Explanatory Note
(This note is not part of the Order)
These Regulations implement the Insurance Reorganisation and Winding-up Directive 2001/17/EC in respect of the Lloyd’s of London insurance market. The Directive was originally implemented for all insurers in the UK apart from Lloyd’s by the Insurers (Reorganisation and Winding Up) Regulations 2003 on 17 April 2003. These Regulations were replaced by the Insurers (Reorganisation and Winding Up) Regulations 2004 (“the principal Regulations”) which gave effect, in relation to insurers, to the new administration provisions in the Enterprise Act 2002. These Regulations make necessary adaptations of the principal Regulations in order to implement the obligations of the Directive with regard to the association of underwriters known as Lloyd’s which is the regulated undertaking within Community law.
The Regulations provide (in Part 2) for application to the Court by the FSA or the Society of Lloyd’s or both for the making of a Lloyd’s market reorganisation order, if the solvency tests required by the FSA are not or may not be satisfied. They provide for a reorganisation controller who is made an officer of the court and for the court to fill out or limit his powers as necessary. There is provision for a moratorium on legal processes involving affected market participants (as defined) and the Society. The appointment is required to be notified by public notice to all members and former members. The reorganisation controller is required to develop a market reorganisation plan subject to the approval of the FSA for achievement of the objectives of the reorganisation order. The reorganisation controller is entitled to be remunerated and his remuneration is to be paid for by members, former members, the Society and managing agents. The principal Regulations and the Financial Services and Markets Act 2000 (Administration Orders Relating to Insurers) are applied to all members on the making of a Lloyd’s market reorganisation order. There are procedures for the court to except certain assets or members from the scope of the order. Where insurance creditors are not or may not be satisfied any such exception is revoked. Once the order has been made procedures exist for continued payment of insurance liabilities and for managing agents to continue to be able to seek payments from central funds of the Society where a member’s premiums trust fund is inadequate to meet liabilities and the member cannot meet a cash call made by the managing agent. Provision is made for the reorganisation controller to be informed of all administration procedures, voluntary arrangements in respect of companies or individuals and equivalent Scottish procedures and to be able to attend and take part in relevant meetings and hearings in relation to these. Scottish members or former members are required to inform a person about to become a trustee under a trust deed for creditors that they are or were members of Lloyd's. Special provision is made to apply set-off at the level of each member’s participation in respect of mutual dealings on a syndicate by syndicate basis. Part 3 of the Regulations adapt the provisions of the principal Regulations to apply to underwriting members of the Society, including former members and apply these provisions to members of every description whether bodies corporate, Scottish limited partnerships or individuals, unless they are specifically excluded from the effect of the Lloyd’s market reorganisation order. The notification and publication requirements in Part 3 of the principal Regulations are adapted so that they arise at the point that a Lloyd’s market reorganisation order is made and apply equally to the Lloyd’s market reorganisation order and to reorganisation measures and winding up or bankruptcy proceedings in relation to particular members. Part 4 applies Parts 4 and 5 of the principal Regulations. In particular, the priority of insurance debts over all other unsecured or non-preferred debts is provided for and attaches to all the unencumbered property of members who are affected by the order and are insolvent but not to assets in the premiums trust funds and other Lloyd’s trusts (referred to in the Regulations as “relevant rust funds”). The protection for reorganisation measures or insolvency proceedings begun before the Directive came into force for other insurers is adapted so that in the case of members of Lloyd’s it applies to all such measures and proceedings begun before the Lloyd’s market reorganisation order is made.