New Central Fund and Property of the Society

Constitution of New Central Fund Application of Fund General Funds of the Society Miscellaneous

Constitution of New Central Fund

Establishment of New Central Fund

The Society shall establish, hold, manage and apply in accordance with the provisions of this byelaw a fund to be known as the New Central Fund (in this byelaw ‘‘the Fund’’).

New Central Fund and Property of the Society Byelaw, paragraph 1

Assets of Fund

The Fund shall consist of: 

(a) contributions to the Fund for the time being paid or payable under paragraph 3; 

(b) moneys borrowed by the Society under paragraph 5; 

(c) recoveries for the time being paid or payable to the Society under paragraph 9; 

(d) any other moneys or assets which may from time to time be paid or added to or accrue to the Fund; 

(e) the investments or other property for the time being representing such contributions, moneys or assets; 

(f) income arising from investments or other moneys or assets from time to time constituting the Fund.

New Central Fund and Property of the Society Byelaw, paragraph 2

Contributions to Fund

1. Every underwriting member of the Society shall in each calendar year, in accordance with the provisions of this paragraph – 

(a) pay to the Society a contribution to the Fund (an ‘‘annual contribution’’); and 

(b) be liable to pay to the Society, if called upon to do so from time to time, a contribution or contributions not exceeding a specified amount (that amount being in this paragraph referred to as a ‘‘callable contribution’’).

New Central Fund and Property of the Society Byelaw, paragraph 3(1)

2. If it appears requisite or expedient to do so the Council may from time to time levy from members of the Society in addition to annual contributions and callable contributions under [1. above] such further contributions (each a “special contribution”) as the Council may by special resolution prescribe.

New Central Fund and Property of the Society Byelaw, paragraph 3(2)

3. The amounts of annual contributions and of any special contributions, the manner of calculating such amounts and the date or dates on which such contributions shall be payable shall be such as the Council shall by special resolution prescribe.

New Central Fund and Property of the Society Byelaw, paragraph 3(3)

4. The amounts of the callable contribution of each underwriting member for each year shall be such that the aggregate amount of the callable contributions of all members for that year is as nearly as may be equal to £200,000,000, or such other sum as the Council may by special resolution determine. The Council may also by special resolution determine the manner in which callable contributions are to be calculated, demanded and paid. 

New Central Fund and Property of the Society Byelaw, paragraph 3(4)

5. The Council may from time to time by special resolution exempt a member or any class or classes of member from liability to make contributions under this paragraph. 

New Central Fund and Property of the Society Byelaw, paragraph 3(5)

6. Any exemption granted under sub-paragraph (5): 

(a) may apply indefinitely or for such period as the Council may specify; and 

(b) may be general or limited to a particular levy or levies, whether in respect of annual contributions, callable contributions or special contributions.

New Central Fund and Property of the Society Byelaw, paragraph 3(6)

7. The Council shall not levy any annual contribution, callable contribution or special contribution on a member in a manner inconsistent with an undertaking given to that member under the Powers of Charging Byelaw (No. 12 of 1990) which is for the time being in force; and for the purposes of this paragraph and of that byelaw any undertaking given to a member before this byelaw comes into force and relating to the exercise of powers of the Council under the Central Fund Byelaw (No. 4 of 1986) shall be construed as if: 

(a) any reference in that undertaking to the exercise of powers of the Council under the Central Fund Byelaw (No. 4 of 1986) included a reference to the exercise of powers of the Council under this byelaw; 

(b) any reference to contributions to the Central Fund included a reference to contributions to the Fund under any provision of this [Consolidated Requirements Part 2 > General Operational Matters > New Central Fund and Property of the Society > Constitution of New Central Fund > Contributions to Fund].

New Central Fund and Property of the Society Byelaw, paragraph 3(7)

8. Any contribution shall be levied on a member by service on him or on any one or more of his underwriting agents of a notice specifying the amount payable and, except in the case of a callable contribution, the date or dates on which it is payable.

New Central Fund and Property of the Society Byelaw, paragraph 3(8)

9. Payment of contributions in accordance with this paragraph shall be a condition relating to permission to underwrite insurance business at Lloyd’s pursuant to paragraph 42 of the Membership Byelaw (No. 5 of 2005) and the provisions of the Membership Byelaw (No. 5 of 2005) shall apply accordingly where any member fails to comply with such condition. 

