Conflicts of Interest

Your attention is drawn to the fact that when HAL gives you advice or arranges transactions in investments for you, HAL or an associate of HAL or some other person connected with it may have an interest, relationship or arrangement that is material. 

HAL recognises that conflicts of interest may occur in the normal course of business and where such conflicts occur, it is committed to putting the interests of its Members before its own.  Where any such material interest exists, HAL will disclose it before it commences acting for a Member in respect of the relevant matter.  Additionally each year, for underwriting Members of Lloyd’s, a material interest statement for the 12 months to 31st December will be issued during July of the following year.

Fees

The majority of fee that a Member pays to HAL is by way of a fixed fee based on the Premium Limit of the Members, and a sliding scale profit commission. HAL actively monitors the premium limits of its Members according to the company’s Know Your Principal regime to ensure that the level of underwriting is suitable to a Member’s individual circumstances.

Remuneration Policy

Member Executives are remunerated by way of salary and in addition, bonuses may be paid on a percentage basis of the companies’ profitability.  HAL is satisfied that its Member Executives will provide unbiased advice as they will not be motivated by keeping Members invested when they consider that conditions do not warrant the investment.

Consultants are remunerated in a number of ways, being fixed fee, on a per head basis and as a percentage of fees and profit commission. Prior to Members agreeing to participate for the following year of account, they will be advised of the potential conflict, which may be considered to be present by way of these arrangements.

In order to avoid conflicts of interest in relation to research material, all the research team are remunerated by way of salary and in addition, bonuses may be made on a percentage basis of HAL’s profitability.  HAL is satisfied that its research area will produce unbiased research material as it will not be motivated by keeping Members invested when it considers that conditions do not warrant the investment.

Research Committee

The Hampden Underwriting Research Committee (“HURMC”) deals with all matters concerning selection of syndicates, negotiation of capacity, purchase of capacity, selling of capacity, allocation of capacity, the formation of all MAPAs, all auction activity, including advice to Members regarding auction prices and negotiation of syndicate expenses, fees and profit commission.  The Committee consists of members of the research department who do not look after Members and, three members of staff who do look after Members, one of which is also the director in charge of the research department. 

The research department will make a recommendation for any particular action. Where relevant, the recommendation will include any action that the MAPAs will take with regard to the syndicate action. The interests of the Members will be the same as those interests of the MAPA. Any bulletin will also include allocations on a syndicate of any members of staff.

Syndicate Selection

The syndicate selection process for the forthcoming year is the responsibility of HURMC with ratification by the HAL Board. The process is transparent and is only influenced by the view of the future profitability of the syndicates.

Major Syndicate Transactions - Offers

Syndicate offers whereby Members may potentially sell their capacity on a syndicate and therefore could reduce their premium limit presents a conflict of interest for HAL. Therefore, as part of HAL’s own procedures and service standards, HAL requires an independent valuation of any offer to be produced with the aim of giving advice to HURMC as to the fairness and reasonableness of any offer. This independent view is included in the advice to all Members as and when an offer is made to Members.

Auctions

Order Priority

The Member Executive or a member of his team places tenders or bids into a sealed box.  The sealed box is opened by a member of the administration team and entered onto the system on a strict first come first served basis. Files are produced of the bids and tenders by the administration department. The files are submitted to Lloyd’s and the allocation of capacity is by way of Auctions on a price first, then first come, first served basis.

Directors’ and Consultants’ Underwriting

The Compliance Officer checks the files to ensure, amongst other things that any bids or tenders for members of staff are in line with research recommendations and any sales are either at the Auction Pricing Committee agreed price or that there is a file note of a specific request from the Member.

Directors and Consultants underwriting intentions, as far as they are known, are notified to Members prior to the Auction.  Directors’ and Consultants' trades at the auctions will be advised by way of auction disclosures.  Directors’ and Consultants' final allocations will be advised to Members when finalised.  In order to avoid any conflicts of interest a Director or Consultant who is also a Member Executive has to have his own underwriting affairs managed by a colleague.

Connected Persons auction activity is disclosed on the Lloyd’s auction website. Details will be available after the auctions and Members will be advised on how to access this when the results of the auctions are disclosed.

Allocation of Free Capacity

On occasions, free capacity does become available on some syndicates. On these rare occasions, all Member Executives and Consultants are advised of the free capacity. The Member Executive or Consultant makes requests for the free capacity in writing for their Members who are interested and have spare funds to be able to write the capacity. A deadline date for requests for allocations is set from the outset.  At that date the allocations are either made in full or if there is an over-subscription then they are pro-rated. If there is any spare capacity after the deadline date then it is allocated on a first come first served basis.

MAPAs

The MAPA Committee makes the MAPA underwriting decisions.   One member of the MAPA Committee who does not have any clients of his own and/or does not underwrite on his own account, will set pricing of purchases and sales. The setting of the prices will be made without reference to the other MAPA Committee members.

Auction Pricing

The Auction Pricing Committee determines auction pricing for sales. Neither Member of the Committee look after or offer advice to Members.  It is not considered appropriate to set a price for purchases and each Member Executive assesses these individually.  All conversations with Members regarding auctions prices are recorded in file notes. A review of these is carried out annually to check on consistency.

Nameco Buying and Selling

In order to avoid potential conflicts of interest, the Client Executive will act on behalf of a seller of a Nameco. A non-connected person within HAL will act as facilitator for the purchaser. The seller and purchaser will be advised of the potential perceived conflicts of interest.