Chapter 3

Requirements made under the Overseas Underwriting Byelaw
Conditions of underwriting – Part B of theOverseas Underwriting Byelaw

Lloyd’s Japan – Paragraphs 5 and 8 of the Overseas Underwriting Byelaw
1. (a) Lloyd’s Japan Inc may charge, pursuant to any agency agreement or other agreement
or arrangement between it and any member of the Society (whether or not anunderwriting member) or any managing agent of any such member, any commission,
profit commission, fee or other remuneration or any advance payment or
reimbursement of expenses incurred by it in the performance of its functions inconnection with the underwriting business of that member.
(b) Any levy under this paragraph should be made by service on the member or on themember’s managing agent of a notice specifying the amount payable and the date ordates on which it is payable.
2.

A member of the Society (whether or not an underwriting member) shall not in thecourse of his underwriting business at Lloyd’s accept Japanese local insurance
business directly from any proposer or non-Lloyd’s broker in Japan otherwise than
through Lloyd’s Japan Inc and unless he has appointed Lloyd’s Japan Inc as General
Agent (as defined in article 219 of the Insurance Business Law (Law No. 105 of1995) of Japan).

Canada – Paragraphs 5 and 8 of the Overseas Underwriting Byelaw
3.

It shall be a condition and requirement of permission to underwrite Canadian Businessthat where any member of the Society (whether or not an underwriting member) uses
or purports to use the system known as Scheme Canada that member shall comply
with the provisions of the Scheme Canada Rules (as amended from time to time)
contained in the schedule 1 to these conditions and requirements and for these
purposes –“Act” means the Insurance Companies Act S.C. 1991 C.47 including any amendmentsor regulations made pursuant thereto.
“Canadian Business” means such part of a member's underwriting business at
Lloyd's (being general business) as constitutes either(a)contracts or policies of insurance (other than contracts or policies of marine
insurance) to the extent to which such contracts or policies insure risks

34

(b)

(c)

(d)

which are or will be ordinarily in Canada including all policies in Canada
as defined in the Act;
contracts or policies of reinsurance underwritten by the member of any
general business (other than contracts or policies of marine insurance)
underwritten by a company (not being a member of Lloyd's) incorporated in
Canada and licensed to underwrite insurance business under the laws ofCanada or any province or territory thereof;
contracts or policies of reinsurance underwritten by the member of generalbusiness (other than contracts or policies of marine insurance) underwritten
in Canada by a company (not being a member of Lloyd's) incorporated
elsewhere than in Canada and licensed to underwrite insurance businessunder the laws of Canada or any province or territory thereof;
any contract of reinsurance to close of any year of account underwritten by
the member to the extent only to which the member is liable under suchcontract in respect of.
(i)

(ii)

(iii)

contracts or policies of insurance (other than contracts or policies ofmarine insurance) underwritten by other members to the extent towhich such contracts or policies insure risks which are or will be
ordinarily in Canada including all policies in Canada as defined in
the Act; orcontracts or policies of reinsurance underwritten by other membersof general business (other than marine insurance) underwritten by acompany (not being a member of Lloyd's) incorporated in Canada
and licensed to underwrite insurance business under the laws ofCanada or any province or territory thereof ;contracts or policies of reinsurance underwritten by other membersof general business (other than contracts or policies of marine
insurance) underwritten in Canada by a company (not being amember of Lloyd's) incorporated elsewhere than in Canada andlicensed to underwrite insurance business under the laws of Canadaor any province or territory thereof.

35

SCHEDULE 1
SCHEME CANADA RULES (THE “RULES”)

Paragraphs
PART A
1

PRELIMINARY

Interpretation

PART B
2--

INSURANCE SERVICES

Provision of services

PART C-SCHEME CANADA

3 Scheme Canada
4 Demand and collection of moneys
5 Establishment of bank accounts
6 Currencies
7 Advice and accounting of Scheme transactions
8 Settlement of Scheme transactions
9 Agreed settlement dates
10 Settlement information statements
11 Obligations to fund settlements
12 Wrongful and unpaid credits
13 Default declarations
14 Scheme transactions involving defaulters
15 General saving relating to default
16 Termination of Scheme
17 Exclusion from participation in Scheme
18 Saving of rights on termination or exclusion
PART D-INFORMATION

19 Provision of information
20 Storage and distribution of information
21 Confidentiality of information
PART E-MISCELLANEOUS AND GENERAL

22 Power of Lloyd’s Canada Inc to prescribe charges
23 Regulations, codes of practice and manuals
24 Power to enter into agreements, etc.
25 Variation of services
26 Service of notices
27 Liability
28 Records/Determinations
29 Compliance with laws
30 Force majeure
31 Commencement and transitional provisions
36

PART A
1.

