GENPRU 1.5 Application of GENPRU 1 to Lloyd's

GENPRU 1.2 applies to managing agents and to the Society in accordance with:

1. (1)

   for managing agents, INSPRU 8.1.4 R; and

2. (2)

   for the Society, INSPRU 8.1.2 R.

GENPRU 1.5.7 R applies to members, pursuant to the insurance market direction in GENPRU 1.5.5 D.

The members taken together must at all times maintain overall financial resources, including capital and liquidity resources, that are adequate, both as to amount and quality, to ensure that there is no significant risk that liabilities under or in respect of contracts of insurance written at Lloyd's will not be met as they fall due.

GENPRU 1.3 applies to managing agents and to the Society in accordance with:

1. (1)

   for managing agents, INSPRU 8.1.4 R; and

2. (2)

   for the Society, INSPRU 8.1.2 R.

When recognising and valuing assets that are available to meet liabilities arising from a member's insurance business, neither the Society nor managing agents may attribute any value to any amounts receivable but not yet received from that member or another member, except for:

1. (1)

   timing differences provided that a corresponding amount has been deducted from syndicate assets or funds at Lloyd's;

2. (2)

   the Society's callable contributions, which are valued according to GENPRU 1.5.17 R to GENPRU 1.5.18 R; and

3. (3)

   debts owed by a member to another member of the Society where the debt is a liability arising out of the insurance business he carries on at Lloyd's.

When recognising and valuing assets held as members' funds at Lloyd's the Society may, if the conditions in GENPRU 1.5.13 R are satisfied, attribute a value to letters of credit and guarantees that it holds in respect of a member's insurance business.

The conditions referred to in GENPRU 1.5.12 R are that letters of credit and guarantees must be:

1. (1)

   in the form prescribed by the Society from time to time and notified to the FSA; and

2. (2)

   issued by a credit institution or an insurance undertaking.

When recognising and valuing assets held as members' funds at Lloyd's the Society may attribute a value to verifiable sums arising out of life assurance policies.

The Society must value any letter of credit, guarantee or life assurance policy at its net realisable value. The Society must make all appropriate deductions, including those in respect of:

1. (1)

   the expenses of realisation; and

2. (2)

   any reduction in value that would be likely to occur if the asset needed to be realised at short notice to meet liabilities falling due earlier than expected.

If a member relies on a value attributed to a letter of credit or guarantee to meet any applicable capital resources requirement and that letter of credit or guarantee will expire in less than one month, the Society must take appropriate steps to ensure that the applicable capital resources requirement will continue to be met, including taking steps to ensure that sums due under the letter of credit or guarantee are drawn down when due and carried to the appropriate Lloyd's trust fund.

For the purposes of GENPRU 1.5.15R (2), the amount assumed to be callable from a member must not exceed the lower of:

1. (1)

   the maximum callable contribution that member is or may be liable to make in that financial year; and

2. (2)

   the amount by which the member's own capital resources exceed the member's own capital resources requirement.

The Society must value callable contributions taking appropriate account of any legal, constructive or other limits on its ability to call for contributions from members or to realise the amount called.

The Society must give the FSA adequate advance notice if it proposes to change the maximum amount of the callable contribution that members may be liable to make in any financial year.

Subject to GENPRU 1.5.22 R, the Society must recognise and value all of a member's liabilities in respect of its insurance business.

The Society need not recognise or value a member's liabilities that are recognised and valued at syndicate level by managing agents in accordance with GENPRU 1.3.

For the purposes of calculating a member's capital resources, when valuing a member's funds at Lloyd's the Society must deduct the value of a member's liabilities determined under GENPRU 1.5.21 R.

In recognising and valuing a member's liabilities, the Society and managing agents may, to the extent permitted by applicable accounting principles, leave out of account the liabilities in respect of 1992 and prior general insurance business reinsured by Equitas Reinsurance Limited.