duties including the obligation to avoid conflicts of interest, to act in good faith, and refrain from acting for their own benefit or that of a third party without the informed consent of the principal (i.e., the insured). He also discussed several recent consumer cases which are considering duties related to secret or half-secret commissions. These demonstrate that the risk of failing to disclose commission could result in the payer of the commission being held liable as well as the agent. 

Lastly, Bill Batchelor, partner at Skadden, Arps, Slate, Meagher & Flom LLP, provided an antitrust/competition law compliance point of view in light of the perceived push towards facilitisation of business in Lloyd’s and the emergence of enhanced underwriting and broker facilities. He advised the audience to consider the following questions when entering into co-(re)insurance agreements:

Does the agreement impose commercial restrictions on the insurer, such as relinquishing pricing authority?

1. Are the parties to the agreement competitors?
2. Has an assessment been conducted to check if the arrangement complies with UK and/or EU competition law?
3. What sources of information/data are used in the facility (ie consider data sharing between competitors)?

Finally, the speakers endorsed the key questions that the LMA has suggested firms should consider when looking at an SMB arrangement:

1. Does making the payment put the insurer in a position where the broker might be influenced to place business with that insurer rather than another that might be more suitable for the insured?
2. Does the payment of a placement-related charge constitute outsourcing, and how would this align with regulation?
3. Are the services providing a genuine benefit to the insurer?
4. Are the charges commensurate with the benefit provided?
5. Can the benefit to the insurer be evidenced and audited?
6. If the broker has a significant share of the business line, will the underwriter still be shown business regardless of whether the underwriter pays?
7. Has the amount paid to the insurer been disclosed to the insured, and who has provided informed consent?

Is the amount being paid consistent with maintaining the fair value assessment of the product?

Environmental, social and governance (ESG) considerations are a rapidly growing aspect of businesses within the insurance industry and have a significant impact on the way the market functions. This will only increase in relevance.

We recognise the important role that we, at the Lloyd’s Market Association (LMA), must play in supporting the market to address climate change challenges and to help protect communities and economies from their increasing impacts.

The sustainability agenda has already formed a prominent part of all discussions at board level both among our members and within the LMA. We acknowledge our commitment to making the Lloyd’s market a better place and we will look to provide members with the tools needed to support you in the progression of sustainability strategies.

By offering resources and tools to support our members’ sustainability objectives, we will:

• Reinforce members’ ability to position the market as a place to foster innovations in products, distribution and capital structures to respond to client needs as they seek to do business more sustainably.
• Aim to provide tools and guidance for our members to showcase these benefits and growth opportunities, as well as supporting their transition strategies. 
• Support LMA stakeholder collaborations which can be utilised to provide services, support reporting standards, as well as risk analyses related to sustainability targets.
• Recognise the breadth of issues encompassed in sustainability and facilitate our members in generating creative solutions and opportunities across the full range of ESG impacts.

Sustainability Data Standard Resource for Insurers

Overview

The Sustainability Data Standard Resource, developed collaboratively by the LMA and the IUA, is a framework designed to streamline and standardise the collection of sustainability-related data in the insurance industry. This initiative responds to growing regulatory pressures, evolving client expectations and the fragmented nature of current sustainability data practices. The resource comprises 22 core sustainability data points, organised under three pillars – environmental, social and governance.

Why it matters

Climate change, social responsibility and ethical governance are now central to business strategy. For insurers and reinsurers, understanding clients’ sustainability credentials is increasingly vital – not just for regulatory compliance, but also for informed underwriting and portfolio management. However, the industry has faced challenges:

• Disparate data collection methods across carriers and brokers.
• Inconsistent metrics and definitions.
• High administrative burden on clients.
• Lack of transparency in how data is used.

The LMA-IUA resource addresses these issues by offering a common set of sustainability data points and definitions, promoting efficiency, consistency and clarity.

Access the resource 

• Download the Sustainability Data Standard tool

• Download the Sustainability Data Standard guidance

Related insights

• LMA/KPMG Underwriting the Transition report 
• CFO Risk and Sustainability Quarterly update
• LMA – Climate change and insurance: The evolving role of scenario modelling

In recent years, the intersection of artificial intelligence (AI) and the insurance market has witnessed a transformative wave, fuelling improvements in data processing, driving up the efficiency of analysis and enhancing predictive power. As insurers navigate an era of unprecedented data availability, AI emerges as a potent catalyst, enabling the industry to unlock new possibilities and address age-old challenges; the infusion of AI technologies promises to revolutionise the insurance sector, fostering innovation, accuracy and agility in an ever-evolving market.

The Maturity of Generative AI in the Specialty and Reinsurance Markets

Generative AI is one of the most talked about topics within the Lloyd’s market. It presents a unique opportunity for the specialty and reinsurance sectors to revolutionise their operations and products and while there are challenges to overcome, particularly around talent, governance and data, the potential benefits are substantial. The LMA was delighted to co-host a launch event with Oxbow Partners and contribute the foreword for the report.

Download the report, The Maturity of Generative AI in Speciality and Reinsurance Markets.

12 February 2024

AI Regulatory Developments – Understanding the Obligations and Risks

AI/large language model (LLM) technology is perhaps the greatest operational change in recent industry memory. In this blog, our Legal Trainee Thomas Singleton explores obligations and risks associated with new AI regulatory developments.

Read the full blog here.

12 February 2024

LMA Response to PRA and FCA Consultation Paper

We have reviewed and obtained the views of our members for the FCA and PRA’s Discussion Paper DP22/4 on Artificial Intelligence (AI) and machine learning which was published in October 2022. DP5/22 aims to understand how AI may affect the prudential and conduct supervision of financial services firms.

LMA Response to PRA and FCA AI and Machine Learning

10 February 2024