On 6 July 2010, Lloyd’s issued Market Bulletin Y4408 (click here to see a copy of the bulletin) clarifying the reporting requirements of managing agents who underwrite broker errors and omissions (E&O) insurance. These requirements were issued in April 2010 by Market Bulletin Y4390 (click here to see a copy of the bulletin).

Managing agents are required to disclose in their business plans whether they intend to underwrite broker E&O insurance with respect to brokers which also place business with syndicates under their management. This requirement applies to facultative reinsurance (including the reinsurance of captives), broker E&O insurance placed in the open market and line slips. However, it does not apply to business written through coverholders.

Managing agents must also report to the Lloyd’s Performance Management Director any claim made on a broker E&O insurance against syndicates under their management in excess of £500,000, if the relevant broker places business with one or more of the syndicates under their management.

The requirements were issued in response to a perceived conflict of interest where managing agents both receive business from, and underwrite the liability of, brokers in the market.