The Insurers (Reorganisation and Winding Up) (Lloyd's) Regulations 2005

Made: 19th July 2005

Laid before Parliament: 20th July 2005

Coming into force: 10th August 2005

The Treasury being a government department designated for the purposes of section 2(2) of the European Communities Act 1972 in relation to the insolvency of insurers, in exercise of the powers conferred by that section hereby make the following Regulations:

PART 1 — GENERAL

Citation and commencement

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These Regulations may be cited as the Insurers (Reorganisation and Winding Up) (Lloyd's) Regulations 2005, and come into force on 10 August 2005.

Interpretation

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• (1) In these Regulations—

• “the Administration for Insurers Order” means the Financial Services and Markets Act 2000 (Administration Orders Relating to Insurers) Order 2002 and the “Administration for Insurers (Northern Ireland) Order” means the Financial Services and Markets Act 2000 (Administration Relating to Insurers)(Northern Ireland) Order 2007;

• “affected market participant” means any member, former member, managing agent, members' agent, Lloyd's broker, approved run-off company or coverholder to whom the Lloyd's market reorganisation order applies;

• “approved run-off company” means a company with the permission of the Society to perform executive functions, insurance functions or administrative and processing functions on behalf of a managing agent;

• “the association of underwriters known as Lloyd's” has the meaning it has for the purposes of Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) , as it had effect immediately before IP completion day;

• “central funds” means the New Central Fund as provided for in the New Central Fund Byelaw (No. 23 of 1996) and the Central Fund as provided for in the Central Fund Byelaw (No. 4 of 1986);

• “company” means a company within the meaning of section 1 of the 2006 Act or a company incorporated elsewhere than in Great Britain that is a member of Lloyd's;

• “corporate member” means a company admitted to membership of Lloyd's as an underwriting member;

• “coverholder” means a company or partnership authorised by a managing agent to enter into, in accordance with the terms of a binding authority, a contract or contracts of insurance to be underwritten by the members of a syndicate managed by that managing agent;

• “the FCA” means the Financial Conduct Authority;

• “former member” means a person who has ceased to be a member, whether by resignation or otherwise, in accordance with Lloyd's Act 1982 and any byelaw made under it or in accordance with the provisions of Lloyd's Acts 1871 – 1982 then in force at the time the person ceased to be a member;

• “Gazette” means the London Gazette, the Edinburgh Gazette and the Belfast Gazette;

• “individual member” means a member or former member who is an individual;

• “insurance market activity” has the meaning given by section 316(3) of the 2000 Act;

• “insurance market debt” means an insurance debt under or in connection with a contract of insurance written at Lloyd's;

• “Lloyd's Acts 1871-1982” means Lloyd's Act 1871 , Lloyd's Act 1911 , Lloyd's Act 1951 and Lloyd's Act 1982;

• “Lloyd's broker” has the meaning given by section 2(1) of Lloyd's Act 1982;

• “managing agent” has the meaning given by article 3(1) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 ;

• “member” means an underwriting member of the Society;

• “members' agent” means a person who carries out the activity of advising a person to become, or continue or cease to be, a member of a particular Lloyd's syndicate;

• “overseas business regulatory deposit” means a deposit provided or maintained in respect of the overseas insurance and reinsurance business carried on by members in accordance with binding legal or regulatory requirements from time to time in force in the country or territory in which the deposit is held;

• “overseas insurance business” means insurance business and reinsurance business transacted by members in a country or territory other than the United Kingdom;

• “the PRA” means the Prudential Regulation Authority;

• “the principal Regulations” means the Insurers (Reorganisation and Winding Up) Regulations 2004 ;

• “relevant trust fund” means any funds held on trust under a trust deed entered into by the member in accordance with the requirements of the FCA or the PRA and the Byelaws of the Society for the payment of an obligation arising in connection with insurance market activity carried on by the member or for the establishment of a Lloyd's deposit and includes funds held on further trusts declared by the Society or the trustee of such a trust deed in respect of any class of insurance market activity;

• “the Room” has the meaning given by section 2(1) of Lloyd's Act 1982;

• “the Society” means the Society incorporated by Lloyd's Act 1871;

• “subsidiary of the Society” means a company that is a subsidiary of the Society within the meaning of section 1159 of the 2006 Act;

• “syndicate” has the meaning given by article 3(1) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001.

• (2) Subject to paragraph (3), words and phrases used in these Regulations have the same meaning as in the principal Regulations except where otherwise specified or where the context requires otherwise.

• (3) For the purposes of these Regulations, “UK insurer” is to be treated as including a member or a former member.

• (4) These Regulations have effect notwithstanding the provisions of section 360 of the 2000 Act.

