Facultative risk

A reinsurance risk that is placed by means of separately negotiated contract as opposed to one that is ceded under a reinsurance treaty.

Facultative/obligatory treaty

A reinsurance contract which allows the reassured to select which risks of a given type are to be ceded to the reinsurer. The reinsurer is obliged to accept all the cessions made by the reassured provided they fall within the scope of the treaty.

Fee for service

Where a broker is remunerated on the basis of a fee agreed with its client instead of brokerage. The benefit to the broker is that, subject to the terms of agreement, the fee will be payable whether or not cover is placed whereas brokerage is only payable in respect of the placement of cover.

Fidelity insurance

A type of insurance which is designed to protect a firm from losses caused by the dishonest acts of its employees.

Following underwriter

An underwriter of a syndicate or an insurance company that agrees to accept a proportion of a given risk on terms set by another underwriter called the leading underwriter.

Franchise (Lloyd’s)

The Lloyd’s brand, worldwide trading licences, financial strength rating, mutual security and other support services that enable members to underwrite insurance and reinsurance at Lloyd’s on a global basis.

Franchise Board

See Lloyd’s Franchise Board.

Franchisee

A managing agent.

Franchise goal

The creation and maintenance of a commercial environment at Lloyd’s in which the long term return to all capital providers is maximised.

Franchisor

Lloyd’s in the form of the Council, Franchise Board and their respective committees and executives.

Freedom of establishment

In the context of insurance the right of an insurer located in one member state of the European Union (“EU”) to sell insurance in another member state of the EU through a local branch, agency or subsidiary. In the case of Lloyd’s this includes business that is underwritten by a coverholder in a EU member state where Lloyd’s has a representative office and where the coverholder may enter into contracts of insurance without first consulting the managing agent that granted the binding authority.

Freedom of services

The right to provide services on a cross-border basis within the European Union (EU). The essential feature so far as the provision of insurance is concerned is that the contract is made in an EU member state which is different from the member state where the risk is located (see European Union/European Economic Area risk). It therefore covers open market business (with or without the involvement of a local intermediary) and business that is written under any binding authority where the local coverholder does not have authority to enter into contracts of insurance without first consulting the managing agent that granted the binding authority.

Funds at Lloyd's

Funds of an approved form that are lodged and held in trust at Lloyd's as security for a member’s underwriting activities. They comprise the members deposit, personal reserve fund and special reserve fund and may be drawn down in the event that the member’s syndicate level premium trust funds are insufficient to cover his liabilities. The amount of the deposit is related to the member's premium income limit and also the nature of the underwriting account. (see risk based capital).