Hampden recognises that certain words and phrases as used in the Lloyd's market are not straightforward and need clarification.

If you discover a term that is not listed and would like it to be added, we would like to hear from you, so please email  alistair.troughton@hampden.co.uk

Accident Year Experience

The matching of the total value of all losses occurring (losses paid, plus loss reserves) during the defined twelve-month period (ie the date of loss falls within the time period) with all the earned premium for this same exposure period.

Acquisition costs

These represent the costs of obtaining the insurance business: they include the broker’s commission and other related expenses.


Accumulations of insurance loss exposures which result from underwriting multiple risks that are exposed to common causes of loss.

A.M. Best

A.M. Best is a worldwide insurance-rating and information agency whose ratings are recognised as an ideal benchmark for assessing the financial strength of insurance related organisations, following a rigorous quantitative and qualitative analysis of a company’s balance sheet strength, operating performance and business profile.

Attritional loss

A common loss, as opposed to a major/catastrophe loss.

Active Underwriter

The person with chief authority to accept risks on behalf of the Members of the syndicate. Hampden lists the Active Underwriters in the annual “Syndicate Profiles” publication.


There are three types of Agent. Managing Agents, for example Hiscox, are responsible for all aspects of running Lloyd's Syndicates. Members’ Agents, such as Hampden, advise individual Members of Lloyd's on their underwriting commitments and provide a link between them and their Syndicates. Lloyd's Agents, the 'eyes and ears' of Lloyd's, provide worldwide shipping information and assist Underwriters in the settlement of claims.


These enable Members to buy or sell freehold capacity each year. Hampden provides analysis and advice about participating in the auctions.

Binding authority

A contracted agreement between a managing agent and a coverholder under which the coverholder is authorised to enter into contracts of insurance for the account of the members of the syndicate concerned, subject to specified terms and conditions.


Underwriting business at Lloyd's is conducted at boxes in the Underwriting Room in Lime Street, where Underwriters sit at desks seeing the brokers who approach them to show them both renewals and new pieces of business.


The fee deducted by the broker who introduces the business to the Market. Can be anywhere between 15% to 30% of the premium depending upon the type of business.


These are the intermediaries between the underwriters and the insureds, placing risks using their specialist knowledge of the Lloyd's Market. Currently there are 202 firms of brokers at Lloyd's bringing business from 200 countries and territories.

Burning cost

A method of calculating the premium in non-proportional reinsurance, in particular excess of loss and stop loss reinsurance, whereby the premium is directly related to the insured’s claims experience; the reinsurer reviews the cedant’s claims experience to ascertain what proportion of premium income would have been “burned up” by the reinsurance claims.


Also referred to as the ‘stamp’, this is the maximum amount of business (premium income) that a syndicate is authorised to write in a year of account, expressed in sterling, ignoring acquisition costs such as fees paid to brokers and allowing for the syndicate's reinsurance costs

Syndicates choose to maintain different amounts of headroom in their stamp capacity and this can also change depending on the market.

Capacity Utilisation

Assuming £100m of stamp capacity, 90% capacity utilisation means £90m gross premiums.

Captive insurer

An insurer which is wholly-owned by another organization (usual non-insurance), the main purposeof which is to insure the risks of the parent organisation.

Case reserve

Reserves for outstanding claims built up on a case by case basis with the amount likely to be paid out on each claim being separately estimated.

Catastrophe losses

Sudden or severe natural disasters sometimes causing large insured losses. They include: hurricane, earthquake, severe thunderstorm, flood, extra-tropical cyclone, wildfire, winter storm.

Catastrophe reinsurance

A form of excess of loss reinsurance which, subject to a specified limit, indemnifies the reinsured company for the amount of loss in excess of a specified retention with respect to an accumulation of losses resulting from a catastrophic event or series of events.


To obtain reinsurance cover for insurance business, the company obtaining reinsurance is said to “cede” the business in question.


The Company which cedes the business covered by a reinsurance contract.