Citation and interpretation(1)

These rules may be cited as ‘Scheme Canada Rules’ (the “Rules”).

(2)

The provisions of the Schedule to these Rules (interpretation) shall haveeffect.

PART B
2.

PRELIMINARY

INSURANCE SERVICES

Provision of services(1)

Lloyd’s Canada Inc (“LCI”) may provide the services referred to in subparagraph (2) on the terms prescribed by these Rules.

(2)

The services referred to in sub-paragraph (1) are (a)a service for the accounting, netting and settlement of Canadianinsurance transactions and the transfer of funds more particularly
described in Part C;(b)

any ancillary service incidental or relating to the foregoing services;
and

(c)

any other service which LCI considers it is in the interests of any of thepersons referred to in subparagraph (4) or any class of them to receivein conjunction with any of the foregoing services.

(3)

All or any of the services may be provided wholly or partly by electronicmeans and by the use of electronic documents.

(4)

The services may be provided to or on behalf of (a)the Society (in its capacity as principal payee or payor under insurance
transactions or otherwise);

(b)

LCI;

(c)

any member or group of members of the Society;(d)

any underwriting agent (including any substitute agent);
37

(5)

(e)

any approved run-off company;(f)any Lloyd's broker or any person permitted by the Council to broke
insurance business at Lloyd’s (other than as referred to in subparagraph
(g));

(g)

any Canadian coverholder or correspondent;(h)any trustee of the LCTF and/or LCMTF and/or any premiums trust
deed or any person acting pursuant to any power under a trust deed;
and

(i)

any other person to whom LCI agrees to provide a service.

LCI may provide any service to or on behalf of a participant whether thatparticipant is acting, or appears to the LCI to be acting, as (a)a principal;(b)an agent for a person, whether or not that person is a participant; or(c)a trustee or pursuant to powers under a trust deed, in either casewhether or not the beneficiary of the trust concerned is, or where this is
more than one, includes, another person referred to in subparagraph(4).

Provided that in each of cases (b) and (c) LCI may treat such a trustee or agent
as if it were a transacting principal in respect of the provision of the services
and shall have no obligation to provide the services to, or claim unpaid
amounts owed by an agent or trustee hereunder from, underlying principals or
beneficiaries. LCI shall have a right to claim against any agent or trustee.
(6)

LCI may delegate the provision of all or any of the services referred to inparagraph 2(2) to any person on such terms and conditions as it thinks fit
and/or may agree with any person that such terms and conditions as it thinks
fit and/or may agree with another person that such other person may provide
all or any of such services on the terms and conditions set out or referred to inthese Rules on such terms and conditions as may be agreed with LCI(including, without limitation, in relation to the provision of information andassistance to LCI) or otherwise as it thinks fit. If agreed with LCI, any such
person may provide any such services in the name of LCI and may, with prior38

written consent from LCI, sub-delegate or delegate (as the case may be) the
provision of all or any of such services to another person on such terms as may
be stipulated in LCI’s consent.

PART C
3.

4.

SCHEME CANADA

Scheme Canada(1)

LCI may, as part of the services referred to in paragraph 2(2), maintain asystem to be known as Scheme Canada ( “Scheme”) for the processing,advice, accounting, netting and settlement of Canadian insurance transactions,(including monetary obligations arising from insurance transactions) and othertransfers of funds.

(2)

In providing the services, LCI is acting as the settlement agent of each of theparticipants and undertakes no liability as a principal to any participant inrespect of any insurance transaction.

Demand and collection of moneys(1)

LCI, as principal in respect of amounts due to it as principal payee under any
Canadian insurance transaction, or as agent of any other participant, may
demand and/or collect or procure the demand and/or collection from any
participant any moneys which are, or which appear to LCI to be, due on any
settlement date from that participant (whether as agent or principal) to any
other participant or participants (whether as agent or principal) (each a"payee") under any Scheme transaction. Such demands and/or collections may
be made through the Lloyd’s central accounting system where necessary.

(2)

LCI, as principal in respect of amounts due from it as principal payor under
any Canadian insurance transaction, or as agent of any other participant may
pay or procure payment any of the amounts referred to under sub-paragraph(1) to the relevant payee.

(3)

LCI may, in making payments to and collecting payments from participants, or
procuring the payment to or collection of payments from participants pursuant
to sub-paragraphs (1) and (2) above, aggregate and net all such payments inaccordance with paragraph 8.

(4)

Subject to paragraph 8, payments under Scheme transactions shall be made by39

participants in full and without set-off, deduction or counterclaim.
5.

6.

7.

