The association feels it is ‘prudent to ensure Lloyd’s customers are not left without coverage’

The Lloyd’s Market Association (LMA) has published revised policy language to ensure that customers’ insurance will continue beyond its specified renewal date if the Lloyd’s market becomes inaccessible or its Emergency Trading Protocol fails in light of the Covid-19 outbreak.

The clause, LMA5392, aims to protect policyholders from being left without cover if the coronavirus situation leads to normal renewal discussions being untenable.

The policy wording ensures continuity of coverage for Lloyd’s (re)insureds if for more than one day during the seven business days prior to a scheduled renewal, access to Lloyd’s is prohibited and the Lloyd’s Emergency Trading Protocol fails.

The Emergency Trading Protocol, designed to supplement face-to-face and electronic trading, involves the use of electronic placement systems to submit, negotiate and bind the placement and endorsement of insurance contracts – the market recommends that this method should be adopted instead of face-to-face contact in the event of an emergency.

If using electronic placement systems is not possible, the Emergency Trading Protocol also outlines steps to enable risks to be placed via email that still meet legal requirements.

LMA5392 – Limited Automatic Extension – Prevention of Access to Lloyd’s of London

  1. In the event that, seven (7) or fewer calendar days before expiration of this contract of (re)insurance, all Lloyd’s Syndicates are prevented from entering Lloyd’s of London, One Lime Street, London, EC3M 7DQ:

1.1. by the Corporation of Lloyd’s; or

1.2. following the imposition of quarantine or restriction in movement of people by any national or international body or agency;

for more than one (1) business day during the seven (7) days before expiration of the contract of (re)insurance, this contract of (re)insurance shall, in consideration of a pro-rata additional premium, be automatically extended at the existing terms and conditions for fourteen (14) days from the expiration of the contract of (re)insurance.

  1. However, the automatic extension provided under paragraph 1:

2.1. shall only apply if the (re)insured, their broker or (re)insurers, despite using best endeavours, are unable to implement Lloyd’s Emergency Trading Protocol; and

2.2. shall not increase or reinstate any applicable limit(s) of liability; and

2.3. shall only apply once, unless agreed otherwise in writing by (re)insurers; and

2.4. can be voided by mutual agreement between the (re)insured and (re)insurers.

The LMA, however, believes that it is “unlikely” that insurers and brokers will be unable to access Lloyd’s.

Patrick Davison, deputy director of underwriting at the LMA, said: “Although the situation specified is extremely unlikely to occur, the LMA and its members felt it prudent to draft this model clause to ensure that Lloyd’s customers are not left without coverage should the coronavirus, or any other event, prevent renewal negotiations from taking place.”

Today, Lloyd’s has closed its underwriting room in order to test emergency trading protocols as the number of coronavirus cases in the UK increases.