Introduction to Lloyd's: basic concepts and terms: syndicates
Members are required by the Lloyd’s Act to conduct business severally and on their own account. They cannot do business jointly with others. Members do business in syndicates, which may contain a number of members. Some syndicates comprise only a single corporate member. The syndicate itself has no legal personality, is not a partnership (because there is no such agreement among its members) and is not an unincorporated association (as there is no central code of rules). Its management is instead left to a“managing agent” (LLM1090), and its assets are held on trust.
Syndicates are formed for a single calendar year usually referred to as a ‘year of account’, ‘year of inception’ or ‘underwriting year’, meaning that in which underwriting takes place; though care is needed with the latter definitionas the tax legislation simply uses underwriting year to mean a calendar year, so it can refer also to later years in which claims develop. At the end of the inception year the syndicate may reform with identical or similar membership, but there is no common legal identity between a particular syndicate and its successor. A syndicate is often described as an ‘annual venture’, although the term “syndicate” is often also used to refer to the chain of successor syndicates.
Members provide capital backing to the syndicate and assume a share of the insurance liabilities in respect of policies written by the syndicate in proportion to the amount of their share of (that is, of capital contributed to) the syndicate. The amount of capital required is closely regulated (LLM1180).
Each member receives a share of the syndicate’s profits proportionate to their shareof the syndicate’s business, and is responsible for the losses which arise on theirshare of that business.
A syndicate may be a group of several hundred Names and include large corporate members. Names may be members of many syndicates at the same time, but large corporate members tendnot to be. Names may also be members of Managing Agent Pooling Arrangements(“MAPAs”) (LLM1150), although again, the large corporate members tend not to be.
A member may only underwrite through a managing agent (LLM1090).
Following consolidation within the market, the number of syndicates had declined, but showed a small increase to 66 in 2007. The size of syndicates has tended to increase in recent years.