Establishment of bank accounts(1)

One or more bank accounts may be opened (including accounts in the name of
the trustee of the LCTF and/or LCMTF)for the purpose of operating, orproviding any service under Scheme.

(2)

Every participant shall open and maintain such accounts with such banks as
LCI or the Council may prescribe.

(3)

LCI may as a condition of participation, or continued participation, in Scheme
require participants to establish irrevocable direct debit arrangements and/or
direct credit arrangements in favour of LCI or such other persons as LCI may
specify.

Currencies(1)

Scheme transactions shall be settled only in a Scheme currency.

(2)

Subject to sub-paragraph 6(3), participants shall agree such currency
conversion arrangements between themselves as are necessary to effectsettlement in respect of insurance transactions expressed in convertible
currencies which are required to be settled under the Scheme.

(3)

LCI may, but shall not be obliged to, prescribe the exchange rate to be used,
and the procedures and requirements to be followed, for the conversion ofamounts payable in respect of underlying insurance transactions expressed in aconvertible currency into a Scheme currency and for making adjustments to
exchange rates.

(4)

LCI may, on written notice to participants, declare that a convertible currency
is to become a Scheme currency or declare that a Scheme currency is nolonger a Scheme currency.

Advice and accounting of Scheme transactions(1)

In respect of any Scheme transaction, the participants concerned shall provide
to LCI such information and documents relating to it as LCI may require inorder to facilitate the advice and, if necessary, the accounting, netting andsettlement of the Scheme transaction and shall comply with the provisions of
any regulations, requirements, codes of practice and/or manuals made or40

issued by LCI in accordance with paragraph 23 below.
(2)

(3)

8.

Without prejudice to the generality of sub-paragraph (1), any requirement
made under that sub-paragraph or pursuant to any regulations, requirements,
codes of practise and/or manuals made or issued by LCI in accordance withparagraph 23 below may (a)impose conditions which are absolute or which are to vary from time totime by such factors as are specified in or are determined in accordancewith such conditions and requirements;(b)

make different provision for different classes or categories ofparticipants;(c)make different provision for different classes or categories of insurance
transaction;(d)be made in respect of a specific insurance transaction or a specificclass or category of insurance transaction or be of general application;(e)contain incidental and supplementary provisions.

LCI shall be entitled to rely on information and documents provided under
sub-paragraph (1) in effecting Scheme transactions.

Settlement of Scheme transactions
(1)

(2)

Subject to paragraphs 8(5) and 14, prior to each settlement date (the “relevant
settlement date”) LCI shall calculate in respect of each participant and inrespect of each Scheme currency:(a)the aggregate amount due to be paid to that participant by the otherparticipants under all Scheme transactions of which LCI has notice
which are denominated in that Scheme currency and are due to besettled on the relevant settlement date (the “entitlements”);(b)

the aggregate amount due to be paid by that participant to otherparticipants under all Scheme transactions of which LCI has notice
which are denominated in that Scheme currency and which are due tobe settled on the relevant settlement date (the “gross payments”).

If the entitlements exceed the gross payments the amount of such excess shall,
41

subject to sub-paragraph 11(4), be directly credited or otherwise paid by LCI
to the participant on the relevant settlement date.

9.

(3)

If the gross payments exceed the entitlements, the amount of such excess shallbe directly debited, by LCI from such participant's account(s) or paid by theparticipant to LCI for value on the relevant settlement date.

(4)

LCI may settle a Scheme transaction otherwise than in accordance with subparagraphs (1) to (3) and shall consider representations from participants that a
Scheme transaction that would otherwise be settled in accordance with subparagraphs (1) to (3) should not be so settled.

(5)

Any direction made under sub-paragraph (4) may be given in respect of a
specific Scheme transaction or a specific class of Scheme transaction or be ofgeneral application

Settlement dates
Amounts due for settlement under the Scheme shall be settled or brought into
settlement between participants on one of the applicable settlement dates as specified
from time to time by LCI except where a Scheme transaction is to be settled otherwise
than in accordance with paragraphs 8(1) to (3) above whereupon the settlement dateshall be determined by LCI in its absolute discretion.

10.

Settlement information statements(1)

LCI may deliver or shall procure the delivery to every participant of settlement
information statements in accordance with this paragraph.

(2)

A settlement information statement delivered to a participant may provide
such information as to enable the participant to ascertain (from the settlement
information statement alone or in conjunction with other information) those
Scheme transactions to which the participant is a party and which have been,or which will be, accounted and, if such is the case, settled under the Scheme
during the period covered by the settlement information statement.

(3)

Settlement information statements delivered under sub-paragraph (1) may (a)contain different information for different classes of participant and for
different classes of Scheme transaction;(b)

be delivered at such intervals as LCI may determine; and
42

(c)

11.

contain such additional information as LCI may determine.