Central Fund

A fund, financed by contributions from all Lloyd’s Members, managed by the Council for the advancement and protection of the policyholders insured at Lloyd’s.

Claims-made basis

Coverage applies only to losses which occur and claims that are made during the term of the contract. Once the policy period is over in claims-made covers, the approximate extent of the underwriter's liability is known. This is as opposed to a ‘loss-occurring’ basis.

Closed year

A Year of Account for which final accounts have been issued and which has had its liabilities closed by the Reinsurance To Close ("RITC") process usually into the syndicate's succeeding year of account. At Lloyd's the year is usually closed after the third calendar year has run its course.

Combined ratio

The measure of an insurer's underwriting profitability based on the ratio of net incurred claims plus net operating expenses to net earned premiums. A combined ratio of 100% is break even. A ratio less than 100% is an underwriting profit. The combined ratio should be the best measure of operating performance as it captures all of the costs of being in business whether directly linked to underwriting activity or not.

Coming into Line

The bi-annual calculation of the adequacy of a member's Funds at Lloyd's relative to their underwriting level and commitments.

Corporate capital

Typically provided by the owners and controllers of a Managing Agent in support of their own syndicate as distinct from Third Party capital - see below.

Council of Lloyd's

The formal ruling body responsible for the management and supervision of the Lloyd's Market. It delegates many of its powers to the Franchise Board which in turn runs the Performance Management Directorate, led by Tom Bolt.


Is the protection that is given by insurance e.g. fire, theft, natural disasters.

Coverholder/managing general agent

A firm either in the United Kingdom or overseas authorised by a managing agent under the terms of a binding authority to enter into contracts of insurance in the name of the members of the syndicate concerned, subject to certain written terms and conditions. A Lloyd’s broker can act as a coverholder.

Deductible or excess

The first amount of loss which the insured is responsible for paying before insurance cover pays.

Deferred acquisition costs

Costs incurred for the acquisition of the renewal of insurance policies (e.g. brokerage, premium levy and staff related costs) which are capitalised and amortised over the term of the contracts.


Directors and Officers, a form of insurance typically purchased by senior management to protect against liabilities from shareholders’ actions due to financial losses caused by management’s errors or omissions.


The Economic Capital Assessment number which Lloyd's calculates for each syndicate and which in aggregate across a member's portfolio determines the level of Funds at Lloyd's needed in the Coming into Line tests.


Errors and Omissions, insurance typically purchased by solicitors, accountants and the like protecting the policyholder against any professional error or omission that leads to a financial loss being suffered by a third party.

Economic Capital Assessment (ECA)

The level of capacity required by the syndicate’s members to support their underwriting. Calculated as the ICA ‘uplifted’ by 35% to ensure capital is in place to support Lloyd’s ratings and financial strength.

Estimated maximum loss

An estimate of the monetary loss which could be sustained by insurers on a single risk as a result of a single fire or explosion considered by the underwriter to be within the realms of possibility (an expression used only in fire, explosion and material damage policies).


The corporate entity into which the general business insurance liabilities of Lloyd's Syndicates allocated to the 1992 and prior years of account have been reinsured

Excess of loss reinsurance

Reinsurance cover provided to an insured in excess of a specified deductible or level. Protects an insurance company against losses impacting its account too severely.

Expense ratio

Net expenses incurred in insurance activities as a percentage of net earned premiums.


  1. The state of being subject to the possibility of loss.
  2. The measurable extent of risk.
  3. The possibility of loss to insured property caused by its surroundings.


The maximum value of claims made on an insurer from an event or events that would result in the total exhaustion of the cover or indemnity offered by an insurance policy.


Insurance/reinsurance by offer and acceptance of individual risks rather than in a treaty.

Freehold capacity

Syndicate capacity that is owned by the Member and has rights attached to continuity and any pre-emptions. As a result of being freehold, this type of capacity can be traded in the auctions.

