Lloyd’s Introduces Framework for Broker-Originated Reinsurance Structures

On 16 October 2026, Lloyd’s published Market Bulletin Y5493, introducing a principles-based framework for broker-originated reinsurance structures within Lloyd’s effective 1 January 2027. The framework responds to the growth of broker facilities and third-party capital solutions and is intended to support innovation and growth while maintaining underwriting discipline and protecting the Central Fund.

The framework applies to broker-originated reinsurance structures seeking approval to operate within Lloyd’s. It introduces specific requirements concerning portfolio concentration, ownership, capital participation, underwriting, and governance while retaining Lloyd’s existing new entrant approval and ongoing oversight arrangements.

Key Requirements of the Framework

1. Performance and Market Concentration

• Structures must demonstrate alignment with Lloyd’s cross-cycle target of a 95% net combined operating ratio.
• Lloyd’s has established an initial marketwide risk appetite of up to 10% of an individual broker’s treaty portfolio’s being placed into these structures.

2. Ownership and Capital Participation

• Brokers cannot own or capitalise the structures.
• The member aligned to the managing agent must have a minimum capital participation of 19.99%. Standard new entrant capital allocation rules and timings apply.

3. Eligibility and Underwriting Requirements

• At least 25% of capacity must be provided by lead reinsurers, with the panel agreed by the managing agent.
• Once the participation cede has been determined as part of the overall proposition, cedents must cede either all of their eligible portfolio with the relevant broker to the structure or none of it.
• Certain types of business are out of scope, including, but not limited to, hybrid fronting carriers, managing general underwriters, and legacy providers. Captive involvement is subject to a prior submit arrangement.
• Managing agents must have strong reinsurance pricing capabilities, existing portfolio solutions expertise, and sufficient data access to validate, verify, and challenge broker assumptions.
• Structures must have no exposure to cyber war “type 4” language.

4. Governance, Reporting, and Oversight

• The framework requires regular engagement with Lloyd’s, with data shared at least quarterly.
• Brokers must be able to provide the managing agent with data at least monthly, including dashboards, exception reports, and bind-level data.
• Mandatory governance, underwriting, and portfolio management guardrails must be agreed with Lloyd’s and contractually agreed between the managing agent and capital provider.
• Lloyd’s CPG will continue to approve annual plans and relevant midyear changes.

5. Portfolio Development and Performance Monitoring

• 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 may include winding up the structure.

6. Sharing of Economic Benefits

• Lloyd’s expects cedents to share in efficiencies generated by these structures, including operational and capital efficiencies, through a client dividend.

Implications for Market Participants and Next Steps

The framework provides greater clarity for brokers, managing agents, capital providers, and reinsurers on Lloyd’s expectations for broker-originated reinsurance structures, including capital participation, portfolio eligibility, governance, and reporting.

The framework sets out requirements that prospective participants will need to address as part of Lloyd’s existing new entrant approval process. Market participants considering new arrangements can engage with Lloyd’s through that process ahead of 1 January 2027.

If you would like to discuss the new framework or its implications for your business, please contact your usual Sidley contact or a member of our Insurance M&A and Regulatory team.