(4)

A participant may appoint a person to whom LCI is able to send settlement
information statements to and to receive settlement information statements on
its behalf.

(5)

The members of a syndicate shall for the purposes of sub-paragraph (4) bedeemed to have appointed the managing agent of the syndicate to receive all
settlement information statements on their behalf.

(6)

Where a participant has appointed a person under sub-paragraph (4), theparticipant shall give written notification to LCI of the appointment together
with such additional information as LCI may require.

(7)

Where a participant has appointed a person under sub-paragraph (4), theobligations of LCI to the participant under sub-paragraph (1) shall bedischarged by delivery of settlement information statements to the person so
appointed by the participant.

Obligation to fund settlements(1)

Every participant shall, in accordance with any conditions and requirements of
LCI, make available, or procure that there are made available, sufficient funds
on the applicable settlement date for the settlement of any Scheme transaction
in respect of which amounts are to be paid by or on behalf of that participant.

(2)

Where a participant is required to make funds available for the settlement of
Scheme transactions and does not make the full amount of such funds
available on or before the applicable settlement date LCI may -

(3)

(a)

refuse to settle any or all Scheme transactions until sufficient funds
have been made available; or(b)apply any funds received from the participant in the pro rata
settlement of outstanding Scheme transactions to which it is a party; or(c)settle any or all Scheme transactions in respect of, on account of or on
behalf of the participant.

Where LCI settles a Scheme transaction under sub-paragraph (2)(c), theparticipant shall on demand pay forthwith to LCI amounts equal to any sums
so paid in settlement in respect of, on account of or for the benefit on behalf of43

that participant, together with (if so demanded) interest thereon charged inaccordance with sub-paragraph (5) and shall indemnify LCI in respect of any
interest paid or payable or any charges, expenses or liabilities incurred by LCI
or the Society by reason of LCI having settled the Scheme transaction, and
LCI and/or the Society may bring proceedings to recover the same as a civil
debt. All amounts payable pursuant to this sub-paragraph by any participant
carrying on an underwriting business shall be treated for all purposes as an
expense of that underwriting business.

12.

(4)

Where LCI refuses to settle any Scheme transaction under sub-paragraph 2(a)LCI may either reduce the amount of the entitlements of any participant
payable to it pursuant to paragraph 8 by the amount which such participant
would have received in respect of such Scheme transaction had it been settled
in full or may suspend the payment to the relevant participant until such
Scheme transactions have been settled in full. Where LCI makes a pro rata
partial settlement of a Scheme transaction under sub-paragraph 2(b) LCI shall
reduce the amount of the entitlements of any participant payable to it pursuant
to paragraph 8 by an amount equal to the amount which such participant would
have received in respect of such Scheme transaction had it been settled in fullless the amount of the pro rata partial settlement made by LCI.

(5)

LCI may charge interest on any amount paid under sub-paragraph (2)(c) fromthe applicable settlement date until the date of repayment of such amount to
LCI or the Society. The rate of interest shall be five per cent. above the thencurrent prime rate of the Royal Bank of Canada (or such other leading bank as
LCI may select).

(6)

Without prejudice to any other powers of LCI, LCI may treat any sum payable
under sub-paragraph (3) or (5) as a Scheme transaction which may be settled,or brought into settlement, under Scheme.

(7)

Without prejudice to the provisions of paragraph 18, the rights and liabilities
conferred or created by this paragraph shall subsist notwithstanding that theparticipant in respect of, or on account of or for the benefit of whom atransaction has been settled under sub-paragraph 2(b) has, if a member of theSociety, ceased to be such a member by reason of resignation, death orotherwise or, if not such a member, has ceased to be a participant.

Wrongful and unpaid credits(1)

Where, in calculating the entitlements due to a participant under paragraph448(1)(a), LCI has taken into account any amount which is due to be paid to thatparticipant and which is not subsequently paid on the relevant settlement dateor any amount which is not due to that participant on the relevant settlement
date, LCI may directly debit the accounts of that participant in respect of thatamount or make demand for the prompt repayment of that amount. Such
participant shall repay LCI immediately on its making such demand and thatparticipant shall indemnify LCI against any loss, liability, charge or expense
arising from the crediting or other payment of such amount to its account.
(2)

13.

Where, at any stage during the operation of a service a participant becomesaware of an inputting or similar or analogous error such participant shallimmediately notify LCI of the error. LCI may, where it is practicable so to do,reverse any transaction notified to it as having been erroneously made or ofwhich LCI has itself become aware. The participant shall settle in full any
transaction notified to it pending the correction taking effect.

