We have listed below some information that may be of general interest.  For more information on any of these subjects please contact your Names Executive.

LMAS Service Standards:  LMAS has various service standards which it adheres to.  The two standards which may be of most interest to Names are the answering of correspondence within one week and the return of telephone calls within 24 hours.  The remaining service standards are available upon request.

Reducing Your Bank Guarantee/Letter or Credit: As you may be aware, at two points during the year, 30th April  and 31st July, Lloyd's perform a Capital Test to evaluate a Names' Funds at Lloyd's position against their potential liabilities.  As there are no longer any additional Market Services Charges, it is recommended that any Name that is entitled to a reduction in their Funds at Lloyd's should, at the appropriate time, reduce their Bank Guarantee or Letter of Credit and reduce the amount they pay to their Bank for this service.  A Name may also wish to settle any Cash Calls or Losses from their own resources by providing LMAS with a cheque.  We could then apply to Lloyd's for a substitution of assets and reduce the Guarantee/Letter of Credit by a similar amount.  

Deposit to Personal Reserve Fund Transfer: Any Name that has cash in the General Deposit knows that, due to to the Trust Deed under which these funds are held, it is difficult and timely to release these funds to settle losses.  It is possible to perform a Deposit to PRF transfer by signing the relevant Deed which, with a few exceptions, would enable the Deposit funds to be transferred to the PRF.  This would provide a quicker and easier way for your cash to be utilised to settle losses.  It should also be mentioned that it is also quicker and easier for Lloyd's to perform a compulsory draw down against funds held in the PRF.

Substitution of Funds: Names may exchange an asset held at Lloyd's for another acceptable asset of equal value.  In order to request a substitution, Names should contact their Names Handler to make the necessary arrangements and to submit the appropriate application on their behalf.  Cash can be deposited into a Name's Funds at Lloyd's in exchange for a release of funds of an equal value.  This cash can then be drawn upon to settle losses, however, if the funds are placed into the General Deposit a voluntary release of funds Form would be required in order to transfer the cash to settle losses.

Partial Release of Funds: Each year Lloyd's complete solvency calculations for Names with open syndicate participations and the process, known as "The Capital Test", determines the minimum funding requirement for Names.  The figures are published in May (30th December Valuation) with a subsequent revision based on the position at the end of June.  In the event that a Name's Funds at Lloyd's exceed the funding requirement as calculated by Lloyd's, Names may be eligible to apply for a partial release of funds held in excess of their requirement.  There are several initial criteria which must be met before an application for a release can be submitted:

The value of the funds held at Lloyd's must be in excess of the minimum funding requirement in order for the excess to be released.

All current liabilities must be funded, including any Market Services Charges or Member's Agents Expenses; THERE MUST NOT BE ANY OUTSTANDING DEBTS.

The funds are of a releasable nature, for example no releases are permitted from the Special Reserve Fund  whilst the Name has continuing liabilities through open syndicates.

An exercise is conducted annually by LMAS to advise Names where their Funds at Lloyd's exceed the funding requirement and the release criteria has been met.  This process takes place after the distribution process has been completed and the revised funding requirement based on the position at 30th June has been published.  LMAS will contact Names where a potential release is available and, subject to the Names request meeting all the necessary criteria, an application will be submitted to Lloyd's.  You should be aware that funds held in the Special Reserve Fund can not be released and a minimum of £5,000 must be maintained as non SRF monies.  Lloyd's impose a concentration disallowance on certain categories of assets held in Funds at Lloyd's.  Your Names Handler can provide more details on Lloyd's concentration of assets rules.  Applications for a partial release must be lodged with Lloyd's before a specified date in October for Lloyd's to consider the request.  After that date the window of opportunity closes for the year as Lloyd's begins the process of calculating solvency for the subsequent year. 

Total Release of Funds: With the closure of all open syndicates and settlement of any outstanding liabilities the majority of Name's would become eligible to have the balance of their Funds at Lloyd's released.  Following completion of the distribution process at the end of June, Names with no open syndicate participations can apply for the release of their remaining Funds at Lloyd's through their Names Handler.  LMAS will send notice to Names that are eligible for a release following the conclusion of the distribution process and, provided that all remaining liabilities have been funded, instructions for the release of assets can then be provided by Names to LMAS, for submission to Lloyd's.  The revisions to the Market Services Charging Structure have removed both the Total Release and Cessation of Membership Charges.

Exeat policies:  Exeat policy quotations are sent to Names annually (usually early July).  Only those Names with involvement purely in syndicates in run-off will be sent a quotation.  A Name should consider the following points:  By purchasing an Exeat policy, you will be able to draw a line under your Lloyd's Underwriting and have any remaining assets released from Lloyd's.  Once your funds have been released you will not have any further Market Services Charges to settle, which equates to a saving for an average name of approximately £500 a year.  You may also save money on Accountancy charges and, if applicable, Bank Guarantee/Letter of Credit charges.  It would also give you peace of mind.  In the event of the death of a Name, it is possible for the Estate to purchase an Exeat policy at the appropriate time.  The down side is that it is generally felt that syndicates would close naturally at a cost less than the Exeat policy quotation. 

Estates of Deceased Names:  Following the death of an underwriting Name of Lloyd’s and the issue of the Grant of Probate or Letters of Administration, executors will be in a position to make a distribution of assets as set out under the terms of the Will or that governed by the rules of intestacy. However, they may wish to consider seeking leave of the Court before doing so.

Names will be aware that all 1992 and prior Lloyd’s business has been reinsured into Equitas, a limited liability company approved by the DTI to conduct reinsurance business.  In the event of Equitas’ failure to settle its underwriting obligations on behalf of the Name, it is conceivable that a valid claimant would seek settlement from the principal, i.e. the Name, or, in the event of the Name’s death, the executors or administrators of his/her Estate. 

To protect the executors from any personal liability following the distribution of the estate’s assets and in the event of Equitas’ failure, the executors may wish to seek the protection of the Court.

In a test case the executors of a deceased Name, with the support of the Society of Trust and Estate Practitioners (STEP), applied to the Court which subsequently permitted the executors to distribute the estate’s assets on the reliance of the financial validity of Equitas, thus absolving the executors from any future liability to creditors in the event of Equitas’ failure.  Although STEP did not obtain a general direction, it was agreed that a “fast track” application procedure should be established where an application could be made to the Court in a simple unopposed application to a Master of Chancery Division to obtain the appropriate authority.

A practice direction giving effect to the fast track method was subsequently issued by the Chief Chancery Master.  The procedure is most appropriate where all liabilities of the estate in respect of syndicates of which the deceased was a member have been reinsured into Equitas and the only reason for delaying distribution of the estate is the possibility of personal liability to Lloyd’s creditors.  The practice direction did not at this point apply to estates where liabilities have not been reinsured into Equitas, i.e. 1993 and post-business.  However, an extended Practice Direction, covering the reinsurance of the 1993 and subsequent years of account into succeeding Lloyd’s syndicates and/or the protection afforded by either the Estate Protection Plan or the Exeat policies, has now been approved by the Vice Chancellor.

The revised Direction is available from this office to Names or their legal advisers upon request. 

We should point out that the ‘Fast Track’ application procedure has only been approved in the English Courts.