
Lloyd’s gives advance consent to some changes to Managing Agent Agreements
Members appointing a managing agent are required to enter into one of two standard form Managing Agent’s Agreements, depending on whether they have a members’ agent or not.
The standardised forms of the Agreement cannot be amended without Lloyd’s written consent (with limited exceptions, mainly in relation to the managing agent’s remuneration). In general, Lloyd’s approach has been not to agree to amendments, considering applications on a case-by-case basis.
However, the advent of limited tenancy syndicate participations has meant that the standard form of Managing Agent’s Agreement needed to be varied, as the default position under the standard form is for members to have freehold tenancy. Consequently, this led to an increase in the number of applications to vary in the past few years.
Lloyd’s is therefore giving advance consent to a number of commonly requested variations to simplify the process of onboarding new syndicate members on a limited tenancy basis. On 20 September 2024, Lloyd’s published Market Bulletin Y54441 which provides for this. HFW were pleased to be involved in the consultation process.
The four categories of agreed amendments are:
- Amendments limiting the period of appointment of the managing agent in respect of a syndicate (Limited Tenancy) – Such amendments can limit the period a member can remain on one or more syndicates managed by a manging agent to (i) a fixed period, (ii) a fixed period with an option to extend at the election of the managing agent, or (iii) for a rolling period until notice is given by the managing agent.
- Amendments setting out agreed terms regarding any related party transactions – Where managing agents are appointed on a “turnkey” basis the managing agent may also provide services to third parties, which might ostensibly raise conflicts of interest. These must be disclosed, and agreement reached as to how that conflict will be managed. This may require amendments to the Managing Agents Agreement to document what has been agreed.
- Amendments where members of a syndicate participate on different terms – Wording may be adopted where a syndicate has limited tenancy capacity with different members participating on the syndicate on different commercial terms.
- Amendments to Schedule 1 relating to the managing agent’s remuneration – Parties may commonly wish to agree different terms relating to the remuneration of the managing agent where capacity is allocated on a limited tenancy basis.
The wording of permitted amendments is not prescribed, but examples of acceptable wordings are included in appendices to the Bulletin. In many cases, these wordings have become standardised in forms of variation previously approved by Lloyd’s.
The amendments can only be adopted where both parties agree (with the Bulletin specifying that under no circumstances may managing agents impose any of the variations on members of a syndicate) and must be notified to Lloyd’s within 14 days of the variation being executed. Lloyd’s is prescribing the form of notification.
Parties must be careful not to go beyond the scope of the permitted amendments, and if they do so must make an application for consent. Additional terms may be included in an agreement as to how parties will exercise their rights under the Managing Agent’s Agreement, and these are acceptable if they are not themselves variations of the Managing Agent’s Agreement and do not interfere with compliance with Lloyd’s Byelaws and other requirements.
The advance consent does not apply where capacity is to be tradable in the Lloyd’s capacity auctions, and modified freehold capacity variations must be agreed by Lloyd’s on application. It also does not apply to syndicates that are being newly established, as any variations will be considered in the context of the overall approval process.
Footnote
- Y5444 – Limited Tenancy Capacity – Advance Consent.