Default declarations(1)

Where (a)(b)

a participant (i)is unable to fulfil its obligations in respect of any Scheme
transaction; or(ii)appears to LCI to be or likely to be so unable; oran insolvency event occurs in relation to the participant or any relevant
principal or beneficiary on whose behalf it acts,

LCI may make a default declaration in respect of that participant, whereupon
the following provisions of this Part shall apply.
(2)

Where LCI makes a default declaration, it shall as soon as is reasonably
practicable thereafter give written notice of the default declaration to thedefaulter and such other persons as LCI thinks fit.

(3)

The form of the default declaration and the manner in which notice thereof isgiven to the persons referred to in sub-paragraph (2) shall be as LCI thinks fit.

(4)

LCI may at any time it thinks fit revoke a default declaration.

(5)

Where LCI revokes a default declaration it shall give written notice thereof to45

the defaulter and such other persons as it thinks fit.
14.

System transactions involving defaulters
As soon as is reasonably practicable after a participant has been declared a defaulter,
LCI may -

15.

(a)

suspend the settlement of sums due to or from the defaulter which would
otherwise be settled or brought into settlement on settlement dates after thedate on which the participant has been declared a defaulter; and(b)take such steps and make such arrangements as LCI thinks fit to facilitate thesettlement of amounts due to the defaulter from other participants and otherpersons and amounts due from the defaulter to other participants and otherpersons, provided that LCI shall not be obliged to take any action in respect of
the settlement of sums for which instructions have already been given to any
relevant clearing institutions.

General saving relating to default
Nothing in this Part shall prevent LCI, the Society, any other participant or any otherperson from exercising any lawful right or fulfilling any lawful obligation in respectof the defaulter whether or not the right or obligation concerned arises in respect of a
Scheme transaction.

16.

Termination of the Scheme(1)

LCI may in its absolute discretion upon giving not less than six months’ notice(or such lesser period as LCI may determine at any time, having regard to theprevailing circumstances) to participants terminate any or all of the services
including the provision of the Scheme.

(2)

As soon as practicable after any notice to terminate the Scheme has taken
effect LCI shall take such steps as it considers appropriate -

(3)

(a)

to account to participants for any sums that may be due to them under
the Scheme; and(b)

to facilitate the orderly winding up of the Scheme.

Termination of the Scheme or any service shall not release any participantfrom any liability which at the time of termination had already accrued toanother participant or LCI nor affect in any way the provisions of46

paragraphs 28 and 29.
17.

Exclusion from participation in the Scheme
(1)

(2)

(3)

LCI may exclude a participant from participation in the Scheme where(a)in the opinion of LCI, the participant has used or is using or is
proposing to use the Scheme in a way which has caused or is causing
or will cause material harm or damage to the Scheme, otherparticipants or information processed, held or transmitted on, under or
through the Scheme;(b)

the participant has ceased to be a person referred to in paragraph2(4)(b) to (i);(c)

LCI has made a default direction in respect of the participant underparagraph 13;(d)an insolvency event has occurred in relation to the participant or any
principal or beneficiary on whose behalf it acts;(e)the participant has failed to comply with or any other provision ofthese Rules or any provision of any requirements, regulation, code ofpractice or manual made or published by LCI issued underparagraph 23;(f)

the participant has failed to pay a charge payable under paragraph 22
within the period for the time being prescribed; or(g)having regard to the circumstances then pertaining LCI thinks fit that a
participant is excluded from participation in the Scheme.

Before exercising the powers conferred on LCI by this paragraph in respect ofa participant referred to in paragraph 2(4)(c) to (i), LCI shall (a)inform the participant concerned in writing of its intention and of thegrounds for the intended exclusion; and(b)allow the participant to make representations as to the intended
exclusion within such a period and in such form as LCI may allow.

If in the opinion of LCI the power conferred by sub-paragraph (1) is required
to be exercised immediately, LCI may exercise such powers without having
47

first taken the steps referred to in sub-paragraph (2).
(4)

(5)

18.

In any case falling within sub-paragraph (3) LCI shall(a)as soon as possible inform the participant concerned of the reasons forthe exclusion; and(b)allow the participant to make representations within such period as LCI
may require.

LCI shall as soon as practicable after the exclusion of a participant fromparticipation in the Scheme notify in writing all the other participants thereof.

Saving of rights on termination or exclusion
The termination of the Scheme under paragraph 16 or the exclusion from participationof a participant under paragraph 17 shall not affect any right, obligation or liability ofany person accrued, due or outstanding at the date of termination or exclusion andarising under the Scheme or from his participation in the Scheme or in respect of any
Scheme transaction.

PART D19.