New Central Fund and Property of the Society Byelaw, paragraph 3(9)

10. No member or former member of the Society – 

(a) shall have any right to the repayment of any contribution made by him under this paragraph otherwise than in a winding-up of the Society; 

(b) shall have any right to petition for the winding-up of the Society on the ground that any contribution made by him under this paragraph has not been repaid.

New Central Fund and Property of the Society Byelaw, paragraph 3(10)

11. While a determination made by the Council under [paragraph 2. in Consolidated Requirements Part 2 > General Operational Matters > New Central Fund and Property of the Society > Application of Fund > Availability and application of Fund] is in force, no contribution made under this paragraph shall be repaid to any member or former member of the Society (whether in the course of a winding-up of the Society or otherwise) if or to the extent that such repayment would contravene or be inconsistent with any Regulatory Capital Requirement specified in the determination. 

New Central Fund and Property of the Society Byelaw, paragraph 3(11)

Power to require undertakings etc.

1. The Council may as a condition of permission to underwrite insurance business at Lloyd’s require a member to execute a written undertaking to the Society duly to pay any contribution levied on him under [Consolidated Requirements Part 2 > General Operational Matters > New Central Fund and Property of the Society > Constitution of New Central Fund > Contributions to Fund (whether under paragraph 1. or 2.)].

New Central Fund and Property of the Society Byelaw, paragraph 4(1)

2. Subject to any undertaking given by the Council under the Powers of Charging Byelaw (No.12 of 1990) for the time being in force, the Council may require that any undertaking under [1. above] be in such form and contain such provisions as the Council may specify, including, in particular, an agreement that any contribution levied on the member shall be paid free and clear from any set-off, counterclaim or deduction on any account whatsoever.

New Central Fund and Property of the Society Byelaw, paragraph 4(2)

Borrowing for Fund

The Society may from time to time borrow moneys to be held, managed or applied as assets of the Fund, and may secure such borrowing in any manner on the whole or any part of the Fund or on any other property of the Society.

New Central Fund and Property of the Society Byelaw, paragraph 5

Management and investment of Fund

1. Moneys for the time being forming part of the Fund shall be invested or lent or deposited (with or without security and with or without interest or premium on repayment) in such manner as the Council may from time to time provide or permit.

New Central Fund and Property of the Society Byelaw, paragraph 6(1)

2. Moneys or other assets of the Fund may be vested in a trustee or nominee on behalf of the Society on such terms as the Council may from time to time provide or permit. 

New Central Fund and Property of the Society Byelaw, paragraph 6(2)

3. The Council may cause the whole or any part of the Fund to be vested in such person or persons as trustees on such trusts for the benefit of such person or persons and subject to such provisions as may appear to the Council to be expedient for, or incidental or conducive to, any of the purposes set out in [Consolidated Requirements Part 2 > General Operational Matters > New Central Fund and Property of the Society > Application of Fund > Availability and application of Fund].

New Central Fund and Property of the Society Byelaw, paragraph 6(3)

4. Any moneys and other assets vested in trustees under [3. above] shall remain part of the Fund for the purposes of this byelaw, but so that – 

(a) the powers of the Council under this byelaw apply, as regards any moneys and other assets so vested, subject to the terms of the trust deed or trust instrument concerned; 

(b) the Council may exercise any power conferred on it by that trust deed or trust instrument, subject to any obligations or restrictions imposed by law or by the terms of that trust deed or trust instrument, in such manner as may appear to it to be expedient for or incidental or conducive to any of the purposes set out in [Consolidated Requirements Part 2 > General Operational Matters > New Central Fund and Property of the Society > Application of Fund > Availability and application of Fund].

New Central Fund and Property of the Society Byelaw, paragraph 6(4)

5. Subject to [3. and 4. above], no policyholder or other person shall have any right to payment from the Fund or to any account of the management, investment or application of the assets compromised in the Fund.

