Chapter 3: The Lloyd's role players
3.2 An overview of Lloyd's within the South African
The first indication of insurance within South Africa was in 1806, when a UK company, known as Phoenix, had granted agents "to transact business on its behalf". Twenty years later, additional UK companies joined the South African insurance market, along with other foreign companies. It was only later in 1998 when Lloyd's of London established a branch office in South Africa to conduct underwriting business within the South African insurance market.137
135 Day Legal and regulatory aspects of conflicts 5.
136 See Long A structural analysis of Lloyd's of London 2.
137 MacGregor Lloyd's in South Africa 143.
Marine insurance was only introduced around 1838, as life and fire insurance were the main insurance types back then.138 This meant that marine insurance only became a necessity as trade grew globally.139 Furthermore, Lloyd's was part of the group that introduced wireless technology in South Africa and established a "Transvaal War Relief Fund for disabled men in South Africa", confirming that Lloyd's became quite significant in the South African insurance market by 1900.140
One of the earliest signs of Lloyd's of London in South Africa was the communications between a Commander-in-Chief of the Cape, and the Committee of Lloyd's.141 However, there is no clear evidence that Lloyd's of London mandated an agent or that information containing maritime affairs were exchanged.142 The first definite appointment of a Lloyd's agent was in 17 July 1850.143 This appointment did not authorise Lloyd's agent to deal with the insurance business, but rather "appointed to look after Lloyd's interest and keep it informed about ship movements".144
For a period in the 1900s, Lloyd's was not liable to pay tax, nor was it required that Lloyd's should have a license.145 This occurred while Lloyd's, as the other insurers, was accepting insurance risks.146 However, since the enactment of the Insurance Act 37 of 1923, Lloyd's was subject to the provisions of sections 44 and 45; resulting in the first regulation of Lloyd's intermediaries who operated within South Africa on behalf of
138 MacGregor Lloyd's in South Africa 144, 148.
139 MacGregor Lloyd's in South Africa 148.
140 MacGregor Lloyd's in South Africa 153.
141 MacGregor Lloyd's in South Africa 149, 154.
142 MacGregor Lloyd's in South Africa 150.
143 MacGregor Lloyd's in South Africa 150.
144 MacGregor Lloyd's in South Africa 152.
145 MacGregor Lloyd's in South Africa 154-156, 163.
146 MacGregor Lloyd's in South Africa 154-156, 163.
Lloyd's of London.147 Which clearly shows that as the insurance market developed, the regulations followed.
There is much debate on whether foreign companies, such as Lloyd's of London, can form part of the South African insurance market.148 There was further tension in the market since Lloyd's were under less strict regulation in South Africa than other insurance role players.149 But, since Lloyd's of London is one of the only companies that could insure larger risks, removing Lloyd's from the South African insurance market would not have been beneficial.150 Keeping both South African and international owned enterprises in the South African insurance market is beneficial, not only for the risk factor but also for the insured (for more competitive policies).151
When Lloyd's was first established the English courts had jurisdiction over all disputes.152 A concern for the insured is that litigation is costly, and it is assumed that a international entity such as Lloyd's of London could afford this and not the average person. The Admiralty Jurisdiction Regulation Act 105 of 1983 makes provision in section 2 that the South African courts have jurisdiction to hear all maritime-related matters. This was confirmed in the Representative of Lloyds v Classic Sailing Adventures (Pty) Ltd.153
147 MacGregor Lloyd's in South Africa 156-157.
148 MacGregor Lloyd's in South Africa 157.
149 MacGregor Lloyd's in South Africa 156.
150 MacGregor Lloyd's in South Africa 157, 164, 177.
151 Competitive policies imply that the insured can choose a policy that is more beneficial financially with the similar risk coverage.
152 MacGregor Lloyd's in South Africa 157.
153 Representative of Lloyds v Classic Sailing Adventures (Pty) Ltd 2010 5 SA 90 (SCA) para 27.
Later, the Insurance Act of 1943 was implemented, and this is when "Lloyd's was licensed … to carry-on short-term business in South Africa".154 Lloyd's further had its provisions within the Act, as seen in the current legislation.155 After implementing this Act, it was clear that Lloyd's underwriters had now accepted insurance in South Africa and any dispute that arose from a South Africa business transaction between Lloyd's representatives had to be dealt with by South African courts.156
Once the amendment to the Insurance Act of 1943 had been implemented, it was required that Lloyd's representatives157 had to pay a higher deposit.158 Additionally, the premiums disbursed as a result of the Lloyd's business had to be paid into South African banks, this way, there was more security for the insured to receive money from claims as the money was kept within the South African jurisdiction.159
Section 60 of the Insurance Act 27 of 1943 is of importance, and it deals with the representatives of Lloyd's in South Africa. This natural person is appointed by the Council of Lloyd's and reports and represents the council within South Africa. Any legal proceedings against an underwriter within South Africa had to be directed to the beforementioned representative.160 By doing this, the matter is to be heard under the South African court's jurisdiction and not within the English court's jurisdiction.161 The Lloyd's representative also fulfils other functions such as dealing with complaints
154 MacGregor Lloyd's in South Africa 161.
155 MacGregor Lloyd's in South Africa 161.
156 Section 60 of the Insurance Act of 1943; MacGregor Lloyd's in South Africa 163-164.
157 "Any person authorized by the Committee of Lloyd's to act on behalf of Lloyd's in South Africa." S 60(1)(b) of the Insurance Act 27 of 1943.
158 MacGregor Lloyd's in South Africa 165.
159 MacGregor Lloyd's in South Africa 165-166.
160 Section 60 of the Insurance Act 27 of 1943.
161 MacGregor Lloyd's in South Africa 168.
against Lloyd's, ensuring that Lloyd's agents or brokers comply with the South African legislation and that all the policy changes that are amended in London are implemented in South Africa.162 This role player is similar to the Lloyd's coverholder we know today.163
In 1988, Lloyd's "was admitted as a registered South African insurer", which means that the description of Lloyd's of London changes from foreign to local insurer.164 Accordingly, Lloyd's has formed part of the South African Special Risks Insurance Association (Sasria).165 In 1998 the Lloyd's office opened in Johannesburg, and the purpose of this office was to deal with all relevant administrative duties.166
3.2.2 How to become part of Lloyd's business within South Africa
For a person to become part of the Lloyd's business/market, it is essential to first become accredited by Lloyd's of London. The broker, underwriter and underwriting manager are required "to be tribunalised167 at Lloyd's". This means that once the required applications have been launched, an investigation is conducted by the general representatives of Lloyd's. The purpose of this investigation is to determine what "the financial status and repudiation of the applicant" is.168
162 MacGregor Lloyd's in South Africa 168-170.
163 See discussion in chapter 3.5.5 and 5 of this research paper.
164 MacGregor Lloyd's in South Africa 178.
165 MacGregor Lloyd's in South Africa 178.
166 MacGregor Lloyd's in South Africa 183.
167 Tribunalised/tribunalisation only means that the broker can represent Lloyd's by transacting business on the open market. MacGregor Lloyd's in South Africa 185.
168 MacGregor Lloyd's in South Africa 184.
Once the applicant has been accepted, the tribunalisation process is completed.169 The aforementioned only relates to Lloyd's of London's process for a person to become part of the Lloyd’s syndicate. The South African insurance market further requires that the Lloyd’s member must pay a deposit with the FSB.170 Even if a broker or agent has been tribunalised, it does not automatically conclude a binding authority between people or entities. Once the new broker "has a suitable track record", then only will it be allowed to act in accordance with a binding authority.171