DEFINITION of Lloyds Organizations

Lloyds Organizations is an insurance syndicate that bases its organizational structure on the one used by Lloyd’s of London. Also called Lloyds associations or American Lloyd’s, are funded by subscriptions paid by members who participate in underwriting activities. The subscriptions are used to pay general expenses, such as administrative and office expenses. A Lloyds organization should not be confused with Lloyd’s of London, which is an international insurance marketing organization.

BREAKING DOWN Lloyds Organizations

Lloyds organizations act as insurance markets rather than insurance companies. Insurance underwriters and brokers conduct transactions that are facilitated by their membership in the same organization. The organization may focus on a particular type of insurance, such as property or fire, or may involve several types of insurance.

Lloyds in the U.S.

The members of a Lloyds organization form groups, and appoint a lead underwriter to accept business on their behalf. The lead underwriter will conduct day-to-day activities. Brokers participating in the organization must demonstrate their solvency, and be capable of bringing in business to the organization. During the underwriting process, the broker outlines the risk that is being insured against and approaches the underwriters who may specialize in that particular type of risk. The brokers will work with the various underwriters participating in the organization in order to obtain the best terms for his or her client.

The Lloyds organization itself does not assume liability for the underwriting activities of its members, and instead is responsible for the management and operation of the market. For example, the organization will outline the financial rules and regulations that must be followed in the marketplace. Members underwrite and purchase insurance for their own accounts, and thus assume the risk themselves.

Lloyds organizations, just like other organizations, must be licensed to operate by state insurance regulators. Even though a Lloyds organization doesn't underwrite policies, it does collect membership fees, which is often enough to trigger oversight.

Underwriters at Lloyd’s have licenses in Illinois, Kentucky, and the US Virgin Islands and are approved surplus lines insurers in all US states and territories. Lloyd’s is also an accredited reinsurer in all 50 states, the organization stated on its website. Some 41% of Lloyd's global premiums are held by US customers with total premium in the US at $15 billion. It paid $2.2 billion in total net claims for Superstorm Sandy. Lloyd's said that it leads the way in the excess and surplus lines and reinsurance segments in the US: 57% surplus lines; 35% reinsurance; 7% exempt and 1% licenses.