LMA clause ensures continuity of coverage in event of market closure

The Lloyd’s Market Association has today published policy language to ensure customers’ coverage continues beyond a specified renewal date if the Lloyd’s market is inaccessible, and Emergency Trading Protocol fails.

This new clause is intended to ensure that re/insureds will not be left without cover if the developing COVID-19 situation renders usual renewal discussions untenable.

The clause, LMA5392, ensures continuity of coverage for Lloyd’s re/insureds in the event that, for more than one day during the seven business days prior to a scheduled renewal, access to Lloyd’s is prohibited and the Lloyd’s Emergency Trading Protocol fails.

Deputy director of underwriting at the LMA, Patrick Davison, said, “Although the situation specified is extremely unlikely to occur, the LMA and its members felt it prudent to draft this model clause to ensure that Lloyd’s customers are not left without coverage should the coronavirus, or any other event, prevent renewal negotiations from taking place.”

LMA5392 – Limited Automatic Extension – Prevention of Access to Lloyd’s of London (Source: LMA)

1. In the event that, seven or fewer calendar days before expiration of this contract of re/insurance, all Lloyd’s Syndicates are prevented from entering Lloyd’s of London, One Lime Street, London, EC3M 7DQ:
1.1. by the Corporation of Lloyd’s; or
1.2. following the imposition of quarantine or restriction in movement of people by any national or international body or agency;
for more than one (1) business day during the seven days before expiration of the contract of (re)insurance, this contract of re/insurance shall, in consideration of a pro-rata additional premium, be automatically extended at the existing terms and conditions for fourteen days from the expiration of the contract of re/insurance.

2. However, the automatic extension provided under paragraph 1:
2.1. shall only apply if the (re)insured, their broker or re/insurers, despite using best endeavours, are unable to implement Lloyd’s Emergency Trading Protocol; and
2.2. shall not increase or reinstate any applicable limit(s) of liability; and
2.3. shall only apply once, unless agreed otherwise in writing by re/insurers; and
2.4. can be voided by mutual agreement between the re/insured and re/insurers.

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