New Central Fund and Property of the Society Byelaw, paragraph 6(5)

Derivative transactions

1. The Council may from time to time – 

(a) provide for or permit the entering into by the Society, in the course of or in connection with the management and investment of the Fund under [Consolidated Requirements Part 2 > General Operational Matters > New Central Fund and Property of the Society > Constitution of New Central Fund > Management and investment of Fund], of transactions of any of the kinds referred to in [2. below]; 

(b) cause any moneys or other assets for the time being forming part of the Fund, or any other property of the Society, to be applied in or towards the discharge of any obligations incurred by the Society under or in connection with any transaction so entered into.

New Central Fund and Property of the Society Byelaw, paragraph 7(1)

2. The transactions to which [1. above] relates are options, futures, swaps, forward rate agreements and any other derivative contracts relating to securities, currencies, interest rates or yields, or other derivative instruments, financial indices or financial measures which may be settled physically or in cash.

New Central Fund and Property of the Society Byelaw, paragraph 7(2)

3l The Council shall adopt such statements of investment principles, risk limits and other controls as appear to it to be expedient for the purpose of ensuring that transactions are entered into by the Society under [1. above] only for one or more of the purposes specified in [5. below]. 

New Central Fund and Property of the Society Byelaw, paragraph 7(3)

4. Any breach of or failure to observe any statements of investment principles, risk limits or other controls adopted under [3. above] shall not cause any transaction to be regarded as falling outside [1. above] or to be otherwise void, invalid or unenforceable; but this is without prejudice to any liability of any person for breach of any duty owed to the Society.

New Central Fund and Property of the Society Byelaw, paragraph 7(4)

5. The purposes referred to in [3. above] are – 

(a) reducing risk; 

(b) reducing cost; 

(c) generating additional capital or income for the Fund without significantly increasing risk; 

(d) facilitating efficiency in the acquisition, holding or disposal of assets forming part of the Fund; 

(e) otherwise facilitating efficiency in the management of the Fund.

New Central Fund and Property of the Society Byelaw, paragraph 7(5)

Availability and application of Fund

1. Subject to and in accordance with the following provisions of this paragraph, the Fund is available, and moneys or assets may be applied out of the Fund (including application by way of loan or on any other terms as to repayment) – 

(a) for the purpose of complying with, and for any purpose required or permitted by, a Regulatory Capital Requirement (including, to the extent required or permitted by any relevant Regulatory Capital Requirement, for the purposes specified in [(5)(a) or (b) below], or both); and 

(b) subject to (a), for any of the purposes specified in [5. below]. 

New Central Fund and Property of the Society Byelaw, paragraph 8(1)

2. The Council at any time may, and shall if so directed by the Prudential Regulation Authority, make a determination that the Fund, or a part of the Fund of an amount or value fixed by the Council and specified in the determination, be made available for the purpose of complying with a Regulatory Capital Requirement (and such a determination may specify different parts of the Fund as available for the purpose of complying with different Regulatory Capital Requirements).

New Central Fund and Property of the Society Byelaw, paragraph 8(2)

3. The Council may from time to time – 

(a) vary any such determination by increasing the amount of any part of the Fund specified in the determination; 

(b) with the prior consent of the Prudential Regulation Authority where the Council has been directed by the Prudential Regulation Authority under [2. above], vary any such determination by reducing the amount of any part of the Fund specified in the determination, or revoke any such determination.

New Central Fund and Property of the Society Byelaw, paragraph 8(3)

4. Where any part of the Fund is specified as available for the purpose of complying with a Regulatory Capital Requirement in a determination made under [2. above] and for the time being in force – 

(a) money or assets corresponding to that part of the Fund may be applied out of the Fund for any purpose required or permitted by the relevant Regulatory Capital Requirement (including, if applicable, the purposes specified in [(5)(a) or (b) below], or both), and for no other purpose; 

(b) if the part or parts of the Fund so specified comprise less than the whole of the Fund, moneys or assets corresponding to the excess may be applied out of the Fund for any of the purposes specified in [5. below].

New Central Fund and Property of the Society Byelaw, paragraph 8(4)

5. The purposes referred to in [1. above]: 

(a) directly or indirectly extinguishing or reducing any liability of a member to any person arising out of or in connection with insurance business carried on by that member at Lloyd’s; 

(b) repaying moneys previously borrowed for the purposes of this byelaw and paying interest, premium or other charges on such moneys; 

(c) any other purpose (whether or not similar to any purpose mentioned in (a) and (b) above) which may appear to the Council to further any of the objects of the Society.