PART 2 — LLOYD'S MARKET REORGANISATION ORDER

Lloyd's market reorganisation order

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• (1) In these Regulations “Lloyd's market reorganisation order” means an order which—

• (a) is made by the court in relation to the association of underwriters known as Lloyd's;

• (b) appoints a reorganisation controller; and

• (c) on the making of which there comes into force a moratorium on the commencement of—

• (i) proceedings, or

• (ii) other legal processes

set out in regulation 8 in respect of affected market participants, the Society and subsidiaries of the Society.

• (2) A Lloyd's market reorganisation order applies to—

• (a) every member, former member, managing agent, members' agent, Lloyd's broker and approved run-off company who has not been excluded from the order in accordance with regulation 7;

• (b) every coverholder who has been included in the order in accordance with regulation 7;

• (c) the Society; and

• (d) subsidiaries of the Society.

Condition for making order

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• (1) The court may make a Lloyd's market reorganisation order if it is satisfied that—

• (a) any regulatory solvency requirement is not, or may not be, met; and

• (b) an order is likely to achieve one or both of the objectives in regulation 5.

• (2) In paragraph (1), “regulatory solvency requirement” means a requirement to maintain adequate financial resources in respect of insurance business at Lloyd's, imposed under the 2000 Act, whether on a member or former underwriting member, either singly or together with other members or former underwriting members, or on the Society and includes a requirement to maintain a margin of solvency.

• (3) In paragraph (2), “former underwriting member” has the meaning given by section 324(1) of the 2000 Act.

Objectives of a Lloyd's market reorganisation order

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The objectives of a Lloyd's market reorganisation order are—

• (a) to preserve or restore the financial situation of, or market confidence in, the association of underwriters known as Lloyd's in order to facilitate the carrying on of insurance market activities by members at Lloyd's;

• (b) to assist in achieving an outcome that is in the interests of creditors of members, and insurance creditors in particular.

Application for a Lloyd's market reorganisation order

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• (1) An application for a Lloyd's market reorganisation order may be made by the PRA or by the Society, or by both.

• (1A) Before making an application under paragraph (1), the PRA must consult the FCA.

• (2) If the application is made by only one of those bodies it must inform the other body of its intention to make the application as soon as possible, and in any event before the application is lodged at the court.

• (3) The FCA, the PRA and the Society are entitled to be heard at the hearing of the application, regardless of which body makes the application.

• (4) An application must clearly designate—

• (a) any member, former member, managing agent, members' agent, Lloyd's broker, or approved run-off company to whom the order should not apply; and

• (b) every coverholder to whom the order should apply.

• (5) The applicant must give notice of the application by—

• (a) ensuring the posting of a copy in the Room,

• (b) displaying a copy on its website, and

• (c) publishing a copy

• (i) in the Gazette, and

• (ii) in such newspaper or newspapers within the United Kingdom and elsewhere as the applicant considers appropriate to bring the application to the attention of those likely to be affected by it.

• (6) The notice must be given as soon as reasonably practicable after the making of the application, unless the court orders otherwise.

Powers of the court

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• (1) On hearing an application for a Lloyd's market reorganisation order, the court may make—

• (a) a Lloyd's market reorganisation order, and

• (b) any other order in addition to a Lloyd's market reorganisation order which the court thinks appropriate for the attainment of either or both of the objectives in regulation 5.

• (2) A Lloyd's market reorganisation order comes into force—

• (a) at the time appointed by the court; or

• (b) if no time is so appointed, when the order is made

and remains in force until revoked by the court.

• (3) The court may on an application made by the PRA or the Society at the same time as an application under regulation 6 or the reorganisation controller, the PRA, the Society, a subsidiary of the Society or any affected market participant at any time while the Lloyd's market reorganisation order is in force, amend or vary a Lloyd's market reorganisation order so that it—

• (a) does not apply to—

• (i) particular assets, or

• (ii) particular members, former members, member's agents, managing agents, Lloyd's brokers, approved run-off companies or subsidiaries of the Society,

specified in the order; and

• (b) does apply to any coverholder specified in the order.

• (4) The court—

• (a) must appoint one or more persons to be the reorganisation controller;

• (b) must specify the powers and duties of the reorganisation controller;

• (c) may establish or approve the respective duties and functions of two or more persons appointed to be the reorganisation controller, including specifying that one of them shall have precedence; and

• (d) may from time to time vary the powers of a reorganisation controller.

• (5) An application made under paragraph (3) other than at the time of the application under regulation 6 shall be served on the reorganisation controller, the FCA and the PRA who shall each be entitled to attend and be heard at a hearing of such an application.

