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NY DEPARTMENT TO ALLOW LLOYD’S OF LONDON’S SURPLUS LINES BUSINESS TO BE FUNDED AT 50% OF GROSS LIABILITIES

New York, December 2, 1997

Superintendent of Insurance Neil D. Levin today announced that Lloyd’s of London’s U.S. surplus lines business will be funded at 50% of gross liabilities effective December 31, 1997. This will apply to all surplus lines business funded by the Lloyd’s United States situs surplus lines trust funds and written on or after August 1, 1995. As part of this agreement with the Insurance Department, Lloyd’s will also increase the funding of the Lloyd’s American Surplus Joint Asset Trust Fund from $100 million to $200 million, effective January 1, 1998.

Under a 1995 agreement with the Insurance Department, Lloyd’s had been funding its surplus lines business at 100% of gross liabilities. After meeting in London with Lloyd’s and Equitas officials, as well as members of the British Department of Trade and Industry (DTI), the Department believes these are prudent steps based on the following factors:

  • Lloyd’s has demonstrated increasing financial strength through its R & R (Equitas) program. In addition, new internal controls and enhanced periodic financial reporting requirements have been established. New actuarial opinions on a syndicate-by-syndicate basis are being generated, and better computer systems have been implemented to keep track of the actual risks written and reinsured by Lloyd’s syndicates.
  • Lloyd’s, Equitas and the DTI have pledged complete access to Insurance Department staff of key financial, claims paying and reinsurance recoverables going forward, so that the Department can continue to closely monitor the financial health of both Lloyd’s and Equitas.
  • The Department is beginning the process of putting Lloyd’s on a level playing field with the other surplus lines insurers. These other companies fund business at 30% or less of their gross liabilities. 

The Department is putting forth these changes in the form of an amendment to Regulation 41. The change will allow the Superintendent flexibility as market conditions dictate.

Lloyd’s maintains various trust funds in New York State in order to conduct surplus lines and reinsurance business in the U.S. The New York Department regulates Lloyd’s activities, in part, through its oversight of these trust funds. In 1995, the Department required Lloyd’s to increase funding in these trust funds by $500 million and also required Lloyd’s to create separate trust funds for each individual syndicate for U.S. situs surplus lines and reinsurance business so that better accounting and financial responsibility could be established.

 

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