LLD 25.4 Purpose

Under PRU and LLD 19 the Society must, separately in respect of the general insurance business and long-term insurance business carried on by members, ensure:

1. (1)

   its own capital resources are sufficient to cover the aggregate of, for each member, any amount by which the member's capital resources are inadequate to meet the member's CRR; and

2. (2)

   that the aggregate capital resources of the Society and the members supporting the insurance business of the members comply with the requirements of PRU 2.2.15 G to PRU 2.2.26 R.

The PRU provisions as applied to Lloyd's reflect requirements under the Insurance Directives.

Regulatory intervention is triggered under SUP App 2 if:

1. (1)

   the capital resources of the Society are insufficient 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 share of the guarantee fund (the guarantee fund required by Article 17, First Non-Life Directive and Article 29, Consolidated Life Directive);

2. (2)

   the capital resources of the Society are insufficient 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 share of the required margin of solvency (the solvency margin required by Article 16a, First Non-Life Directive and Article 28, Consolidated Life Directive);

3. (3)

   the capital resources of the Society and of each of the members supporting their own insurance business, in the aggregate, no longer comply with PRU 2.2.16 R and PRU 2.2.24 R. PRU 2.2.16 R and PRU 2.2.24 R prescribe limits on the forms of capital resources which a firm must hold. (For Lloyd's, the Society must comply with PRU 2.2.16 R and PRU 2.2.24 R in relation to the aggregate of its own capital resources and the capital resources of the members supporting their own business: see LLD 19.3.4 R);

4. (4)

   the capital resources of the Society are insufficient 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 share of the CRR for the members in aggregate.

PRU requires the Society to ensure that the financial resources supporting the insurance business of each member are adequate at all times. Under PRU 2.3.13 G, the FSA may give individual capital guidance to the Society stating the amount and quality of capital resources that it considers ought to be held to meet PRU 1.2.22 R. If the Society's own capital resources fall below individual capital guidance given to the Society in respect of those resources, the FSA may take further action as set out in SUP App 2.7.1 G to SUP App 2.7.5 G.