Moratorium

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• (1) Except with the permission of the court, for the period during which a Lloyd's market reorganisation order is in force, no proceedings or other legal process may be commenced or continued against:

• (a) an affected market participant;

• (b) the Society; or

• (c) a subsidiary of the Society to which the order applies.

• (2) In paragraph (1),

• (a) “court” means in England and Wales the High Court, in Northern Ireland the High Court and in Scotland the Court of Session; and

• (b) “proceedings” means proceedings of every description and includes:

• (i) a petition under section 124 or 124A of the 1986 Act or Article 104 or 104A of the 1989 Order for the appointment of a liquidator or provisional liquidator;

• (ii) an application under section 252 of the 1986 Act or Article 226 of the 1989 Order for an interim order;

• (iii) an application or a petition for a bankruptcy order under Part 9 of the 1986 Act or Part 9 of the 1989 Order; and

• (iv) a petition for sequestration under section 5 or 6 of the Bankruptcy (Scotland) Act, but

does not include prosecution for a criminal offence.

• (3) Except with the permission of the court, for the period during which a Lloyd's market reorganisation order is in force, no execution may be commenced or continued, no security may be enforced, and no distress may be levied, against (or against the assets of or in the possession of):

• (a) any person specified in paragraph (1);

• (b) a relevant trust fund (or the trustees of a relevant trust fund); and

• (c) an overseas business regulatory deposit.

• (4) Paragraph (3) does not prevent the enforcement of—

• (a) approved security granted to secure payment of approved debts of a member incurred in connection with an overseas regulatory deposit arrangement; or

• (b) security granted by a Lloyd's broker over assets not being assets constituting or representing assets received or held by the Lloyd's broker as intermediary in respect of any contract of insurance or reinsurance written at Lloyd's or any contract of reinsurance reinsuring a member of Lloyd's in respect of a contract or contracts of insurance or reinsurance written by that member at Lloyd's.

• (5) In the application of paragraph (3) to Scotland, references to execution being commenced or continued include references to diligence being carried out or continued, and references to distress being levied shall be omitted.

• (6) For the period during which a Lloyd's market reorganisation order is in force, no action or step may be taken in respect of any of the persons specified in paragraph (1) by any person who is or may be entitled—

• (a) under any provision in Schedule B1 or in Schedule B1 to the 1989 Order to appoint an administrator;

• (b) to appoint an administrative receiver or receiver;

• (c) under section 899 or section 901F of the 2006 Act to propose a compromise or arrangement,

unless he has complied with paragraph (7)

• (7) A person intending to take any such action or step shall give notice in writing to the reorganisation controller before doing so.

• (8) Where a person fails to comply with paragraph (7),

• (a) an appointment to which sub-paragraph (6)(a) or (b) applies shall be void, and

• (b) no application under section 899 or section 901F may be entertained by the court,

except where the court, having heard the reorganisation controller, orders otherwise.

• (9) Every application pursuant to paragraph (1) or paragraph (3) must be served on the reorganisation controller.

• (10) For the period during which a Lloyd's market reorganisation order is in force, an affected market participant in Scotland may not grant a trust deed for his creditors without the consent of the reorganisation controller.

• (11) Where a person who is subject to a Lloyd's market reorganisation order is, at the date of the order, in administration or liquidation or has been made bankrupt or is a person whose estate is being sequestrated or who has granted a trust deed for his creditors—

• (a) any application to the court for permission to take any action that would be subject to a moratorium arising in those earlier proceedings shall be served on the reorganisation controller and the reorganisation controller shall be entitled to be heard on the application; and

• (b) the court shall take into account the achievement of the objectives for which the Lloyd's market reorganisation order was made.

• (12) In this regulation—

• (a) “approved debt” means a debt approved by the Society at the time it is incurred;

• (b) “approved security” means security approved by the Society at the time it is granted over or in respect of assets comprised in the member's premiums trust funds or liable in the future to become comprised therein;

• (c) “overseas regulatory deposit arrangement” means an arrangement approved by the Society and notified to the PRA whose purpose is to facilitate funding of any overseas business regulatory deposit.

Reorganisation controller

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• (1) The reorganisation controller is an officer of the court.

• (2) A person may be appointed as reorganisation controller only if he is qualified and fully authorised to act as an insolvency practitioner under Part 13 of the 1986 Act or under Part 12 of the 1989 Order and the court considers that he has appropriate knowledge, expertise and experience.

• (3) On an application by the reorganisation controller, the court may appoint one or more additional reorganisation controllers to act jointly or severally with the first reorganisation controller on such terms as the court sees fit.

Announcement of appointment of controller

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