1A 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 rules and guidance in SUP App 2 apply to the Society:
with the modifications set out in LLD 25.3.1 R to LLD 25.8.1 G; but
except SUP App 2.8.1 G to SUP App 2.8.5 G, SUP App 2.9.1 R, SUP App 2.10.1 R, SUP App 2.12.1R (2)(a), SUP App 2.12.2 G and SUP App 2.12.7 R.
For the purpose of this Chapter LLD 25 and the application of SUP App 2 to the Society:
"capital resources", as the context requires:
in relation to the Society's own capital resources, means its own capital resources calculated in accordance with PRU 2.2.12 R;
in relation to a member's capital resources, means the member's capital resources calculated in accordance with LLD 19.3.10 R;
in relation to the aggregate capital resources of the Society and the members supporting the insurance business of the members, means the aggregate of the capital resources in (1)(a) and (b) but excluding the Society's callable contributions.
"guarantee fund":
in relation to the general insurance business carried on by members, means the amount of capital resources required in order to comply with PRU 2.2.18 R, LLD 19.3.4 R and LLD 19.3.14 R; and the "member's share of the guarantee fund" for general insurance business means the result of the calculation set out in LLD 19.3.15 R;
in relation to the long-term insurance business carried on by members, means the amount of capital resources required in order to comply with PRU 2.2.17 R and LLD 19.3.4 R; and the "member's share of the guarantee fund" for long-term insurance business means the result of the calculation set out in LLD 19.3.13 R;
"required margin of solvency":
in relation to the general insurance business carried on by members, means the higher of the Society GICR and the general insurance capital requirement for the members in aggregate; and
in relation to the long-term insurance business carried on by members, means the long-term insurance capital requirement for the members in aggregate.
The calculations of the base capital resources requirement, the long-term insurance capital requirement and the general insurance capital requirement for members and for the members in aggregate are set out in PRU 2.1 and in LLD 19. LLD 19.2.13 R requires the Society to calculate the Society GICR. PRU 2.2.17 R and PRU 2.2.18 R, as applied to Lloyd's and modified by LLD 19.3.4 R and LLD 19.3.13 R to LLD 19.3.15 R, contain requirements for the calculation of the guarantee fund and the member's share of the guarantee fund.
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:
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
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:
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);
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);
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);
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.
For the purposes of SUP App 2.4.1 R and SUP App 2.4.2 G, capital resources will have fallen below the guarantee fund if the Society's own capital resources are such that they are no longer 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 share of the guarantee fund.
For the purposes of SUP App 2.5.1 R to SUP App 2.5.3 G, capital resources will be such that they no longer equal or exceed the required solvency margin if the Society's own capital resources 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 solvency margin.
For the purposes of SUP App 2.6.1 G, capital resources will have fallen below the capital resources requirement if the Society's own capital resources 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 capital resources requirement for the members in aggregate.
For the purposes of SUP App 2.7.1 G to SUP App 2.7.5 G, capital resources will have fallen below the level of individual capital guidance if the Society's own capital resources have fallen below the level advised in individual capital guidance given to the Society in respect of those capital resources.
