Executive Summary
- What’s new: Lloyd’s of London has issued a framework setting out its appetite, expectations and approval requirements for broker-originated reinsurance structures, effective 1 January 2027.
- Why it matters: The framework gives the market clarity on the terms on which broker-led reinsurance facilities supported by third-party capital can be written at Lloyd’s, and imposes guardrails on concentration, ownership and capital, governance and underwriting.
- What to do next: Market participants contemplating such structures should test their proposed broker-led reinsurance facilities at Lloyd’s against the eligibility criteria and engage with Lloyd’s through the standard new entrant approval process, bearing in mind standard capital allocation rules and timings.
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On 16 October 2026, Lloyd’s of London1 (Lloyd’s) issued Market Bulletin Y5493, setting out how broker-originated reinsurance structures — reinsurance portfolios originated by a broker from its own treaty book, supported by external capital and underwritten at Lloyd’s — will be overseen from 1 January 2027. Lloyd’s describes the framework as transparent and principles-based. The backdrop is the growth of broker facilities and third-party capital solutions, which Lloyd’s recognises has created an emerging opportunity for broker-led reinsurance facilities supported by external capital. Lloyd’s expects demand for these broker-led reinsurance facilities to continue to increase.
What Does the Framework Require?
The key features of the framework are as follows.
Performance and concentration. Structures must demonstrate alignment with Lloyd’s cross-cycle 95% net combined operating ratio target. Lloyd’s has also set an initial marketwide risk appetite of up to 10% of an individual broker’s treaty portfolio that can be placed into these structures.
Ownership and capital. Brokers cannot own or capitalise these structures. There is a minimum capital participation requirement of 19.99% from the member aligned to the managing agent, which is intended to ensure that the managing agent overseeing the syndicate is even more aligned to the economic performance of the syndicate.
Eligibility criteria. Eligible structures must fulfil a set of requirements designed to mitigate concentration and anti-selection risks:
- A minimum of 25% of capacity must be provided by the lead reinsurers, with the panel agreed by the managing agent.
- Certain types of business are out of scope, including but not limited to hybrid fronting carriers, managing general underwriters and legacy providers. The involvement of captive arrangements is subject to a prior submit arrangement.
- Cedents must cede the agreed cession percentage of all of their eligible portfolio with the respective broker to the structure, or none of it.
- The managing agent must have strong reinsurance pricing capabilities, existing portfolio solutions expertise, and sufficient data access to validate, verify and challenge the assumptions provided by the broker.
- Structures must also have no exposure to “Cyber war ‘type 4’ language.”
Reporting and oversight. The framework imposes a continuing information and governance burden:
- Regular engagement with Lloyd’s, with data shared at least quarterly.
- Mandatory governance, underwriting and portfolio management guardrails agreed with Lloyd’s and contractually agreed between the capital provider and the managing agent.
- Data must be capable of being provided to the managing agent by the broker at least monthly, including dashboards, exception reports and bind level data.
Performance over time. If indexation of at least 70% has not been reached by year three of the structure, Lloyd’s and the managing agent will agree next steps, which can include winding up the structure. In line with all business at Lloyd’s, the Capital Planning Group will continue to approve annual plans, and any midyear changes where relevant.
Client dividend. Lloyd’s expects the cedent to share in the efficiencies generated by the structure, both operational and capital, through the mechanism of a client dividend.
How Will Structures Be Approved?
Broker-originated reinsurance structures will be subject to the standard new entrant approval process and ongoing oversight arrangements, and standard new entrant capital allocation rules and timings apply. In practice, this means that sponsors should consider planning for these facilities with the Lloyd’s timetable in mind. The eligibility criteria are threshold conditions; the commercial and prudential assessments that any new entrant faces apply, and the capital allocation timetable will drive when a structure can commence underwriting.
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1 Lloyd’s of London is the trading name for Lloyd’s, which is a statutory corporation incorporated by a private Act of Parliament in 1871. It is also referred to in more recent financial services legislation as the Society of Lloyd’s.
This memorandum is provided by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates for educational and informational purposes only and is not intended and should not be construed as legal advice. This memorandum is considered advertising under applicable state laws.