This chapter applies to the Society and to managing agents.1

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.

The Society must report to the FSA within 6 months of the end of each financial year on its financial situation and solvency and on the whole of the insurance business carried on by members.

The report in LLD 15.2.1 R must be prepared in accordance with PRU 1.3.5 R2 and this chapter.

The report in LLD 15.2.1 R must include:

1. (1)

   the Lloyd's Return which comprises a completed set of the forms set out in LLD 15 Annex 1 R, together with any statements, notes, reports or certificates required by this chapter; and

2. (2)

   a copy of the syndicate accounts for each syndicate that is required by byelaw to prepare accounts for the financial year.

With the exception of the statements required to be annexed to the Lloyd's Return by LLD 15.3.6 R, the4Lloyd's Return must be examined and reported on by the auditors appointed to audit the affairs of the Society.

The Society must provide a printed copy of the Lloyd's Return to the FSA, with Form 13 signed by three signatories who are senior officers of the Society each duly authorised by the Council to sign the Lloyd's Return on behalf of the Society.

If the FSA notifies the Society that any part of the Lloyd's Return is not in conformity with this chapter, the Society must promptly make any appropriate corrections or adjustments and if necessary re-submit the Lloyd's Return (or relevant part of it).

In preparing the Lloyd's Return, the Society must:

1. (1)

   complete the forms in LLD 15 Annex 1 R, subject to LLD 15 to LLD 25, following the requirements of and making the disclosures required under Appendices 9.1, 9.2, 9.3 and 9.4 of IPRU(INS), as if in the documents referred to in those Appendices references to an insurer were references to the Society and members, and adapting the requirements in those Appendices where necessary;1

   11
2. (2)

   complete the forms in LLD 15 Annex 1 R using standard accounting classes as set out in LLD 15 Annex 6 R where the forms require reporting by accounting class;

3. (3)

   report treaty reinsurance general business falling in accounting classes 9 to 10 as set out in LLD 15 Annex 6 R in Forms 28 and 29 in LLD 15 Annex 1 R by reference to the categories in the underlying accounting classes; and

4. (4)

   complete forms 13, 14, 40-60 in LLD 15 Annex 1 R for each long-term insurance business syndicate.

1. (1)

   Where a reinsurance contract in LLD 15.3.1 R (3) covers more than one underlying accounting class as set out in LLD 15 Annex 6 R it must be apportioned between accounting classes in the way that best reflects its underlying composition.

2. (2)

   However, where the apportionment in (1) cannot be made with reasonable accuracy or without disproportionate effort, then the contract must be allocated to the accounting class as set out in LLD 15 Annex 6 R that most closely reflects its underlying composition.

3. (3)

   Whether apportioned under (1) or allocated under (2), a consistent approach must be taken to reporting:

   1. (a)

      the progress of a treaty in subsequent years; and

   2. (b)

      substantially similar insurance business in subsequent years.

4. (4)

   Where a different policy is subsequently followed a suitable explanatory note must be provided.

If, during the financial year in question, the Society has agreed to, or carried out, a material connected party transaction, it must provide a brief description of that transaction by way of a supplementary note to the Lloyd's Return.

The description to be provided under LLD 15.3.3 R must state:

1. (1)

   the names of the transacting parties;

2. (2)

   a description of the connection between the parties;

3. (3)

   a description of the transaction;

4. (4)

   the amounts involved;

5. (5)

   any other elements of the transaction needed for an understanding of its effect or potential effect upon the financial position of the Society; and

6. (6)

   amounts written off in the period in respect of debts due to or from transacting parties which are connected parties.

Transactions with the same connected party may be disclosed on an aggregated basis unless separate disclosure is needed for a proper understanding of the effect of the transactions upon the financial position of the Society.

2The Society must annex to the Lloyd's Return a copy of each statement completed by a managing agent under LLD 15.13.9 R.

2For the purposes of the Lloyd's Return and LLD 15.3.6 R, the Society must, for each statement annexed, identify the syndicate to which the contract of insurance or 'financing arrangement' relates.

The Society must for the purposes of reporting under this chapter:

1. (1)

   classify the direct and facultive general insurance business of members according to appropriate risk groups; and

2. (2)

   where the risks are material, complete a separate Form 34 in LLD 15 Annex 1 R for each group.

The Society must not include:

1. (1)

   policies falling within classes 14, 15, 16, 17 or 18 within the same risk group as policies falling within any other class, except that policies falling within class 14 may be included in the same risk group as policies falling within class 15; or

2. (2)

   policies in respect of private motor car risks, within the same risk group as policies in respect of other risks falling within accounting class 2 as set out in LLD 15 Annex 6 R; or

3. (3)

   policies in respect of comprehensive private motor car risks, within the same risk group as policies in respect of non-comprehensive private motor car risks; or

4. (4)

   policies transferred to members by way of a transfer under section 111 of the Act (Sanction of the court for business transfer schemes), within the same risk group as other policies.

