IPT08550 - IPT audit assurance: London company market
The ‘company market’ and Lloyd’s comprise almost the entire London insurance market. The purpose of the company market is to allow brokers to place risks through a number of corporate insurers. In practice a risk may be placed with Lloyd’s syndicates and the company market. The company market is organised through a market body called the International Underwriting Association (IUA) and involves insurers who are members. The IUA was formed by the merger of two bodies, the Institute of London Underwriters (ILU), which dealt with predominantly marine and aviation risks, and the London Insurance and Reinsurance Market Association (LIRMA), which dealt with non-marine risks.
This market operates out of the London Underwriting Centre (LUC) building, processing policies on behalf of their members. The administrative bureaux processing details of the risks written under the auspices of the IUA is the London Processing Centre (LPC) and is located in Folkestone.
Many of the IUA member companies also have offices and separate underwriting rooms located elsewhere within the City, some being within the Lloyd’s building. If a risk being underwritten by a company at their own underwriting room is being covered 100% by them, the premium may be dealt with outside the IUA accounting arrangements.
Not all insurance companies that operate in the London market are members of the IUA.
Arrangements for assurance
Members of the IUA receive a daily signing message from the LPC, which details the risks underwritten for that day. In addition to this, monthly reports are produced, showing the company’s entire IPT transactions, on hard copy. Nil reports are not produced.
Data is supplied by LPC to the Lloyd’s Assurance Team, which allows for reports of companies’ IPT liability and associated information to be produced. The Lloyd’s Assurance Team, towards the end of each calendar year, produce figures for each company. This report details the IPT liability and gross premium (net of IPT) for the preceding year. The reports will be supplied to officers when requested.
The LPC does not produce a nil report for members who have not processed business through the LPC system in a month. Therefore the absence of a report for any particular month would appear to indicate no business being written; however, it is not unknown for items to go astray. The reports supplied to you will assist you in establishing the level of your insurer’s IPT liability through the LPC, independently. If you do not have the information for your insurer, contact the Lloyd’s Assurance Team. If you would like other non-standard reports, contact the Lloyd’s Assurance Team to discuss your needs.
You will need to establish if the insurer has its own underwriting room separate from the LUC, and how the premiums are processed, to ensure that this business is not omitted from the IPT return.
Assurance of liability and apportionment
The liability for IPT of a premium and any apportionment is, in practice, decided by the lead underwriter and broker. Although all of the following underwriters also have a responsibility to ensure that the IPT is correct, many of them will accept the lead underwriter/broker decision without question. Since it is the IPT shown on the slip that is reported back to all the IUA members and used by them when completing their IPT returns, if an error is made by the leader all the following companies will probably make the same error.
Therefore you and all other IPT officers with responsibility for an IUA member have a part to play in the assurance of all those who are members of the London company market. If an error is found during a visit in respect of a transaction dealt with through the London company market, a reference should be sent to the Insurance UoE, giving full details of the transaction. The Insurance UoE will ensure that all the relevant LIPTOs are informed of that error.