INSURANCE Citation and commencement 1 These Regulations may be cited as the Insurance (Lloyd's) Regulations 1997 and shall come into force on 1st January 1998. Interpretation 2 In these Regulations— “the 1982 Act ” means the Insurance Companies Act 1982; and “the 1983 Regulations ” means the Insurance (Lloyd's) Regulations 1983 . Financial Resources 3 1 For regulation 3 of the 1983 Regulations (financial resources) substitute— 3 1 In their application to the members of Lloyd’s taken together, section 32 of the Act (margins of solvency) and regulations made for the purposes of that section shall have effect subject to the following modifications. 2 No valuation regulations shall be applicable. 3 The following items shall have no value except in pursuance of a determination made by the Secretary of State pursuant to section 84(1) of the Act, that is to say— a those relating to future profits; b those relating to zillmerising, that is to say the method known by that name for modifying the net premium reserve method of valuing a long term policy by increasing the part of the future premiums for which credit is taken so as to allow for initial expenses; and c those relating to hidden reserves resulting from the under-estimation of assets and the over-estimation of liabilities (other than mathematical reserves). 4 Subject to paragraph (3) above, the value of the assets and the amount of the liabilities of the members of Lloyd’s taken together shall be determined on a basis approved by the Secretary of State. 5 The members of Lloyd’s taken together shall maintain both a global margin of solvency and a combined margin of solvency, calculated as follows— a the global margin of solvency shall be the sum arrived at by applying regulation 17(1) of the Insurance Companies Regulations 1994 (margins of solvency: determination) to the members of Lloyd’s taken together, subject to the modifications made to Schedules 3 and 4 to those Regulations (relating to general business margins of solvency) which are set out in Schedule 1 below; and b the combined margin of solvency shall be the sum arrived at by aggregating the prescribed surpluses of all such members calculated in accordance with Schedule 1A below. 6 In determining whether at any time the global margin of solvency is maintained by the members of Lloyd’s taken together, account shall be taken of the assets and liabilities of Lloyd’s in addition to the assets and liabilities of the members. 7 In determining whether at any time the combined margin of solvency is maintained by the members of Lloyd’s taken together— a the assets and liabilities of members shall be aggregated except that no account shall be taken of the assets of any member to the extent that they exceed the prescribed surplus of that member; and b the assets of Lloyd’s shall be taken into account to the extent that they are available to meet the liabilities of any member. 3A In the application to the members of Lloyd’s taken together of section 33 of the Act (failure to maintain minimum margin) and of regulations made for the purposes of that section, whether in relation to the global or the combined margin of solvency, those regulations shall have effect as if such members taken together were authorised for all classes of general business carried on at Lloyd's. 3B In the application to the members of Lloyd’s taken together of section 35 of the Act (form and situation of assets) and of regulations made for the purposes of that section, all insurance business carried on by members of Lloyd’s as such members shall be treated as carried on in the United Kingdom except business carried on in accordance with an authority or permission under the laws of another country and included in a return to a supervisory authority in that country. 2 After Schedule 1 to the 1983 Regulations (modifications of Schedules 3 and 4 to the Insurance Companies Regulations 1994), insert Schedule 1A (calculation of prescribed surplus), as set out in Schedule 1 to these Regulations. Statement of business by Council of Lloyd's 4 In Schedule 3 to the 1983 Regulations (statement of business by Council of Lloyd's)— a after paragraph 3 insert— 3A In the case of any shortfall in the assets of any underwriter which are available to meet the underwriter’s liability in respect of insurance business and the prescribed surplus calculated in accordance with Schedule 1A to the Insurance (Lloyd's) Regulations 1983, there are sufficient assets of Lloyd’s available to meet that shortfall. ; b for paragraph 5 substitute the following paragraph— 5 The rules and regulations of Lloyd’s determining the value of assets and the amount of liabilities for the purposes of section 32 of the Insurance Companies Act 1982 have been complied with in respect of every underwriter at Lloyd's. ; c omit Form 4; d in Form 6— i for the heading substitute “STATEMENT OF SOLVENCY OF UNDERWRITERS AT LLOYD'S (GLOBAL BASIS)”; and ii after Note 2 insert the following— 3 The required minimum margin shown above is calculated taking together the business of all underwriters at Lloyd's. The form demonstrates the extent to which the assets of underwriters and Lloyd’s exceed the required minimum margin calculated on that basis. 4 The amounts shown in lines 1 and 6 of Form 6 and line 1 of Forms 6A and 6B respectively are derived from the same underlying syndicate information. However, the figures in Form 6 represent the required minimum margin in respect of general and long term business for the underwriters at Lloyd’s taken together, while those in Forms 6A and 6B are calculated from the aggregate for general and long term business of the prescribed surpluses of every underwriter at Lloyd's. ; e after Form 6 insert Forms 6A and 6B as set out in Schedule 2 to these Regulations; and f in Form 9— i in line 14, after the words “Central Fund” insert “and New Central Fund”; and ii in Note 5 , for the words “Central Fund is a fund” substitute the words “Central Fund and New Central Fund are funds” and for “to which underwriters contribute” substitute the words “contributed to by underwriters”. Anthony Nelson, Minister for Trade, Department of Trade and Industry 8th March 1997