Funds at Lloyd’s

These are the assets, which can be cash, shares, or bank guarantees, that Members have to deposit with Lloyd’s to support their underwriting. The minimum amount is 40% of capacity but will generally be higher at 50%, or more, according to a syndicate's Individual Capital Assessment, as calculated by the Managing Agent and subsequently uplifted by Lloyd's.

Gross premiums written

Amounts payable by the insured, excluding any taxes or duties levied on the premium, including any brokerage and commission deducted by intermediaries.

Hard Market

An insurance market where prevalent prices are high, with restrictive terms and conditions offered by insurers.


Hampden's Stop Loss products are all called HASP with different numbers after, eg HASP 1 or HASP 6. These products help our clients manage the underwriting cycle. Much more information is available from a Member's Executive.

Horizontal Limits

Reinsurance coverage limits for multiple events.


This stands for incurred but not reported: an estimate made at the end of each year to cover the expected cost of losses that may have occurred but not yet been reported to the syndicate.


A term used to mean protection against possible damage or loss, especially a promise of payment, or the money paid if there is such damage or loss. A policy of indemnity is designed to place the insured in the same financial position as he/she would have been in had the insured peril not occurred.

Insurance cycle

The market softens when an increase in capital and competition – often coupled with a period of lower claims – causes premiums and therefore profits to fall. Eventually the market will reach a turning point, when capital declines – often as a result of a catastrophe or other capital reduction – and underwriters push up prices and tighten terms and conditions. Thus a hard market ensues, in which profits improve.


The Policyholder - the person(s) or organisation protected in case of a loss or claim.

Insurable interest

A legal or equitable financial interest, in property or in the happening of some event; such an interest is essential for the validity of a contract of insurance; in life insurance the policy holder must have a financial interest in the life assured at the time the policy is issued.

Integrated Lloyd’s vehicle

A company which owns/controls dedicated vehicles supporting one or more continuous syndicates and the managing agent.


A term used mainly in reinsurance to denote a stratum of cover, for example, claims between £10,000 and £50,000 (which might be expressed as £40,000 excess of £10,000); insurance cover may be arranged in a number of successive layers, with different layers being covered by different insurers or reinsurers.

Leading Underwriter

In the Lloyd’s market, one of the experts in a particular type of business; a broker seeking cover presents the slip in the first place to a leading underwriter who sets the premium and signifies the extent of participation in the risk by syndicates on whose behalf he/she is authorised to accept risks; other underwriters are obliged to follow the lead as regards the rate of premium.

Leasehold capacity or limited tenancy capacity

This type of capacity does not come with ownership rights and cannot be traded in the auctions. Syndicates with this type of capacity are a growing proportion of LLVs’ portfolios. See SPSs below.

Line size

The maximum exposure or monetary value of a risk or class of risks accepted by an insurer.


Limited Liability Vehicle - Third Party Capital Members usually trade at Lloyd’s through small limited companies called NameCos or limited liability partnerships called LLPs.


The proportion of a risk accepted by an underwriter. Also used to refer to the amount which an Underwriter has fixed as his maximum exposure for any one risk.

Lloyd’s Market

Click here to visit the Lloyd's website. Hampdden has produced an Introductory Guide to Lloyd's which is available from a Member's Executive

Lloyd's Market charges

Lloyd's produces a listing of the Market's charges and its Members' Services charges annually. A full list is available here. For any explanation please contact a Member's Executive.

Long-tail business

A term used to describe an insurance risk that has the potential for claims development or new claims to be reported a number of years after expiry of the term of the policy.

Loss occurring basis

As opposed to claims-made, the loss occurrence basis provides coverage for losses from claims which occurred during the policy period, regardless of when the claims are asserted. The underwriter may not discover the extent of liability for years to come from losses asserted to have occurred within the policy period.

Loss ratio

The proportion of claims paid or payable to the premiums earned or written.


These are balanced portfolios of syndicate capacity put together by a Members’ Agent for the convenience of Members who do not want to be involved in the construction of their syndicate portfolios.

