Loss Funds are monies held in trust by a third party administrator (TPA) or broker on behalf of the capacity provider and which are used to facilitate the payments of claims at a set agreed value level.
Director Andy Collery said of the issue; ‘there is little doubt that the various London market and Lloyd’s initiatives around the movement and analysis of data has allowed the market to ensure they have a far better understanding of claims payments. However it has only been in the past three years that the market has been given the ability to code the payment of loss funds, and therefore better able to be track amounts and returns’.
He added, ‘There is and remains an issue with what we would describe as those “legacy” loss funds. By that we mean loss funds which are three years or older given that Lloyd’s operates a three-year accounting system’.
Ambant’s experiences indicate the level of the problem varies between managing agencies. In the past, some were very good at maintaining a record of loss funds and ensuring they track their status, while others who placed less focus on the issue. According to Collery, ‘focus is the core mantra for the market around these funds. It must look to the issue of legacy loss funds as in effect this potentially could free money waiting to be returned’. At Ambant we operate a loss fund service for clients that not only identifies and reconciles current and historic loss funds but also identifies missing funds and reclaims surplus across these funds.
But there remains a great deal of apathy from some in the market to the questions around legacy loss funds. We have been told by some that they have simply written the fund off, or do not believe it is worth the time and effort to carry out an investigation into the number and status of those historic funds.
Ambant believes that a failure to focus on these legacy funds is leaving underwriters and claims departments in danger of missing out on cash that could be recovered and put to far better use. To emphasise the point Ambant has recovered US$29m for 6 Lloyd's Syndicate clients over 10 years of account since the service began 3 years ago.
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