Application of PRU 7 to Lloyd's

Part

LLD Lloyd's

Chapter

Application of PRU 7 to Lloyd's

Printed on: 24/11/2024

Rulebook at: 01/01/2005

LLD 24

Application of PRU 7 to Lloyd's

LLD 24.1

Section 150 of the Act (Actions for damages)

01/01/2005

LLD 24.1.1

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.

01/01/2005

LLD 24.2

Insurance risk systems and controls

01/01/2005

Application of PRU 7.1

LLD 24.2.1

PRU 7.1 applies to managing agents in accordance with LLD 16.3.3 R.

01/01/2005

LLD 24.3

Capital resources requirements and technical provisions for insurance business

01/01/2005

Application of PRU 7.2

LLD 24.3.1

PRU 7.2 applies to the Society in accordance with LLD 16.3.1 R.

01/01/2005

LLD 24.3.2

The following rules and guidance apply to managing agents in accordance with LLD 16.3.3 R:

(1) PRU 7.2.13 G to PRU 7.2.20 R (except PRU 7.2.13 R (1));

(2) PRU 7.2.42 G to PRU 7.2.43 G; and

(3) PRU 7.2.74 G to PRU 7.2.80 G.

01/01/2005

Establishing technical provisions

LLD 24.3.3

Managing agents are advised by the syndicate actuary in relation to the long-term insurance business carried on through long-term insurance business syndicates. The standards and guidance issued by the Faculty and Institute of Actuaries to assist syndicate actuaries are important sources of evidence as to generally accepted actuarial best practice, as referred to in PRU 7.2.16 R (1).

01/01/2005

General insurance capital requirement

LLD 24.3.4

PRU 2.1.30 R and LLD 19.3.10 R to LLD 19.3.12 R set out the calculation of the general insurance capital requirement for Lloyd's.

01/01/2005

LLD 24.3.5

The Society must calculate the brought forward amount for the members in aggregate in accordance with PRU 7.2.51, using the result of LLD 19.2.6 R for the prior financial year and the aggregate of all members' technical provisions for the relevant periods.

01/01/2005

Accounting for premiums and claims

LLD 24.3.6

For the purposes of PRU 7.2.66 R and further to that rule, in the case of Lloyd's members, amounts of premiums and claims must be adjusted for approved reinsurance to close to exclude any amount included in, or adjustment made to, premiums and claims to reflect the consideration for an approved reinsurance to close.

01/01/2005

LLD 24.3.7

Members of Lloyd's can effect contracts of approved reinsurance to close with other members in accordance with LLD 17.5. For the purposes of PRU as it applies to Lloyd's, the capital requirement relating to business transacted through an approved reinsurance to close is calculated for the reinsuring and not the reinsured member under the contract.

01/01/2005

LLD 24.4

Mathematical reserves

01/01/2005

Application of PRU 7.3

LLD 24.4.1

PRU 7.3 applies to managing agents in accordance with LLD 16.3.3 R.

01/01/2005

Approved reinsurance to close

LLD 24.4.2

In respect of business that has been subject to an approved reinsurance to close, managing agents must calculate mathematical reserves (before and after deduction of reinsurance cessions) for the reinsuring and not for the reinsured member.

01/01/2005

LLD 24.5

Equalisation provisions

01/01/2005

Application of PRU 7.5

LLD 24.5.1

PRU 7.5 applies to the Society in accordance with LLD 16.3.1 R:

(1) with the modification set out in LLD 24.5.2 R; and

(2) except PRU 7.5.11 R to PRU 7.5.37 G.

01/01/2005

LLD 24.5.2

The Society must calculate a credit equalisation provision for the aggregate insurance business of all members; it is not required to calculate a credit equalisation provision separately for the business of each member.

01/01/2005

LLD 24.5.3

The Society must allocate the result of LLD 24.5.2 R between itself and each of the members on a fair and reasonable basis.

01/01/2005

LLD 24.6

Internal-contagion risk

01/01/2005

Application of PRU 7.6

LLD 24.6.1

PRU 7.6 applies to managing agents and to the Society in accordance with:

(1) for managing agents, LLD 16.3.3 R; and

(2) for the Society, LLD 16.3.1 R.

01/01/2005

Restriction of business to insurance

LLD 24.6.2

The Society and managing agents must take all reasonable steps to ensure that:

(1) a corporate member does not carry on any commercial business other than insurance business and activities arising directly from that business; and

(2) individual members do not, in their capacity as underwriting members, carry on any commercial business other than insurance business and activities arising directly from that business.

01/01/2005

Syndicates not to carry on both general and long-term business

LLD 24.6.3

A managing agent must not permit both general insurance business and long-term insurance business to be carried on together through any syndicate managed by it.

01/01/2005

LLD 24.6.4

PRU 7.6.17 G contains guidance setting out the FSA policy (reflecting requirements of the Insurance Directives) in relation to the carrying on together of general and long-term insurance business.

01/01/2005