The Society must give the FSA notice of proposed changes to the definition or classification of the risk groups in LLD 15.4.1 R, sufficient to allow the FSA properly to assess the implications of the proposals.

The Society must, in connection with the general insurance business carried on by members, include in the Lloyd's Return a statement of major treaty reinsurers.

A major treaty reinsurer is any insurance company to which in the financial year in question or any of the five preceding financial years:

1. (1)

   in the case of proportional reinsurance, 2% or more of the gross premiums receivable in respect of general insurance business of the members in aggregate has been ceded; or

2. (2)

   in the case of non-proportional reinsurance, 5% or more of the gross premiums receivable in respect of general insurance business has been ceded.

The statement required under LLD 15.5.1 R must include:

1. (1)

   the full name of each major treaty reinsurer;

2. (2)

   the amount of the reinsurance premiums payable in the financial year to each such reinsurer;

3. (3)

   whether and if so how the reinsurer was connected to any member or any managing agent;

4. (4)

   the amount of any debt of each such reinsurer included at line 75 of Form 13 in LLD 15 Annex 1 R;

5. (5)

   the amount of any deposit received from each such reinsurer under reinsurance treaties included at line 31 of Form 15 in LLD 15 Annex 1 R; and

6. (6)

   the reinsurers' share of technical provisions shown on Form 13 in LLD 15 Annex 1 R, except that in respect of claims incurred but not reported, such recoveries need only be included to the extent that they are in respect of specific occurrences for which provisions have been allocated;

or, as the case may be, a statement that having aggregated the reinsurance ceded by members no reinsurer is a major treaty reinsurer.

The Society must, in connection with the general insurance business carried on by members, include in the Lloyd's Return a statement of major facultative reinsurers.

A major facultative reinsurer is an insurance company to which or with respect to which:

1. (1)

   0.5% or more of the gross premiums receivable in respect of general insurance business of the members in aggregate has been ceded; or

2. (2)

   the addition of the amounts in items (4) and (5) of LLD 15.5.6 R produces an amount exceeding 1% of the aggregate gross assets of members.

The statement required under LLD 15.6.1 R must include the matters listed in LLD 15.5.6 R, with appropriate amendments.

The Society must, in connection with the general insurance business carried on by members, include in the Lloyd's Return a statement of major reinsurance cedants.

A major reinsurance cedant is an insurance company which in the financial year in question or any of the three preceding financial years:

1. (1)

   cedes an amount which exceeds 5% of the gross premiums receivable by members in respect of general insurance business accepted under reinsurance treaties; and

2. (2)

   cedes an amount which exceeds 2% of the gross premiums receivable by members in respect of general insurance business.

The statement required under LLD 15.7.1 R must include the matters listed in LLD 15.5.6 R, with appropriate amendments.

Derivative contracts

The Society must annex a statement to the Lloyd's Return comprising a brief description of:

1. (1)

   any byelaws and guidelines issued by the Society governing the use of derivative contracts;

2. (2)

   any provision in those guidelines governing the use of contracts under which members have a right or obligation to acquire or dispose of assets which was not, at the time when the contract was entered into, reasonably likely to be exercised and the circumstances in which, pursuant to that provision, such contracts may be used;

3. (3)

   the extent to which members were during the financial year a party to any contracts of the kind described in (2);

4. (4)

   the extent to which any of the amounts recorded in Form 13 would be changed if assets which members had a right or obligation to acquire or dispose of under derivative contracts outstanding at the end of the financial year (being, in the case of options, only those options which it would have been prudent to assume would be exercised) had been acquired or disposed of;

5. (5)

   the difference between (4) and the amount which would result under (4) if such options had been exercised and this were reflected in Form 13 to the maximum extent;

6. (6)

   how different the information provided pursuant to (4) and (5) would have been if, instead of applying to contracts outstanding at the end of the financial year, (4) and (5) had applied to derivative contracts outstanding at such other time during the financial year as would have changed the amounts in Form 13 to the maximum extent;

7. (7)

   the maximum loss which would be incurred by members on the failure by any one other person to fulfil its obligations under derivative contracts outstanding at the end of the financial year, both under existing market conditions and in the event of other foreseeable market conditions, together with an assessment of whether such maximum loss would have been materially different at any other time during the financial year;

8. (8)

   the circumstances surrounding the use of any derivative contract held at any time during the financial year which did not fulfil the criteria in PRU 4.3.5 R1; and

   1
9. (9)

   the total value of any fixed consideration received by members (whether in cash or otherwise) during the financial year in return for granting rights under derivative contracts and a summary of contracts under which such rights have been granted.

For the purposes of LLD 15.8.1 R, if members are a party to:

1. (1)

   a contract for differences; or

2. (2)

   any other contract which is to be, or may be, settled in cash

they must be treated as having a right or obligation to acquire or dispose of the assets underlying the contract.

