What is a Lloyd's Open Market Correspondent

Lloyd's of London is a specialist insurance and reinsurance market where multiple syndicates underwrite risks. Through its unique structure, Lloyd’s provides coverage for an appreciably wide range of risks, from standardised commercial insurance to highly unusual or complex exposures, including niche risks like celebrities' limbs and space missions. "Lloyd's open market correspondent" refers to a person who is approved by Lloyd’s to introduce business to a Lloyd’s broker or Lloyd’s underwriter for placement in the Lloyd’s market on an open market basis ("Lloyd's OMC").

Lloyd's OMCs are insurance intermediaries approved by Lloyd’s to place business directly into the Lloyd’s market, usually from overseas territories where Lloyd’s operates. Unlike general intermediaries, Lloyd's OMC's must be formally accredited by Lloyd’s and can only place risks with registered Lloyd’s brokers, not directly with syndicate underwriters.

Lloyd's OMCs act as a bridge between the Lloyd’s market in London and stakeholders in a particular country or region. While Lloyd's OMCs do not underwrite or bind policies, they play an essential facilitative role in allowing policyholders to benefit from Lloyd’s specialist underwriting capacity while maintaining regulatory integrity.

How does the exemption change the current position?

Previously, any person wishing to render services as an intermediary in relation to a short-term insurance policy in South Africa was required to obtain approval from the Authority. With effect from 25 April 2025, the exemption means that Lloyd's OMCs no longer require such approval to operate as intermediaries of short-term insurance in South Africa, subject to certain requirements being met.

The exemption is a positive development in the South African insurance sector. Although utilising the services of a Lloyd's OMC to place business with Lloyd's underwriters is not a new phenomenon in South Africa, this exemption has significantly streamlined the process. Due to the growth of the South African insurance market, local insurers may lack the capacity to cover all of the risk present in certain high-capacity and specialist sectors without the need to reinsure. In light of this, the exemption facilitates efficient access to Lloyd's capacity by removing a prior approval step specific to Lloyd's OMCs, while maintaining regulatory protections.

Lloyd's OMCS make Lloyd’s products and syndicates more accessible by acting as the first point of contact for local stakeholders, allowing South African policyholders to benefit from Lloyd’s global capacity and expertise, particularly in specialist or unusual risks that may not be widely catered for by local insurers. This increased ability to access high-capacity and specialist insurance may be particularly beneficial to sectors such as personal indemnity, mining, cybercrime, infrastructure and marine trade owing to the niche risks present in those industries.

Less "red tape" around Lloyd's OMCs significantly increases the flexibility afforded to short-term policyholders, allowing them easier access to the expertise and innovation of the Lloyd's market should they choose to place risk with them.

Who qualifies as a Lloyd's Open Market Correspondent?

The exemption is specific and limited in that it only applies to Lloyd’s OMCs.

Accordingly, it should be noted that –

• other foreign intermediaries or brokers remain subject to the existing approval requirements under section 8(2)(d) of the STI Act; and
• the exemption does not extend to long-term insurance intermediaries.

Conditions of the Exemption

While this development certainly eases the requirements of Lloyd's OMCs, the exemption is subject to several conditions which Lloyd's is required to fulfil, namely –

• Lloyd's must promptly inform the FSCA of any material changes to the circumstances upon which the exemption was based;
• Lloyd's is required to maintain appropriate and robust governance, control and oversight measures in order to minimise the risk of possible unfair outcomes to financial customers impacted by the exemption;
• Prior to approving any Lloyd's OMC in South Africa, Lloyd's must undertake a due diligence in respect of the proposed OMC in order to ensure that they are licensed as a Financial Services Provider under the Financial Advisory and Intermediary Services Act 37 of 2002 ("FAIS Act") and have the appropriate operational procedures in place to comply with all applicable legislative requirements; and
• Lloyd's is required to report annually to the FSCA on or before 1 July on the nature and value of the insurance business carried out by Lloyd's OMCs in the South African market during the preceding year.

Conclusion

The exemption applies specifically to short-term insurance intermediaries and does not serve as a waiver  of the applicable FAIS requirements, such as key approvals, conflicts of interest, record keeping or fit and proper persons. In terms of the FSCA notice, the exemption is subject to amendment or withdrawal, a caveat which highlights its potentially temporary nature. 

The impact and effect of the exemption will undoubtedly be influenced by the utilisation of the additional capacity made available to the South African market and Lloyd's compliance with the Authority's conditions. A positive outcome may present a case for the extension of the current exemption and/or lead to an expansion thereof to include long-term insurance intermediaries in the future.