20.

INFORMATION

Provision of information(1)

LCI may require any participant to supply LCI and/or any service provider
with such information as LCI may specify in connection with the provision of
any service.

(2)

Each participant shall immediately notify LCI and any service provider on
becoming aware that an insolvency event has occurred or is likely to occur inrelation to it or any principal or beneficiary on whose behalf it acts.

Storage and distribution of information
LCI and any service provider may as part of, or for the purposes of, or in connection
with, providing a service hold information provided under paragraph 19 of any otherprovisions of these Rules or otherwise provided to, or obtained by, it in providing aservice and, subject to paragraph 21 may distribute such information or any of it.

21.

Confidentiality of information(1)

Subject to paragraph (2) and paragraph 24 (2), information provided to, or48

obtained by, LCI under these Rules or in providing any service shall be held
subject to the provisions of the Information and Confidentiality Byelaw (No.
21 of 1993 and applicable Canadian law), provided that LCI may disclose suchinformation to any service provider in so far as it thinks fit.
(2)

PART E
22.

23.

Information provided to, or obtained by, any service provider under theseRules or in providing any service shall be held subject to the provisions
relating to disclosure and use as may be agreed between the service provider
and LCI.
MISCELLANEOUS AND GENERALPower of LCI to prescribe charges(1)

Every applicant and every participant shall pay to LCI such charges as LCI
shall notify to them from time to time .

(2)

For the purposes of this paragraph LCI may (a)determine the amount of any charges in accordance with a specified
scale or other specified factors;(b)determine the time or times of payment of charges;(c)provide for the exemption from payment of, or the return or abatementof, any charges in specified circumstances;(d)charge interest on such amounts of charges as are unpaid on the due
date until the date of payment at a rate determined by LCI; and(e)make different provision for different cases.

Regulations, codes of practice and manuals(1)

LCI may make, amend and terminate requirements, regulations, and issue
codes of practice and/or manuals in respect of the provision and operation of
the services or any of them and the administrative and technical procedures tobe observed by participants.

(2)

Where any provision in a regulation, requirement, code of practice or manual
made or issued under sub-paragraph (1) conflicts with a provision of theseRules, the latter shall prevail.
49

24.

25.

Power to enter into agreements, etc.
(1)

LCI may enter into such contracts and arrangements as LCI considers arenecessary or expedient for the purposes of or in connection with the provisionof any service under this byelaw.

(2)

Where LCI has entered into a contract or arrangement as described in subparagraph (1), and, as a result thereof, LCI uses systems and equipment
owned, maintained, operated or controlled by third parties, LCI may disclose
to such third parties information about participants and Scheme transactions to
the extent that such disclosure is necessary for the purpose of, or giving effectto, the contract or arrangement concerned.

(3)

Any service provider may, if LCI so agrees, disclose to third parties
information about participants and their businesses to the extent that suchdisclosure is necessary for the purpose of or in connection with the provisionof any service.

Variation of services(1)

Subject to this paragraph, LCI may vary a service or any part of a service.

(2)

Subject to sub-paragraph (3), LCI shall not vary a service to any material
extent without giving prior notice of the proposed variation to the affectedparticipants. LCI shall consider the representations (if any) of the affectedparticipants on any such variation before reaching any decision on thevariation.

(3)

If in the opinion of LCI any material variation is required to be made as amatter of urgency in order to enhance a service or any part of a service or topreserve the integrity of the services or any part of a service or to preserve theinterests of participants or any of them LCI may make that variation without
first having taken the steps referred to in sub-paragraph (2).

(4)

In any case falling within sub-paragraph (3) LCI shall (a)as soon as practicable thereafter inform the affected participants inwriting of the variation; and(b)permit the affected participants to make representations to LCI on theaction taken by LCI within such period as LCI may prescribe50and where such representations are received by LCI, it shall reconsider theaction taken under sub-paragraph (3).
26.

27.

Service of notices(1)

All notices and other communications by LCI or a service provider which arerequired to be given to a participant under these Rules shall for all purposes betreated as effectively given if left at or sent by post to the address from time totime notified to LCI or the service provider in question by that participant as
the address to which notices and other communications are to be sent or, if
give by facsimile transmission or email by submitting it to such number or
email address from time to time notified to LCI or the service provider inquestion as appropriate by that participant.

(2)

Any notice or communication sent to a participant by ordinary post shall betreated as having been effectively given by properly addressing and posting a
letter containing that notice or communication and shall be deemed to havebeen served 24 hours after the letter is posted. Any notice or communication
sent by facsimile or email transmission shall be deemed to have been received
when evidence of its receipt is transmitted to the person sending it and any
notice or communication sent by electronic means shall be deemed to havebeen received when transmitted.

