Introduction to Lloyd's: capital structure: the chain of security
A principal aim of regulation is to ensure that policy holders’ claims can always be met even in years where the claims made are much higher than the premiums received.
A series of financial requirements for Lloyd’s Names aims to make sure that this can always be achieved. These are (in order of security):
- the premium trust fund (PTF)(LLM1190)
- Funds at Lloyd’s (FAL) (LLM1200) – which include the Lloyd’s Deposit, the personal reserve fund (PRF) and, for individual members, may include a special reserve fund (SRF)
- other personal wealth (OPW), that is, additional assets of members but not held at Lloyd’s (LLM1200) – OPW is not available for capital setting purposes from 2006
- the Lloyd’s Central Fund (LLM1210) – a fund of last resort when a member cannot meet its liabilities.
Lloyd’s requires an admission fee from applicants and an annual subscription from all members. It also makes a series of financial requirements of its members and regular checks are made to ensure that these requirements continue to be met, for example ensuring that capital requirements are met for solvency purposes (LLM1220).