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HMRC internal manual

Lloyd's Manual

HM Revenue & Customs
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Introduction to Lloyd's: capital structure: the chain of security: the Central Fund and other central assets

The Central Fund is a fund of last resort. It is a safeguard for policyholders should a member fail to meet insurance liabilities in full. Where a member has insufficient assets on an individual basis, assets in the Central Fund can be earmarked to cover that member’s liabilities if it should prove necessary, at the discretion of the Council of Lloyd’s.

Members are required to contribute annually to the fund by reference to their capacity (LLM1120). Special contributions may be levied from time to time. The annual contribution to the Central Fund is in addition to the annual subscription fee that members have to pay.

For 2005, members’ contributions were 0.5% of capacity. In addition, for the first time in 2005, loans of 0.75% of a member’s capacity were levied from the syndicate’s PTFs. These loans are repayable on closure of the year of account.

When a payment is made out of the Central Fund to meet the liability of a member (that is, a ‘drawdown’ is made), it gives rise to a debt from the member to the Central Fund.

In 2004, the Society raised external funding from capital markets by issuing subordinated debt, in order to bolster Lloyd’s central assets for solvency purposes.