Liability(1)

Neither LCI nor any delegate of LCI (each a “service provider”) shall have any
liability (whether direct or indirect, in contract, tort or otherwise) to any
participant or any principal or beneficiary of any participant or any of theirrespective shareholders or any other person (each such person a “claimant”)
for or in connection with the services except for direct losses suffered by theclaimant to the extent that such losses are found in a final, non-appealable
judgment by a court of competent jurisdiction to have resulted directly andprimarily from the negligence or wilful misconduct of that service provider
and in no event shall LCI or that service provider be liable for any claimant’s
loss of profits, business or anticipated savings or for any indirect orconsequential loss whatsoever.

(2)

Without limiting any provision of sub-paragraph (1), LCI shall not be
responsible for the negligence or wilful misconduct of, or any other loss or
liability arising in connection with, the action or inaction of any service
provider selected by LCI with reasonable care.
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28.

29.

(3)

LCI will have no liability or responsibility, except as expressly provided inthese Rules, for the good faith or acts or omissions, creditworthiness,
performance or standing of any participant or any other person whomsoever orfor admitting any participant to the Scheme, making or failing to make any
default declaration in respect of a participant or taking or failing to take any
action to terminate or suspend the provision of any service to any participant.

(4)

LCI assumes no liability or responsibility for the consequences arising out of
delay or loss in transmission of any messages, letters, cheques or documents,
or for delay, mutilation or other errors arising in transmission of any
telecommunication or other electronic notification and will not be liable or
responsible for any delays resulting from the need to obtain clarification of any
instructions received.

(5)

Each participant shall indemnify and hold harmless LCI and any service
provider from and against any and all claims, damages, losses, liabilities, costs
and expenses (including, without limitation legal fees and disbursements) that
may be incurred by or asserted or awarded against LCI or any service
provider, in each case arising out of or in connection with any investigation,
litigation or other proceeding commenced by any person against LCI or any
service provider which arises out of or in connection with the provision by LCI
or any service provider of any of the services to that participant or as a resultof any breach by that participant of its obligations to LCI or any service
provider, except to the extent such claim, damage, loss, liability, cost or
expense has resulted directly and primarily from LCI’s or any service provider
negligence or wilful misconduct. All amounts payable pursuant to this subparagraph by any participant carrying on an underwriting business shall betreated for all purposes as an expense of that underwriting business.

Records/Determinations(1)

In the absence of manifest error, the records of LCI relating to the settlementof Scheme transactions shall constitute conclusive evidence as to matter.

(2)

Any determination or notification by LCI concerning any rate or amount to be
determined or calculated in connection with the services shall, in the absenceof manifest error, be conclusive evidence as to the matter.

Compliance with laws
In carrying out the services LCI or any service provider may refrain from doing
anything which might, in its opinion, constitute a breach of any law or regulation or52

any duty of confidentiality or be otherwise actionable at the suit of any person andmay do anything which, in its opinion, is necessary or desirable to comply with any
law or regulation of any jurisdiction or to comply with the order of any court.
30.

Force Majeure
LCI and any service provider shall have no responsibility or liability for or regarding
any non-performance, improper performance, suspension of performance or delay inperformance, of LCI’s or any service provider’s obligations under or in connection
with the services by reason of any circumstances beyond LCI's or any service
provider’s reasonable control including, without limitation, by reason of any failure
by a clearing agent to make a payment on a settlement date, any breakdown or failureof transmission, communication or computer facility or other mechanical breakdown
or malfunction, work stoppage, postal or other strike or other labour disturbance orindustrial action, earthquake, flood, fire, storm and other act of God, explosion,accident, sabotage, terrorism, insurrection, revolution, riot, rebellion or other unrest or
disturbance or present or future law or act of any governmental or regulatory
authority.

31.

Commencement and transitional provisions(1)

These Rules shall come into force on 1 March 2004.

(2)

The document entitled “Scheme Canada Manual” shall be deemed to be amanual issued under paragraph 23.

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SCHEDULE
Interpretation
1.

In these Rules, unless the context otherwise requires "approved run-off company" has the meaning given to it in the Underwriting Byelaw(No. 2 of 2003)"arrangement" includes any agreement or arrangement whether or not intended to be
enforceable by legal proceedings and whether or not evidenced in writing;“Canadian coverholder” means any approved coverholder (as defined in the Delegated
Underwriting Byelaw (No 1 of 2004)) who transacts Canadian insurance businesspursuant to a recognised binding authority in Canada;“Canadian correspondent” means a broker (not being a Lloyd’s broker) or otherintermediary in Canada introducing risks:(a)(b)

directly to a Lloyd’s broker for placing with underwriters; orif a non-Lloyd’s intermediary, directly to underwriters
otherwise than by a binding authority.