New Central Fund and Property of the Society Byelaw, paragraph 8(5)

6. Subject to [7. below], no moneys or other assets shall be applied out of the Fund: 

(a) by way of payment (other than a payment on arm’s length terms in respect of property, assets, services or other benefits) to any member of the Equitas group; or 

(b) directly for the purpose of extinguishing or reducing any liability of a member in respect of which Equitas Reinsurance Limited has, under an Equitas reinsurance contract, undertaken to reinsure and indemnify that member. 

New Central Fund and Property of the Society Byelaw, paragraph 8(6)

7. [6. above] shall not preclude the Council from applying moneys or assets out of the Fund for any of the purposes mentioned in [5. above]: 

(a) in discharge of any legally binding obligation of the Society arising under a contract entered into or other instrument executed at or before the time at which this byelaw comes into force; or 

(b) in any other case, with the prior sanction of a resolution of the members in general meeting. 

New Central Fund and Property of the Society Byelaw, paragraph 8(7)

8. In this paragraph, except [7.(b) above], references to a ‘‘member’’ shall be taken to refer also to former members and to the estates of deceased members of the Society.

New Central Fund and Property of the Society Byelaw, paragraph 8(8)

Liability of members in respect of payments made out of the Fund 

1. Where moneys or other assets have been applied out of the Fund (including any part of the Fund vested in trustees under [Consolidated Requirements Part 2 > General Operational Matters > New Central Fund and Property of the Society > Constitution of New Central Fund > Management and investment of Fund]) for the purpose mentioned in [5.(a) in Consolidated Requirements Part 2 > General Operational Matters > New Central Fund and Property of the Society > Application of Fund > Availability and application of Fund], any member in relation to whom such moneys or assets have been so applied shall within 28 days after demand pay to the Society an amount not exceeding the aggregate of any sums so applied in relation to that member. 

New Central Fund and Property of the Society Byelaw, paragraph 9(1)

2. The Council may at any time agree to reduce or waive any amount demanded by the Society or owed by a member to the Society under this paragraph. 

New Central Fund and Property of the Society Byelaw, paragraph 9(2)

3. In this paragraph references to a ‘‘member’’ shall be taken to refer also to any person, or to the estate of any person, who has been a member at any time on or after the date when this byelaw comes into force, notwithstanding that that person is no longer a member at the time of any application referred to in or demand made under this paragraph.

New Central Fund and Property of the Society Byelaw, paragraph 9(3)

General Funds of the Society

Application of general funds of the Society

1. In this [section (General Funds of the Society > Application of general funds of the Society)] “the general funds of the Society” means funds and property of the Society (including the income therefrom) other than funds or property forming part of the Fund. 

New Central Fund and Property of the Society Byelaw, paragraph 10(1)

2. Subject to and in accordance with the following provisions of this paragraph, the general funds of the Society are available, and moneys or assets forming part of the general funds of the Society may be applied, for the purpose of complying with, and for any purpose required or permitted by, a Regulatory Capital Requirement. 

New Central Fund and Property of the Society Byelaw, paragraph 10(2)

3. The Council at any time, may and shall if so directed by the Prudential Regulation Authority, make a determination that the general funds of the Society, or a part of the general funds of the Society of an amount or value fixed by the Council and specified in the determination, be made available for the purpose of complying with a Regulatory Capital Requirement (and such a determination may specify different parts of the general funds of the Society as available for the purpose of complying with different Regulatory Capital Requirements).

New Central Fund and Property of the Society Byelaw, paragraph 10(3)

4. The Council may from time to time – 

(a) vary any such determination by increasing the amount of any part of the general funds of the Society specified in the determination; 

(b) with the prior consent of the Prudential Regulation Authority where the Council has been directed by the Prudential Regulation Authority under [3. above], vary any such determination by reducing the amount or any part of the general funds of the Society specified in the determination, or revoke any such determination.

New Central Fund and Property of the Society Byelaw, paragraph 10(4)

5. Where any part of the general funds of the Society is specified as available for the purpose of complying with a Regulatory Capital Requirement in a determination made under [3. above] and for the time being in force – 

(a) moneys or assets corresponding to that part of the general funds of the Society may be applied for any purpose required or permitted by the relevant Regulatory Capital Requirement, and for no other purpose;

(b) if the part or parts of the general funds of the Society so specified comprise less than the whole of the general funds of the Society, moneys or assets corresponding to the excess may be applied for any of the purposes specified in section 7 of Lloyd’s Act 1911.

