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LLD 3.1 Application, purpose and enabling provision1

Application

LLD 3.1.1 R

This chapter applies to the Society.

LLD 3.1.2 R

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.

Purpose

LLD 3.1.3 G

The rules and guidance in this chapter are intended to promote confidence in the market at Lloyd's, and to protect certain consumers of services provided by the Society in carrying on, or in connection with or for the purposes of, its regulated activities. They do this by:

  1. (1)

    giving guidance to the Society about the protection that the Central Fund should provide for policyholders; and

  2. (2)

    enabling the FSA to keep under review the protection the Central Fund provides for policyholders.

Enabling Provision

LLD 3.1.4 D

The directions in this chapter are given under section 318 of the Act (Exercise of powers through Council) for the purpose of achieving the objective specified, as required by section 318(2) of the Act.1

LLD 3.1.5 D

The directions given in this chapter are given in relation to the exercise of the powers by the Society in respect of the Central Fund and are given with a view to achieving the objective of ensuring that the Society in making payments or in providing any other financial assistance from the Central Fund does so on a basis which takes no account of amounts of compensation which policyholders may receive under the provisions of the compensation scheme in respect of protected claims against members.1

LLD 3.2 The Central Fund

LLD 3.2.1 G

The Society should seek to ensure that the Central Fund provides protection for policyholders so as to minimise the need for Lloyd's policyholders to have recourse to the compensation scheme.1

LLD 3.2.2 G

The Society should seek, and take appropriate account of, the FSA's views on all proposed changes in its arrangements relating to the Central Fund.

LLD 3.2.3 D

The Society must, in the exercise of its powers to make payments from the Central Fund or to provide other forms of financial assistance from the Central Fund, ensure that in calculating and determining the amount of any such payment or the amount of any other financial assistance, it takes no account of the amounts of compensation which policyholders may receive under the provisions of the compensation scheme in respect of protected claims against members.1

LLD 3.3 Information about the Central Fund

LLD 3.3.1 R

The Society must give the FSA a report on the Central Fund as at the end of each calendar quarter.

LLD 3.3.2 R

The report referred to in LLD 3.3.1 R must reach the FSA within two weeks of the end of each calendar quarter and must include information on:

  1. (1)

    the net market value of the Central Fund;

  2. (2)

    payments made from the Central Fund in that quarter;

  3. (3)

    the types of investment in which the Central Fund is held;

  4. (4)

    the commencement or cessation of, or any changes in the terms of, any insurance policy taken out to protect the Central Fund; and

  5. (5)

    any claim made, or circumstances notified that are likely to lead to a claim, under any insurance policy taken out to protect the Central Fund.

LLD 3.3.3 G

Because of the significance of the Central Fund in the protection of policyholders, the Society should notify the FSA under LLD 3.3.2 R (5) of all matters relevant to any actual or potential claim. These include but are not limited to the facts on which that claim is based, the circumstances under which those facts arose and any relevant response to the claim from any insurer or reinsurer concerned.

LLD 3.3.4 G

The report referred to in LLD 3.3.1 R must be submitted in writing in accordance with SUP 16.3.7 to SUP 16.3.10 (see SUP 16.3.6).1