"Canadian insurance transaction" means any transaction effected, or intended to beeffected, as part of, or arising from, the business of insurance or any activity
whatsoever directly or indirectly related to, or arising from, the business of insurancein Canada;“claimant” has the meaning given to it in paragraph 27(1);"convertible currency" means a currency which is not a Scheme currency;“default declaration” means a declaration made by LCI under paragraph 13(1);"defaulter" means a participant in respect of which LCI has made a default
declaration;"direct credit arrangement" means any arrangement whereby a person is authorised tocredit another person's account;"direct debit arrangement" means any arrangement whereby a person other than the54account holder is authorised to debit, or take money from, that account;“entitlements” has the meaning given to it in paragraph 8(1);“gross payments” has the meaning given to it in paragraph 8(1);“insolvency event” means:(a)in relation to any individual or partnership, the making of a receiving order inbankruptcy against such individuals or any partner in such partnership by thedue process of law of any country, such individual or partner in suchpartnership making or proposing any composition with his creditors orotherwise acknowledging his insolvency, or being adjudicated bankruptcy or
adjudicated or declared insolvent by the due process of law of any country;
and(b)

in relation to any body corporate its making or proposing any composition
with its creditors or otherwise acknowledging its insolvency, a bankruptcy
order being made against it by the due process of law of any country; its being
adjudicated or declared insolvent by the due process of law of any country, anorder being made or resolution being passed for its winding up or dissolution,a receiver, trustee or analogous officer being appointed in respect of the whole
or any material of its property or assets, its directors presenting or filing in any
court a petition in respect of its bankruptcy, winding up or other insolvency or
which seeks any reorganisation, dissolution or similar relief or there occurring
an event in any jurisdiction which is analogous to any of the foregoing events;"insurance" includes assurance, reinsurance, reassurance and suretyship;“LCI” means Lloyd’s Canada Inc (or its successors and assignees from time to time);“LCMTF” means the trust fund constituted by the Lloyd’s Canadian Margin Fund
Trust Deed dated 25 May 2001 as amended from time to time;“LCTF” means the trust fund constituted by the Lloyd’s Canadian Trust Deed dated
25 May 2001 as amended from time to time;"managing agent" means a person who is listed as a managing agent in the register ofunderwriting agents under the Underwriting Byelaw (No. 2 of 2003);
55

"participant" means a person set out in paragraph 2(4) acting in one of the capacities
set out at paragraph 2(5) to whom or on behalf of whom a service is for the time being
provided under this byelaw;“payee” has the meaning given to it in paragraph 4(1);"premiums trust deed" means a trust deed in the form for the time being required by
the Council constituting a premium trust fund (including all such trust deeds relating
to long term business and any Overseas Direction or Special Trust Direction as therein
defined);"prescribed form" means, in relation to any application, notice or other document,such forms and contents as may from time to time be prescribed by LCI;
"Scheme currency" means any currency in which LCI or any service provider settles
Scheme transactions;"Scheme" means Scheme Canada as referred to in paragraph 3;"Scheme transaction" means an insurance transaction which, in accordance with theseRules is, or should be, processed under the Scheme or in respect of which monetary
obligations are, or should be, settled under the Scheme;"services" means the services referred to in paragraph 2(2) for the time being provided
under this byelaw;“services provider” means (other than in paragraph 27) a person, other than LCI, who
is referred to in paragraph 2(6) and who provides any service referred to in paragraph2(2);“settlement information statement” means a statement as described in paragraph 10;“settlement date” means a date specified by LCI under paragraph 9 for the settlementof Scheme transactions.
“Society” means the Society incorporated by Lloyd’s Act 1871 by the name of
Lloyd’s;

56

"substitute agent" means a person appointed to act as agent for an underwriting
member under the Substitute Agents Byelaw (No 20 of 1983) or in accordance withpart K of the Underwriting Byelaw (No 2 of 2003)“syndicate" means a group of underwriting members underwriting insurance businessat Lloyd's through the agency of a managing agent;“underwriting agent” has the meaning given to it in the Underwriting Byelaw (No. 2
of 2003), and includes any substitute agent.
2.

The references in paragraphs 2(3), 26(1) and 26(2) to "electronic means" and inparagraph 2(3) to "electronic documents" include references to computers, networks
and any means whereby information is processed, held or transmitted in a machinereadable form and to documents which are in a machine-readable form. The referencesin this byelaw to any other Lloyd’s byelaw shall be deemed to be a reference to that
Lloyd’s byelaw as the same may be amended from time to time;57