Member or Name

The companies or individuals who own the capacity of a syndicate and who are Members of the Society of Lloyd’s. They provide the capital, which enables the syndicates’ underwriting. This capital is provided by many of the world’s major insurance groups, listed companies, individuals and limited partnerships (LLPs) and limited companies (NameCos).

Managing Agents

Such as Hiscox plc are responsible for managing a syndicate and employing the active underwriter and other staff. They charge fees for managing the affairs of the syndicate and a commission based on overall profitability. Currently, there are 91 syndicates run by 57 agents.

Maximum probable loss (MPL)

The largest loss thought probable under an insurance policy; normally applied to material damage risks where the total sum insured is not considered to be at risk from one loss event: also referred to as probable maximum loss (PML).

Managing General Agent (MGA)

An insurance intermediary vested with underwriting authority from an insurer.

Members' Agents

An agent appointed by a Member to provide services and perform duties such as advising on a Member's underwriting commitments and providing a link between the Member and their syndicates.  Used by Members who are providing private Third Party Capital to syndicates.

Net premiums written

Gross premiums written less outward reinsurance premiums written.

Open years

A year of account that is left open beyond the usual third year as a result of future liabilities not being accurately quantifiable for the Reinsurance To Close (RITC).

P&I Clubs: Protection and Indemnity Clubs

Mutual insurance associations carrying on a form of international maritime insurance whose membership is composed of UK and foreign ship owners.

Performance Management Directorate (“PMD”)

A key part of Lloyd’s management and control of the Market. It sets various minimum standards and collects information from syndicates to review their relative performances, providing feedback to the Managing Agents and underwriters. It vets applications for new syndicates wishing to set up in Lloyd’s. It also annually approves all the syndicates’ business plans.


A group of insurers through which particular risks are insured, normally by each insurer assuming an agreed proportion of the risk, premiums, losses and expenses being shared in the same proportion.


This is the amount paid to an insurer or reinsurer by policyholders in consideration of their acceptance of a risk and for providing cover.

Premium Income Limit

This is the amount of syndicate capacity that a member has in their portfolio of syndicate capacity. The average Premium Income Limit for our individual members is £1.4m.

Proportional reinsurance

A reinsurance agreement in which the reinsured cedes a predetermined proportion of business to his reinsurers along with the same proportion of premium income. Losses and premiums are shared in proportion. Quota share reinsurance is a form of proportional reinsurance indemnifying the ceding company against a fixed percentage of each risk.

Proprietary company

Company owned by shareholders.

Open years

A year of account that is left open beyond the usual third year as a result of future liabilities not being accurately quantifiable for the Reinsurance To Close (RITC).


A number used to express the cost per unit of insurance, usually as a percentage; so for example the rate for insuring a building against fire, lightning, flood, etc. Hampden Research closely tracks the direction of rates in the Market.

Rate on Line

For example, if Lloyd's syndicates provide US$20m of cover to a US insurance company and charge US2m then the rate on line (ROL) is 10%. ROLs are used extensively in the market to judge the adequacy of rates for catastrophe cover and are monitored by Lloyd's Performance Directorate, syndicates and brokers alike.


A realistic disaster scenario is a loss estimate that a syndicate would incur from a hypothetical disaster.


Insurers reduce their exposure to risk by insuring themselves with other insurers against claims. The practice is known as reinsurance which accounts for more than half of Lloyd's total business.


Re-establishment of the sum insured to its original figure after it has been reduced by the amount of a loss payment, usually in return for the payment of an additional premium.

Reinsurance To Close ("RITC")

The reinsurance to close comprises a premium payable by the closing year of a syndicate to the Members on the next open year of account and a contract which transfers the liability for all claims in respect of the closing year to the next open year.


The review and rewriting of a policy for another 12 months. An opportunity for the broker to approach new markets for better terms if justified or for the underwriter to try for higher rates and more premium if the policy has had claims or the market is hardening.


