CII London Market Insurance Principles and Practices (LM2) — Information & Free Practice

About CII London Market Insurance Principles and Practices (LM2)

CII London Market Insurance Principles and Practices (LM2) · GB

Key exam facts

Provider

Chartered Insurance Institute (CII), the examination owner and developer; its Qualifications and Assessment Department publishes the 2027 LM2 examination guide.

Format

Computer-delivered examination at an online exam centre or by remote invigilation: 55 standalone single-response MCQs plus four case studies, each with five single-response MCQs. Each question has four options and one correct or best response.

Exam questions

Total questions: 75.

Time limit

2 hours of examination answering time. This is the assessment allowance, not a total appointment duration including check-in or tutorial.

Passing score

Standard pass mark: 70%. CII adjusts MCQ marks for exam-version difficulty relative to the standard; 70% is not an unconditional raw-score guarantee.

Exam fee

Displayed default Enrolment plus package: members GBP 280.52; non-members GBP 382.28, as rendered on 30 October 2026. The package includes digital study materials and assessment entry (18-month exam voucher); it is a package price, not a verified exam-only or resit fee. Print selection incurs additional postage and packaging.

Topics covered

• Understand the business nature of the London Market (1.82%)

  • Examine and explain the principal parties within the London Market and their relationships with each other and their clients.

• Understand the main classes of insurance written in the London Market (5.45%)

  • Explain the importance of the London Market and why clients may decide to place their business within this market.
  • Examine and explain the main classes of insurance written in the London Market and their main features and describe the losses and liabilities which may give rise to claims under each of the main classes.
  • Describe how underwriters diversify their risks and manage their portfolios.

• Understand reinsurance within the insurance market (5.45%)

  • Examine methods of reinsurance; treaty and facultative; proportional and non-proportional and the differences between them.
  • Calculate amounts ceded to re-insurers and claims recoverable.

• Understand market security (5.45%)

  • Explain basic accountancy concepts including solvency margin calculations.
  • Explain the Lloyd’s chain of security.
  • Explain the role of rating agencies.

• Understand the regulatory and legal requirements applicable to the transaction of insurance business (10.91%)

  • Describe the reasons for compulsory insurance and the types of insurance that are compulsory in the UK.
  • Explain the impact of the Consumer Rights Act 2015 in relation to insurance contracts.
  • Explain the impact of the Contracts (Rights of Third Parties) Act 1999 in relation to insurance contracts.
  • Outline the EU solvency requirements for insurers and industry regulator risk-based capital requirements.
  • Explain the purpose and calculate the rates of UK Insurance Premium Tax (IPT).

• Understand insurance intermediation in the London Market (10.91%)

  • Define the different categories of UK and international intermediaries and the services they provide.
  • Define and explain the roles of the various types of brokers within the London Market.
  • Describe the purpose and function of a generic Terms of Business Agreement (TOBA).
  • Explain broking remuneration including commissions and fees.
  • Describe the basic features of the law of agency.
  • Define the main EU and UK legislative provisions applicable to insurance intermediaries.

• Understand the underwriting function within the context of the London Market (12.73%)

  • Explain how underwriting is conducted in London as opposed to elsewhere.
  • Explain the relationship between London Market brokers and underwriters.
  • Explain lead and follow underwriters within the context of the subscription market.
  • Describe the causes and effects of the market cycle.
  • Explain the concept of the modelling and management of exposures and losses.
  • Explain what is meant by reserving and why it is necessary to make provision for outstanding liabilities.
  • Explain the terms ‘open years management’ and ‘reinsurance to close’ within the Lloyd’s Market.

• Understand the way that business is conducted in the London Market (25.45%)

  • Describe the documentation used to present risks to insurers.
  • Explain the legal significance of quotations and renewals.
  • Describe the duty of fair presentation and the principle of good faith and the consequences of non-compliance.
  • Explain the legal principles essential to a valid contract.
  • Explain the purpose and content of the Market Reform Contract (MRC).
  • Explain the placing process for open MRCs and electronic MRCs.
  • Explain the operation of the General Underwriters’ Agreement.
  • Explain how an underwriter will know they are on risk.
  • Identify and explain the various sections of an insurance policy.
  • Explain the purpose and effect of warranties, conditions and exclusions.
  • Explain what is meant by the term ‘contract certainty’.
  • Explain the collection and processing of premiums.
  • Describe how contracts of insurance can be terminated.
  • Explain how conflicts of interest may arise and how they may be managed.

• Understand the purpose, benefits and operation of delegated underwriting (7.27%)

  • Examine and explain the purpose of delegated underwriting/binding authorities.
  • Explain the controls that Lloyd’s has placed on delegated underwriting/binding authorities.
  • Explain the operation of lineslips and consortium underwriting.

• Know the handling of claims in the London Market (7.27%)

  • Explain the role and responsibilities of insurers and brokers in the processing of claims.
  • Explain the roles of claims personnel.
  • Explain the application of indemnity, subrogation, contribution, proximate cause principles, excesses and exclusions.

• Understand the main methods of resolving complaints (7.27%)

  • Examine and describe the Financial Conduct Authority and Prudential Regulation Authority’s regulation of individuals within firms.
  • Describe the industry regulator’s requirements in terms of claims handling.
  • Describe the services provided by the Financial Ombudsman Service (FOS).
  • Explain the main requirements of the Financial Services Compensation Scheme (FSCS).

How to prepare

Work through the topics, read the explanation after each answer, and revisit the areas where you miss questions. Use the official outline and reference materials below to guide your study.

These independent practice questions are not actual exam items and do not guarantee a passing result.

Frequently asked questions

Official sources and references

• CII LM2 2027 examination syllabus

  p. 1, Objective

• CII LM2 2027 examination syllabus

  p. 1, Summary of learning outcomes, flexibility footnote

• CII LM2 2027 examination syllabus

  p. 1, Important notes

• CII LM2 2027 examination syllabus

  p. 1, Important notes, terminal syllabus examination date

• CII LM2 2027 examination guide

  p. 5, Examination Information, opening paragraph

• CII LM2 2027 examination guide

  p. 5, Section A marking paragraph

• CII LM2 2027 examination guide

  p. 5, Section B paragraph

• CII LM2 unit page

  Key product information, Assessment

• CII Understanding your exam result

  p. 1, Awarding process – MCQ exams

• CII LM2 rendered unit page

  Product purchase options

• CII LM2 rendered unit page

  Enrolment plus, default option paragraph

• CII LM2 rendered unit page

  Enrolment plus, assessment entry item (2)

• CII Important exam deadlines

  Opening paragraph

Confirm current exam arrangements with the exam provider.