Several not joint liability of subscribing insurers
The principle under which each underwriter on a placement is liable only for its own share, without guaranteeing the others', so that one coinsurer's failure leaves a gap nobody fills.
On a subscription market, a risk is split among several underwriters who each take a line. Several not joint liability means that each underwriter commits only for its own share, within the limit of its line, and in no case answers for the others' shares. If one becomes insolvent or refuses to pay, the others are not required to make up the difference, and the insured bears the missing share. The principle is so fundamental in the London market that a standard notice restates it in contracts, and it also governs coinsurance and share reinsurance in other markets. It explains why the composition of the underwriting list matters as much as price: a program placed at one hundred percent with twenty signatures is worth, for each share, what the weakest of them is worth. It also explains the value of the Lloyd's chain of security, whose Central Fund backs each member's commitments, and the role of financial strength ratings in choosing coinsurers. For the broker, it underpins a duty of care over the security of each line placed.
Textbook case: a 100 million program is placed with ten underwriters at 10 percent each. After a total loss, one is in liquidation and pays only 20 percent of its share. The other nine pay their 90 million and nothing more: the insured receives only 2 of the 10 million from the failed line and bears the remaining 8 million.
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