Skuld Offshore and the Lloyd’s platform

Skuld is a world leading provider of insurance to the offshore industry; we insure a wide range of vessels and other assets that are engaged in offshore operations for both protection and indemnity risks, as well as losses for physical damage.

Our current offshore P&I portfolio includes almost 400 mobile offshore units [MOUs] and in excess of 1,500 specialist offshore vessels.

For a number of years, Skuld has followed a diversification strategy; In 2011 Skuld entered the commercial marine insurance market when it opened a Syndicate at Lloyd’s of London. As a result, Skuld has been able to create significant synergies between our worldwide relationships.

In this article, Nik Rockliffe from our P&I team in London sets out some of the workings of Lloyd’s of London and provides an overview of Skuld's unique approach.

The Lloyd’s market

Lloyd’s of London is not an insurance company, but a market place which caters for and provides specialist insurance services to businesses worldwide.

The origin of Lloyd’s is in marine insurance, and as a market place it has been insuring risks for over 300 years. Lloyd’s is headquartered in the City of London and its main building in Lime Street (Skuld London is in an adjacent building) is designed to operate as a market. Lloyd’s offers an exceptionally high level of knowledge and underwriting experience to all types of business combined with providing excellent financial security. Risks placed in the Lloyd’s market vary from ships to football players and thoroughbred race horses. Through Lloyd’s global licensing agreements, the market can be accessed worldwide.

How are risks written in the Lloyd’s market?

The Lloyd’s market is a “subscription market”. This means that several syndicates(1) may take a share in the same risk, allowing policyholders(2) to obtain cover for very large and complex risks. This is very different from a P&I entry, where the Club covers 100 per cent of the risk. In 2017 there were 85 syndicates managed by 56 managing agencies(3).

If you have a fleet of vessels or units employed in the offshore or marine and energy sector with specific and complex requirements for which you need protection, your first port of call normally is your Lloyd’s broker(4). The broker will visit the Lloyd’s market and have access to numerous syndicates spanning three floors of the Lloyd’s building.

A striking feature and tradition of the Lloyd’s market is that brokers will meet with underwriters(5) face-to-face to discuss the risk and requirements of the client and to negotiate the best insurance package. This takes place at the "box"(6), which is the name given to the trading desks where the underwriters sit and business is written. Each syndicate has their own box or boxes at Lloyd’s, and these are given numbers so the market is easier to navigate.

Once a deal has been made in the Lloyd’s market, the broker will present the deal to their client for review and acceptance of price and terms. In the fullness of time, should you need to make a claim under the insurance policy, the broker is also the first port of call for the policyholder.

The financial stability and security of Lloyd’s

Lloyd’s financial strength derives from its unique capital structure, which is often referred to as the “chain of security”. To write business in Lloyd’s, a syndicate must put up funds at the outset to pay their percentage share of claims, called the “Syndicate level assets”. When a policyholder has a valid claim, these funds are accessed first. This is the first link in the chain.

The second link is that every member(7) (corporate or individual) must provide sufficient capital to support their underwriting. These “Member Funds” are held in trust for the benefit of policyholders and used only if first link in the chain, the syndicate assets, have been exhausted.

Link three is the “Central Fund”, which is comprised of, among other things, members’ annual contributions and funds issued by the Corporation of Lloyd’s(8). If a syndicate has failed to meet its liabilities, and link one and two have proved insufficient, the Central Fund is the final reserve available to pay those outstanding claims. 

“Chain of Security”

Skuld’s approach

The Skuld Offshore P&I team works closely with the Skuld 1897 Marine and Energy team. In addition to traditional access via a Lloyd's broker, Skuld’s members and clients can access Skuld 1897's products through our global office network.

Skuld 1897 is a lead market in the marine sector, but also writes other classes of business that are associated with the offshore industry such as covers for operators, energy liabilities and subsea equipment

In offshore projects, there are often elements of risk that do not fit within the parameters of the P&I suite of covers but are part of Skuld 1897’s risk appetite. In those situations, we are often able to offer a joined-up approach to the cover, with an overall quote provided for the various elements of the cover, rather than this having to come from two or more different but connected sources.

When it comes to handling claims, Skuld 1897's approach is consistent with the way Skuld has always handled claims, meaning the clients benefit from a direct approach to claims management from the wider Skuld network. When Skuld 1897 acts as Claims Leader for our clients, all claims are handled by the syndicate claims team with input from our legal or technical experts as necessary.

How we can help

The distinctive way in which the Lloyd’s market is set up and operates allows it to provide solutions for the most complex risks. At Skuld, our similar philosophy is to innovate and be seen as a clear provider of insurance solutions to all brokers and clients that we deal with.  Having a syndicate at Lloyd’s is a very natural fit. 

The complexity of the Lloyd’s market can make it seem daunting, but Skuld’s approach is to make things as accessible as possible. If you have any queries in relation to how either Skuld Offshore or Skuld 1897 may be able to assist, please do not hesitate to contact us.