Names: special reserve funds: withdrawals
Withdrawals in cash must be made from the SRF where there are cash calls or declared syndicate losses, or where the value of the fund exceeds 50% of overall premium limit (OPL) for the closing year or preceding year.
The amount of the withdrawal to meet a cash call is the lower of
- the cash call; and
- the amount of the Name’s SRF (that is, the full value of the fund including capital appreciation/depreciation).
For cash calls made before the normal closing date for a syndicate (or before 31 December of the run-off year of account), the withdrawal must be made within 90 days of the call being made.
A withdrawal is required when the Name has made a syndicate loss, that is, the aggregate of the Name’s share of the commercial profit or loss for each syndicate in which he participated for that account, before subtracting Name-level personal expenses, such as members’ agent fees is negative.
The amount of the withdrawal is the lower of
- the overall loss as reported to the Name in the personal consolidated statement; and
- the amount of the Name’s SRF (being the full value of the fund including capital appreciation/depreciation).
Transfers out of the fund must be made on or before 31 October in the calendar year in which the syndicate results were declared.
Value exceeds 50% OPL
If the value of the fund as at 31 December exceeds 50% of the Name’s OPL for that year the excess is paid out of the fund in cash to the Name within 90 days of the valuation date. For transfers from 1 January 2000, the value must be compared with 50% of the higher of the OPL for that year or the preceding year.
Stop loss recoveries
Where a withdrawal has been made from the SRF in respect of a cash call or an overall loss and some or all of this amount is covered by a stop loss policy, any recoveries under the policy must be paid back into the SRF, within 90 days of their receipt.
Where a stop loss recovery has been received before the withdrawal from the fund takes place, the loss which triggers the withdrawal is reduced by that stop loss recovery.
Where a stop loss recovery has been received, and paid into the SRF, and then the Name is required to repay part or all of the recovery to the stop loss insurers, an amount equal to the sum to be repaid must be transferred from the SRF to the Name.
The existence of an SRF does not affect the application of the normal rules for taxing stop loss recoveries and repayments of those recoveries. Any SRF movements consequent on the receipt or repayment of a stop loss recovery are dealt with following the normal provisions for taxing transfers to and withdrawals from SRFs.
Cessation and death
Where a Name ceases to carry on business, the SRF is only wound up once all underwriting liabilities have been met. The balance of any SRF is then paid out to the Name in accordance with the members’ agent’s instructions submitted to the Lloyd’s Members’ Funds Department.
The SRF will continue to be operated by the personal representatives until it is clear that no further payments will be required to be made out of the SRF in respect of cash calls, syndicate losses for an underwriting year, or repayments of stop loss recoveries.