Exclusive: Lloyd’s removes HISL from its broker register

By David Bull

May 27 - (The Insurer) - Lloyd’s has removed UK-based HISL Brokers from its broker register, The Insurer has learned.

Earlier this month, Lloyd’s said that it was looking into allegations by several carriers and U.S. wholesalers that HISL had incorrectly claimed to have trading relationships with them when marketing a newly launched insurance facility.

Approached by The Insurer for an update on the situation, a Lloyd’s spokesperson confirmed on Friday that HISL had been removed from its broker register, with effect from May 15. The spokesperson did not provide further details.

HISL officials did not respond to an emailed request for comment on Friday. HISL Chairman Richard Tee previously declined to comment on the allegations.

When asked about the HISL facility earlier in May, Lloyd’s told The Insurer: "We are aware of the allegations and are looking into the situation. Anyone who is concerned about the validity of their policy should discuss immediately with their broker.”

The Corporation of Lloyd’s does not regulate brokers itself, with the UK’s Financial Conduct Authority responsible for their authorisation and regulation.

Asked on Friday if it was investigating HISL, the FCA referred The Insurer to its policy of neither confirming nor denying whether it is carrying out an investigation into a firm.

Sources with knowledge of the situation said at least one wholesale broker has made an official complaint against HISL to the FCA, although it is not known whether there has been any response from the regulator.

Although it is the FCA that would launch a formal investigation into a broker, Lloyd’s has the power to deregister an intermediary.

Registered Lloyd’s brokers have direct access to a “unique pool of underwriting expertise” in the Lloyd’s global marketplace, according to Lloyd’s website.

They are able to transact with every syndicate in the Lloyd’s market and can conduct business directly with managing agents, without the need to include other brokers.

They also benefit from the Lloyd’s brand, which it describes as the strongest in the insurance industry and can contribute to global business flows from over 200 countries and territories where Lloyd’s is licensed.

Brokers that are not registered can still place business into the Lloyd’s market as long as they have entered into a terms of business agreement (TOBA) with an individual managing agent.

So-called non-Lloyd’s brokers that have signed a TOBA with an individual managing agent are still expected to “maintain and uphold high standards of service and professionalism” and comply with all laws and regulatory requirements in jurisdictions where they transact business, according to Lloyd’s.

A third category of firm that can transact business in the Lloyd’s market is a “producing broker”, which must work in collaboration with another Lloyd’s placing broker.

The Insurer reported on May 9 that HISL’s head of business development Harry Hail had been marketing a new facility, initially focusing on property and terrorism, claiming support from a number of U.S. wholesale brokers and carriers, including primary insurers and reinsurers.

Hail, who previously declined to comment on the allegations, did not respond to an emailed request for comment on Friday.

Several carriers and brokers that had been named in a marketing presentation and emailed communications viewed by The Insurer said they had not in fact provided capacity to the facility or made premium commitments.

Uncertainty over which companies provided backing for the facility, a mechanism used to place and syndicate risk in the Lloyd’s subscription market, led to U.S. wholesalers seeking alternative lines of insurance on behalf of their retail broker clients for property risks that had already been placed with the facility, two market sources told The Insurer.

U.S. wholesale broker sources said the process of replacing that capacity had been successfully completed.

The Insurer could not independently confirm how much capacity from carriers the HISL facility had in place, or if any insureds or brokers have been negatively impacted because of HISL’s actions.

There could also be implications for the insured and its broker if replacement capacity is more costly and has more restrictive terms, industry sources said.

At least 10 deals, including for risks in Florida and California, had been placed with the HISL facility through U.S. wholesaler USG Insurance Services. The company’s brokerage division national director Mitchel Zelman has been leading placement into the facility, broker sources with knowledge of the situation told The Insurer.

USG declined to comment when approached in relation to The Insurer’s May 9 report. Zelman did not respond to a request for comment.