Principles for Doing Business at Lloyd's P1.4: 1.4 Manage and control expenses so they are appropriate for the business written

Expenses are managed and controlled for the business written. Baseline: a medium to long term strategy to control net operating expense; a clear annual plan for acquisition and administration expenses consistent with Lloyd's market expectations; an internal expense policy with thresholds and referral points; understanding of how gross and net operating expenses affect profit and loss; analysis down to syndicate class of business; quarterly MI against expectation with remediation; administration expenses proportionate and forecast in line with the underwriting strategy; an itemised fixed and variable breakdown, managing agent profit commission identified, acquisition costs proportionate to business and placement method with a documented remuneration strategy for brokers, third parties, coverholders and overseas levies, delegated costs commensurate with work transferred, and understanding of how portfolio mix and outwards reinsurance commissions affect acquisition cost. Higher levels add fixed versus variable strategy linked to growth, monthly MI, forward-looking expense identification and real-time tracking.