Determination of liabilities

Part

LLD Lloyd's

Chapter

Determination of liabilities

Printed on: 21/04/2025

Rulebook at: 01/01/2005

LLD 12

Determination of liabilities

LLD 12.1

Application and purpose

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Application

LLD 12.1.1

This chapter applies to the Society.

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LLD 12.1.2

A contravention of the rules in this chapter does not give rise to a right of action by a private person under section 150 of the Act (Actions for damages) and each of those rules is specified under section 150(2) of the Act as a provision giving rise to no such right of action.

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Purpose

LLD 12.1.3

These requirements provide safeguards against the risk that insurance liabilities will be underestimated (see also LLD 9.1.4 G).

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LLD 12.1.4

Under LLD 9.4.1 R, subject to LLD 9 to LLD 15, the insurance accounts rules and generally accepted accounting practice apply to the valuation of assets and the determination of liabilities.

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LLD 12.3

Members' liabilities

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LLD 12.3.1

At stage (e) of PRU 2.2.14 R the Society must deduct from a member's capital resources a negative valuation difference being, for each member, (for open syndicate years through which the member carries on general insurance business taken together), if A+B exceeds C, A+B-C, where:

(1) A is the total of the member's proportionate shares for each syndicate year of the accumulated excess of income over outgoings;
(2) B is the amount of any unpaid additional contributions the member is required to make to the funds maintained for the syndicate years by the managing agents; and
(3) C is the total of the member's proportionate shares of the liabilities net of reinsurance recoveries.

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LLD 12.3.2

For the purpose of PRU 4.2.52 G to PRU 4.2.56 G (Currency matching of assets and liabilities) and PRU 7.2.30 R (Localisation (UK firms only)), the amounts in LLD 12.3.1 R, which are intended to prevent the premature release of profits, may be left out of account.

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LLD 12.3.3

For the purposes of this chapter the following liabilities may be left out of account:

(1) liabilities of a member for guarantees or letters of credit issued to support the insurance business he carries on at Lloyd's, where the guarantor or issuer has no recourse to premium trust funds or funds at Lloyd's;

(2) liabilities which have been covered by a reinsurance to close with reinsurers who were members when the reinsurance to close was effected;

(3) liabilities of a member, which arise other than in connection with the insurance business he carries on at Lloyd's or his membership of the Society, and cannot be met from his funds at Lloyd's until those funds are released to him; and

(4) liabilities for 1992 and prior general insurance business reinsured by Equitas Reinsurance Ltd.

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LLD 12.3.4

LLD 12.3.1 R requires the aggregate net surplus (if any) in a member's participations in open general insurance business syndicates to be treated as part of his liabilities. This is analogous to the treatment of open years for an insurer using the fund basis of accounting. LLD 12.3.3 R allows liabilities not relevant to the solvency of the Lloyd's market and (to prevent double-counting) amounts covered by reinsurance to close to be left out of account.

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