New Central Fund and Property of the Society Byelaw, paragraph 10(5)

General funds of the Society: derivative transactions

1. The Council may from time to time – 

(a) provide for or permit the entering into by the Society, in the course of or in connection with the management and investment of the general funds of the Society, of transactions of any of the kinds referred to in [2. below]; 

(b) cause any moneys or other assets for the time being forming part of the general funds of the Society to be applied in or towards the discharge of any obligations incurred by the Society under or in connection with any transaction so entered into.

New Central Fund and Property of the Society Byelaw, paragraph 11(1)

2. The transactions to which [1. above] relates are options, futures, swaps, forward rate agreements and any other derivative contracts relating to securities, currencies, interest rates or yields, or other derivative instruments, financial indices or financial measures which may be settled physically or in cash.

New Central Fund and Property of the Society Byelaw, paragraph 11(2)

3. The Council shall adopt such statement of investment principles, risk limits and other controls as appear to it to be expedient for the purpose of ensuring that transactions are entered into by the Society under [1. above] only for one or more of the purposes specified in [5. below]. 

New Central Fund and Property of the Society Byelaw, paragraph 11(3)

4. Any breach of or failure to observe any statements or investment principles, risk [limits] or other controls adopted under [3. above] shall not cause any transaction to be regarded as falling outside [1. above] or to be otherwise void, invalid or unenforceable; but this is without prejudice to any liability of any person for breach of any duty owed to the Society. 

New Central Fund and Property of the Society Byelaw, paragraph 11(4)

5. The purposes referred to in [3. above] are – 

(a) reducing risk; 

(b) reducing cost; 

(c) generating additional capital or income for the general funds of the Society without significantly increasing risk; 

(d) facilitating efficiency in the acquisition, holding or disposal of assets forming part of the general funds of the Society;

(e) otherwise facilitating efficiency in the management of the general funds of the Society.

New Central Fund and Property of the Society Byelaw, paragraph 11(5)

Miscellaneous provisions

Enforcement of contributions etc.; publicity in respect of non-payment

1. Any sum payable to the Society under any of the provisions of this byelaw which is not paid on the due date for payment shall bear interest from the due date until the date of payment (as well after as before judgment) at the rate prescribed from time to time as applicable to judgment debts or such other rate as the Council may from time to time prescribe.

New Central Fund and Property of the Society Byelaw, paragraph 12(1)

2. Any sum payable to the Society under any of the provisions of this byelaw (including any interest payable under [1. above] – 

(a) shall be paid free and clear from any set-off, counterclaim or deduction on any account whatsoever; and 

(b) shall be recoverable in any court of competent jurisdiction as a civil debt.

New Central Fund and Property of the Society Byelaw, paragraph 12(2)

Information

1. Every member shall furnish to the Society such information as the Council may from time to time require in writing for the purposes of this byelaw.

New Central Fund and Property of the Society Byelaw, paragraph 13(1)

2. Any information required under [1. above] shall be furnished in such manner and at such time or times as the Council may specify in writing.

New Central Fund and Property of the Society Byelaw, paragraph 13(2)

3. A member shall only be required under this paragraph to furnish such information as he or his underwriting agent or agents possess or can reasonably be expected to obtain. 

New Central Fund and Property of the Society Byelaw, paragraph 13(3)

Powers of the Council to give undertakings

1. The Powers of Charging Byelaw (No. 12 of 1990) is amended as follows: 

New Central Fund and Property of the Society Byelaw, paragraph 14(1)

2. The Council may in any manner referred to in paragraph 13 of the Reconstruction and Renewal Byelaw (No. 22 of 1995), or in any other case where it appears to the Council to be expedient to do so for the furtherance of the objects of the Society, give undertakings to any person (whether or not a member of the Society) with respect to the exercise of any of the powers of the Council under this byelaw to raise money for the Fund and to apply money out of the Fund.

New Central Fund and Property of the Society Byelaw, paragraph 14(2)