The Society must annex to the Lloyd's Return a statement:

1. (1)

   of each major treaty reinsurer and major facultative reinsurer; and

2. (2)

   for each of the realistic disaster scenarios set by the Society when fulfilling its obligation under PRU to monitor aggregation of risk within the Lloyd's market 1of the contribution it is assumed each such reinsurer would provide in the event of that disaster occurring.

   1

The Society must annex to the Lloyd's Return a statement naming each individual who has served:

1. (1)

   on the Council;

2. (2)

   as Chairman of the Council; and

3. (3)

   as Chief Executive Officer of the Society;

at any time during the financial year, including in each case the dates of commencement or end of service (as the case may be) of any individual who has not served for the entire year.

The Society must annex to the Lloyd's Return a statement identifying any members, members' agents or managing agents that control a significant share of the underwriting capacity of the Society.

To control a significant share means:

1. (1)

   in relation to a managing agent, managing, directing through one or more Members' Agent Pooling Arrangements or owning, whether directly or in conjunction with connected persons, capacity which in aggregate is greater than 5% of the total underwriting capacity of the Society;

2. (2)

   in relation to a members' agent, directing through one or more Members' Agent Pooling Arrangements or owing, whether directly or in conjunction with connected persons, underwriting capacity which in aggregate is greater than 2.5% of the total underwriting capacity of the Society; and

3. (3)

   in relation to a member, owning, whether directly or in conjunction with connected persons, underwriting capacity which, in aggregate, is greater than 2.5% of the total underwriting capacity of the Society.

The Society must annex to the Lloyd's Return:

1. (1)

   a certificate from the Council, including the statements required by LLD 15 Annex 2 R;

2. (2)

   a statement from the Lloyd's actuary, including the statements required by LLD 15 Annex 3 R;

3. (3)

   a certificate from the syndicate actuary of each syndicate which carries on long-term insurance business, including the statements required by LLD 15 Annex 4 R, and;

4. (4)

   an abstract from the syndicate actuary of each syndicate which carries on long-term insurance business of the actuary's report made under SUP 4.6.14 G1.

   1

The Society must ensure that the Lloyd's Return and every document annexed to or provided with it has been examined by the Society's auditors and must provide with the Lloyd's Return an audit certificate in respect of that examination.

The certificate in LLD 15.9.2 R must be in the form set out in LLD 15 Annex 5 R.

The Society must provide within a period not exceeding 30 days:

1. (1)

   on demand to any member or policyholder a copy of the Lloyd's Return and the global account most recently submitted to the FSA; and

2. (2)

   if specifically requested by a member or policyholder, a copy of any syndicate account submitted to the FSA.

Each managing agent must:

1. (1)

   prepare a return for each financial year in respect of the insurance business carried on through each syndicate managed by it; and

2. (2)

   provide the return in (1) to the Society as soon as practicable after the end of the financial year but in any event in time to enable the Society to report to the FSA in accordance with LLD 15.2.1 R.

The Society must:

1. (1)

   issue instructions to managing agents setting out the form and content of the return under LLD 15.13.1 R; and

2. (2)

   issue the instructions in (1) as soon as practicable but in any event in time to enable managing agents to comply with LLD 15.13.1 R.

A managing agent must annex to each return which it prepares under LLD 15.13.1 R, a certificate signed by the persons referred to in LLD 15.13.4 R, including the statements required by LLD 15.13.5 R.

The certificate in LLD 15.13.3 R must be signed by:

1. (1)

   where there are more than two directors of the managing agent, at least two of those directors and, where there are not more than two directors, all the directors; and

2. (2)

   a chief executive, if any, of the managing agent or (if there is no chief executive) the secretary.

A managing agent must ensure for each syndicate managed by it that the return required under LLD 15.13.1 R is examined and reported on by the syndicate auditor.1

A managing agent must annex to each return required under LLD 15.13.1 R an audit certificate provided by the syndicate auditor including the statements required by LLD 15.13.8 R.1

2A managing agent must annex to each return which it prepares under LLD 15.13.1 R a statement of the information required by IPRU(INS)rule 9.32A, as if in that rule references to:

1. (1)

   'insurer' were to the members carrying on insurance business through the relevant syndicate;

2. (2)

   the 'return' were to the return required to be prepared by it in respect of the business carried on through the relevant syndicate under LLD 15.13.1 R;

3. (3)

   the 'insurer's balance sheet' were to the syndicate balance sheet;

4. (4)

   the 'insurer's capital resources' were to the capital resources managed by or at the direction of the managing agent in respect of the insurance business carried on through the relevant syndicate; and

5. (5)

   the 'insurer's total technical provisions' were to the technical provisions in respect of the insurance business carried on through the relevant syndicate.