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Contents

Part I Preliminary

Part II requirements relating to and duties of members of lloyd’s carrying on insurance business under scheme

Part III requirements relating to and duties of Service companies

Part IIIA VALUATION OF ASSETS

Part IIIB VALUATION OF LIABILITIES

Part IV Requirements relating to and duties oF Administrator

Part V Miscellaneous

FIRST SCHEDULE Permitted insurance business

SECOND SCHEDULE Particulars to be furnished by applicant for registration as agent for member of Lloyd’s

THIRD SCHEDULE Particulars to be contained in register of members of Lloyd’s maintained by administrator

FOURTH SCHEDULE Particulars to be contained in register of Service Companies maintained by administrator

FIFTH SCHEDULE

Legislative History

 
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On 19/04/2014, you requested the version in force on 19/04/2014 incorporating all amendments published on or before 19/04/2014. The closest version currently available is that of 04/11/2010.
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PART IIIB
VALUATION OF LIABILITIES
Application of this Part
13K.  This Part applies to the valuation of any liability of an insurance fund established and maintained under regulation 11(1).
Valuation of liabilities
13L.
—(1)  Unless otherwise specified in this Part, a Service Company shall value any liability of an insurance fund in accordance with the Accounting Standards and sound actuarial principles.
(2)  The Authority may, by notice in writing to a Service Company, specify the bases, methodologies and other details of a technical nature to be complied with in relation to the determination of liabilities in respect of a policy and in respect of an insurance fund.
Valuation of liabilities of general business
13M.
—(1)  A Service Company shall calculate the liabilities in respect of policies of an insurance fund established and maintained under regulation 11(1) for the general business written by the Service Company as the sum of —
(a)
premium liabilities, which shall be an amount not less than —
(i)
the unearned premium reserves of the fund calculated as the aggregate of unearned premium reserves for each policy of the fund determined in the manner provided in paragraph (5); or
(ii)
the unexpired risk reserves, calculated as the sum of —
(A)
the value of the expected future payments arising from future events insured under policies in force as at the valuation date, including any expense expected to be incurred in administering the policies and settling relevant claims; and
(B)
any provision for any adverse deviation from the expected experience,
whichever is the higher; and
(b)
claim liabilities, which shall be an amount not less than the sum of —
(i)
the value of the expected future payments in relation to all claims incurred prior to the valuation date (other than payments which have fallen due for payment on or before the valuation date), whether or not they have been reported to the Service Company, including any expense expected to be incurred in settling those claims; and
(ii)
any provision for any adverse deviation from the expected experience.
(2)  In determining the unexpired risk reserves referred to in paragraph (1)(a)(ii) and claim liabilities referred to in paragraph (1)(b), a Service Company shall —
(a)
calculate the amount of unexpired risk reserves and claim liabilities as the amount net of reinsurance ceded —
(i)
by making separate estimates of the gross incurred claims and recoveries from the reinsurance counterparty; and
(ii)
by taking into account the likelihood of default by the reinsurance counterparty; and
(b)
take into account any non-reinsurance recovery such as salvage and subrogation.
(3)  Where there is no material change in —
(a)
the manner in which liabilities are reinsured during the period to which the data used to determine the unexpired risk reserves and claim liabilities relates; and
(b)
the manner in which liabilities are reinsured at valuation date,
a Service Company may, instead of complying with paragraph (2)(a), calculate the amount of unexpired risk reserves and claim liabilities net of reinsurance ceded using claims data that are net of reinsurance.
(4)  A Service Company shall make separate calculations of the premium liabilities, the unexpired risk reserves and the claim liabilities for each line of business described in Form 3 in the Fifth Schedule that is carried on by the Service Company, and such calculations shall be made in the following manner:
(a)
the premium liabilities shall be an amount not less than the unexpired risk reserves;
(b)
the unexpired risk reserves shall be calculated as the sum of —
(i)
the value of the expected future payments arising from future events insured under policies in force as at the valuation date, including any expense expected to be incurred in administering the policies and settling relevant claims; and
(ii)
any provision for any adverse deviation from the expected experience,
after allowing for the effect of diversification, if any, at the level of the relevant insurance fund under paragraph (1)(a)(ii); and
(c)
the claim liabilities shall be an amount not less than the sum of —
(i)
the value of the expected future payments in relation to all claims incurred prior to the valuation date (other than payments which have fallen due on or before the valuation date), whether or not they have been reported to the Service Company, including any expense expected to be incurred in settling those claims; and
(ii)
any provision for any adverse deviation from the expected experience,
after allowing for the effect of diversification, if any, at the level of the relevant insurance fund under paragraph (1)(b).
(5)  The amount of unearned premium reserves for a policy in respect of general business shall be —
(a)
subject to sub-paragraphs (b) and (c) and paragraph (6), an amount calculated on a basis not less accurate than the method;
(b)
in the case of a Service Company which underwrites risks relating to cargo policies, an amount not less than 25% of the net premiums written in the accounting period for those policies or an amount calculated on a basis not less accurate than the method; or
(c)
in the case of a Service Company which carries on the business of reinsurance of liabilities under insurance policies —
(i)
an amount not less than 25% of the net premiums written in the accounting period in the case of marine and aviation policies and 40% of the net premiums written in the accounting period in other cases; or
(ii)
an amount calculated on a basis not less accurate than the method.
(6)  The amount of unearned premium reserves for a policy in respect of general business shall be calculated —
(a)
where the method or some other more accurate method is used, using an amount of net premiums written which is reduced by the actual commissions payable; or
(b)
in any other case, using an amount of net premiums written without any deduction for commissions payable therefrom.
(7)  In paragraphs (5) and (6) —
“marine and aviation policies” means policies of insurance —
(a)
upon goods, merchandise or property of any description transported on board vessels, aircraft or other means of conveyance, including incidental transit before and after shipment;
(b)
upon the freight of, or any other interest in or relating to vessels, aircraft or other means of conveyance;
(c)
upon vessels or aircraft, or upon machinery, tackle furniture or equipment of vessels or aircraft;
(d)
against damage arising out of or in connection with the use of vessels or aircraft, including third-party risks; or
(e)
against risks incidental to the construction, repair or docking of vessels, including third-party risks;
“net premiums written” means the net amount of premiums after deduction of return premiums and payments in respect of reinsurance business ceded.