The Insurance (Lloyd's) Regulations 1996

Explanatory Note

(This note is not part of the Regulations)

These Regulations, which come into force on 24th December 1996, amend the Insurance Companies Act 1982 (“the 1982 Act”) and the Insurance (Lloyd's) Regulations 1983 (S.I. 1983/224), as amended by the Insurance Companies Regulations 1994 (S.I. 1994/1516) (“the 1983 Regulations”). The main purpose of the Regulations is to clarify certain aspects of the regulatory arrangements for members and former members of the Society of Lloyd’s (“Lloyd's”) and to update the prescribed form of returns on behalf of members of Lloyd’s and by the Council of Lloyd’s to the Secretary of State.

The amendments of the 1982 Act are made under section 2(2) of the European Communities Act 1972. They are related to requirements of Council Directive 73/239/EEC (O.J. No. L228, 16.8.73, p.3) on the co-ordination of laws, regulations and administrative provisions relating to direct insurance other than life assurance (“first non-life Directive”), as amended and supplemented by Directive 88/357/EEC (O.J. No. L172, 4.7.88, p.1) and Directive 92/49/EEC (O.J. No. L228, 11.8.92, p.1) (“third non-life Directive”); and corresponding requirements of Council Directive 79/269/EEC (O.J. No. L63, 13.3.79, p.1) on the co-ordination of laws, regulations and administrative provisions relating to direct life assurance (“first life Directive”), as amended and supplemented by Directive 90/619/EEC (O.J. No. L330, 29.11.90, p.50) and Directive 92/96/EEC (O.J. No. L360, 9.12.92, p.1) (“third life Directive”). Those requirements concern the authorisation of insurance undertakings (article 8 of the first non-life and life Directives), the supervisory powers of competent authorities (articles 19(3) of the first non-life and 23(3) of the first life Directives), and the transfer of insurance business (articles 12 of the third non-life and 11 of the third life Directives). The amendments of the 1983 Regulations are made under section 83(4) (audit of underwriters' accounts) and section 86 (statement of business by the council of Lloyd's) of the 1982 Act.

Regulation 1 provides for citation and commencement.

Regulation 2 contains interpretation provisions.

Regulation 3 makes clear that a former member of Lloyd's, as defined in the Regulations, does not require authorisation under the 1982 Act merely because he continues to be liable as a party to contracts of insurance entered into by him as a member of Lloyd's. However, he will be treated as though he were a UK company to which Part II of the 1982 Act applies (subject to any order of the Secretary of State under section 68 of that Act disapplying or modifying the application of provisions in that Part).

Regulation 4 removes, in relation to former members of Lloyd's, the requirement in section 68 that an order under that section may only be made on the application or with the consent of a company. It also provides that an order under section 68 in relation to a former member may exclude or modify the application of any provision of Part II.

Regulations 5 and 6 introduce minor amendments to sections 15 and 83 of the 1982 Act to ensure that the certificate which is required to be furnished by the accountant who audits the annual accounts of an underwriter states affirmatively that the value of the assets are, in the opinion of the auditor, correctly shown and are sufficient to meet the underwriter’s liabilities.

Regulation 7 extends section 85 of the 1982 Act so as to cover transfers of business by former members of Lloyd's.

Regulations 8 and 9 update the format of the financial returns required by sections 83 and 86 of the 1982 Act and by the 1983 Regulations. These returns are made annually by Lloyd’s in relation to its members both individually and taken together. The changes reflect modern audit practices and recent changes to the way in which business is conducted, including the introduction to Lloyd’s of corporate members in 1994.

Regulation 10 contains transitional provisions.

A compliance cost assessment is available, copies of which have been placed in the libraries of both Houses of Parliament. Copies are also available from the Insurance Directorate of the Department of Trade and Industry, Room 5.A.28, 1 Victoria Street, London SW1H 0ET.