LLD 19.3 Capital resources

Subject to LLD 19.3.3 R, LLD 19.3.4 R and LLD 19.3.6 R, PRU 2.2 applies to managing agents and to the Society in accordance with:

1. (1)

   for managing agents, LLD 16.3.3 R; and

2. (2)

   for the Society, LLD 16.3.1 R.

PRU 2.2.15 G to PRU 2.2.26 R (Limits on the use of different forms of capital) do not apply to managing agents.

PRU 2.2.15 G to PRU 2.2.26 R (Limits on the use of different forms of capital) apply to the Society with respect to:

1. (1)

   the capital resources requirements for the members in aggregate; and

2. (2)

   the aggregate capital resources supporting the insurance business of all the members.

PRU 2.2.72 R does not apply to the Society or to managing agents.

In this Chapter LLD 19, "the aggregate capital resources supporting the insurance business of all the members" are:

1. (1)

   the aggregate of all the members' capital resources calculated under LLD 19.3.10 R; and

2. (2)

   the Society's capital resources excluding callable contributions.

Table PRU 2.2.14 R applies with the modifications that:

1. (1)

   (A) CORE TIER ONE CAPITAL includes Lloyd's members' contributions in accordance with LLD 19.3.19 R, subject, in the case of letters of credit, guarantees and verifiable sums arising out of life assurance policies, to compliance with LLD 18.3.3 G to LLD 18.3.9 G; and

2. (2)

   the Society may also recognise and value callable contributions, pursuant to LLD 19.3.9 R.

In calculating its capital resources, the Society may, subject to LLD 18.3.10 G to LLD 18.3.12 R, recognise and value callable contributions.

The Society must calculate each member's capital resources as the sum of:

1. (1)

   a member's proportionate share of the capital resources held at syndicate level for each syndicate in which the member participates; and

2. (2)

   the value of a member's funds at Lloyd's after deducting liabilities in compliance with LLD 18.3.17 R.

In order to comply with PRU 2.1.9 R the Society must ensure at all times that:

1. (1)

   each member's capital resources requirement is covered by:

   1. (a)

      that member's capital resources, calculated according to LLD 19.3.10 R; and

   2. (b)

      to the extent that (a) is insufficient, by the Society's own capital resources; and

2. (2)

   the Society GICR is covered by the aggregate capital resources supporting the insurance business of all the members.

For the purposes of LLD 19.3.11R (1)(b), the Society must maintain at all times capital resources sufficient to meet the aggregate of, for each member, the amount, if any, by which the member's capital resources fall short of the member's capital resources requirement.

The Society must calculate each member's share of the amount of capital resources required to comply with PRU 2.2.17 R as the higher of:

1. (1)

   1/3 of the long-term insurance capital requirement for the members in aggregate; and

2. (2)

   the base capital resources requirement;

allocated between the members in proportion to the result for each member of LLD 19.2.7R (2).

For the purposes of PRU 2.2.18 R, the Society must ensure that the aggregate capital resources supporting the insurance business of all the members meet the higher of:

1. (1)

   1/3 of the general insurance capital requirement for the members in aggregate; and

2. (2)

   1/3 of the Society GICR; and

3. (3)

   the base capital resources requirement;

with the sum of the items listed in PRU 2.2.18 R.

The Society must calculate each member's share of the amount of capital resources required to comply with PRU 2.2.18 R as the higher of:

1. (1)

   1/3 of the general insurance capital requirement for the members in aggregate; and

2. (2)

   1/3 of the Society GICR; and

3. (3)

   the base capital resources requirement;

allocated between the members in proportion to the result for each member of LLD 19.2.11 R.

A Lloyd's member's contribution may be included in tier one capital resources to the extent that:

1. (1)

   the proceeds are immediately and fully available in respect of the member's insurance business at Lloyd's;

2. (2)

   (except in relation to letters of credit), it complies with PRU 2.2.29 R (3) or cannot be repaid to a member until all of the member's liabilities in respect of its insurance business at Lloyd's have been extinguished, covered or reinsured by an approved reinsurance to close;

3. (3)

   it otherwise complies with PRU 2.2.29 R (5) to PRU 2.2.29 R (8).

PRU 2.2.90 R applies to the Society with the modification that the Society must also value its insurance undertakings in accordance with PRU 2.2.90 R.

If a related undertaking is an insurance undertaking which has a deficit in the capital resources available to cover its capital resources requirement, the Society must make provision for:

1. (1)

   its proportionate share of that deficit; or

2. (2)

   in the case of a subsidiary undertaking, the whole of that deficit.

In the case of members, Lloyd's members' contributions are included in PRU 2 Annex 1R and include:

1. (1)

   letters of credit;

2. (2)

   guarantees; and

3. (3)

   verifiable sums arising out of life assurance policies;

held as funds at Lloyd's.