A fund set aside out of assets for general or specific purposes after provisions have been made.


The reinsurance of reinsurance that is, when reinsurance companies cede risk to other reinsurance companies. A reinsurer that reinsures other reinsurers is called a “retrocessionaire".


Level of risk which the policyholder or insurer does not insure or reinsure but keeps for its own account.


This term may variously refer to:

a)      The possibility of some event occurring which causes injury or loss;

b)      The subject matter of an insurance or reinsurance contract; or

c)      An insured peril


Administration of a book once no new risks are being accepted or the insurer has ceased trading.

Short tail

Business upon which claims generally arise and settle quickly. Therefore the result of writing this type of business is usually determined more quickly than long tail business. The majority of property insurance is short tail.


HAL clients participate on these via Special Purpose Arrangements (SPAs). Originally designed to assume certain catastrophe property risks, such as US earthquake or US hurricane from a specific reinsurer and to run in the short-term while rates remain attractive.

Soft Market

An insurance market where prevalent prices are low, and terms and conditions offered by insurers are less restrictive.

Solvency ratio

The ratio of net assets to premiums with a figure less than 16% considered too low by the regulator.


Special Purpose Arrangements are set up by Managing Agents on a leasehold basis. Some are catastrophe orientated in their business plans and others are more general. SPAs are a flexible way for Managing Agents to enable Members to share in the business. They cannot be traded in the auctions. Also see Sidecars above. Previously known as SPSs.


The capacity of a syndicate to accept premium income. See "Capacity" above.

Stop loss

A form of reinsurance under which the reinsurer reimburses the cedant’s losses in any year to the extent by which they exceed a specified loss ratio or amount, subject to some specified limit.

Surplus lines (or excess & surplus) insurer

An insurer that underwrites surplus lines insurance in the USA. Lloyd’s underwriters are surplus lines insurers in all jurisdictions of the USA except Kentucky and the Virgin Islands.

Sum insured

The sum expressed in a policy as the amount payable on the occurrence of the event insured against in the case of a benefit policy, or as the maximum of the insurer’s liability under a contract of indemnity.


Syndicates are formed by one or more Members joining together to accept (re)insurance risks, underwritten on their behalf by underwriters. Each syndicate has a number assigned to it by the Council of Lloyd’s. There are currently 91 different syndicates at Lloyd’s. Hampden’s clients have access to 35.

Third Party Capital

Usually used to refer to capital provided by individual Members and their LLVs through the services of Members’ Agents. Any capital not directly aligned with the Managing Agent is in effect Third Party capital.


A reinsurance contract usually effected to cover all or a certain section of the reinsured’s business. Risks can be attached to the treaty without individual reference to the reinsurers, thereby reducing administration costs.

Ultimate loss ratio

The total forecast claims divided by the total forecast premium expected to arise from a policy, including acquisition costs and IBNR.

Unearned premium reserve

The portion of premium income in the business year that is attributable to periods after the balance sheet date is accounted for as unearned premiums in the underwriting provisions.


The process of evaluating, defining and pricing insurance and reinsurance risks including where appropriate the rejection of such risks.


The situation where the sums insured represent less than the total value of the property at risk.

Utmost good faith (uberrima fides)

A duty laid on the parties to an insurance contract, especially the proposer, of greater force than ordinary good faith, requiring full disclosure of all facts which are or might be material to the contract; this duty subsists throughout the negotiations over the terms of the contract and until the contract has been concluded, and may be maintained during the period of the contract if the policy so provides.

Written line

The maximum amount of insurance that an insurer has agreed to accept when initialling a slip; it may be more than the amount actually insured by an individual insurer if the broker obtains more than a 100% cover for the risk, in which case each insurer’s liability will be reduced proportionately to a signed line.

Year of account

The year to which a risk is allocated and to which all premiums and claims in respect of that risk are allocated. Each year of account stays open for 36 months until closed by the Reinsurance To Close (RITC) contract.



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