Coverholder

What is a Coverholder?

A coverholder is a company or individual that has been granted authority by Lloyd's of London to underwrite insurance on behalf of one or more Lloyd's syndicates. The coverholder operates under a binding authority agreement — a contract that defines the scope of the delegated underwriting power, including the class or classes of business, territorial scope, maximum policy limits, eligible risk types, and all reporting and compliance requirements. The coverholder can bind, endorse, and cancel policies within these parameters without seeking prior approval from the syndicate for each individual risk.

The coverholder model is one of Lloyd's principal distribution mechanisms. Coverholders extend Lloyd's underwriting reach into markets, classes, and geographies that Lloyd's syndicates could not access cost-effectively through direct placement. There are over 4,000 active coverholders approved by Lloyd's operating across more than 200 territories globally, ranging from large international MGAs writing hundreds of millions in premium to smaller specialist operations focused on niche classes in specific markets.

The Lloyd's Coverholder Approval Process

Becoming a Lloyd's coverholder requires formal approval from Lloyd's, obtained through the Coverholder Approval System (CAS) on Lloyd's Atlas platform. The approval process assesses the applicant's legal and regulatory status in its home jurisdiction, its management team's underwriting expertise and experience, its financial standing (minimum net assets requirements apply), its IT and data management systems, its claims handling capabilities, and its compliance and governance framework. Approval is granted for specific classes of business and territories, and must be renewed periodically — typically every three years, subject to satisfactory performance.

Syndicate managing agents perform their own due diligence before granting a binding authority to a coverholder, in addition to the Lloyd's approval requirement. This dual-layer oversight reflects the significant trust being extended: the coverholder is effectively acting as the underwriter for the syndicate's account, and any underwriting decisions made within the binding authority bind the syndicate's capital. Poor underwriting by a coverholder generates losses that the syndicate must pay and that directly affect Lloyd's global capital position.

Coverholder Reporting Obligations

Coverholders carry substantial ongoing reporting obligations to their capacity providers and to Lloyd's. Premium bordereaux — detailed listings of all policies bound during the reporting period — must be submitted monthly or quarterly, depending on the binding authority terms. Claims bordereaux detailing all claims activity must be produced with equal regularity. These reports must meet the data quality standards prescribed by Lloyd's and the syndicate, and are used by the syndicate's actuaries to monitor portfolio performance and set reserves.

Lloyd's conducts performance monitoring reviews of all active coverholders, assessing premium volume, loss ratios, data quality, and compliance with reporting timelines. Persistently poor data quality or late reporting can result in Lloyd's placing the coverholder on a remediation plan or, in serious cases, revoking approval. Coverholders must therefore invest in systems and processes that can reliably produce accurate, timely, and correctly formatted bordereaux — a requirement that grows more demanding as binding authority portfolios grow in volume and complexity.