§ Mr. David ShawTo ask the President of the Board of Trade if he will regulate, under the Insurance Companies Act 1982, the insurance affairs of those resigning from membership of Lloyd's. [40977]
§ Mr. Jonathan EvansIn view of the changes proposed in Lloyd's reconstruction and renewal plan to the reinsurance arrangements that names must enter into before resigning their membership of Lloyd's, I have reviewed the way in which the Insurance Companies Act should apply to those who resign their membership.
Former members of Lloyd's are technically still carrying on insurance business, in that they are potentially liable to meet claims on policies taken out while they were active underwriting members of the society, until all liabilities on those policies have been extinguished. This remains the case even though policies are being handled by agents. In consequence, former names' insurance activities fall to be regulated by the Secretary of State in accordance with the provisions of part II of the Act, in order to protect the interest of policyholders.
Where names resign having reinsured all their remaining liabilities with Equitas, provided it is authorised and/or with successor syndicates in Lloyd's, the interests of policyholders are fully protected for as long as Equitas and/or Lloyd's, as the case may be, remain solvent and continue to pay policyholders' claims without funds passing through the former names. In the light of the contingent nature of the insurance business being conducted, I should be prepared to make an order under section 68 of the Act which, for as long as these conditions are satisfied, would set the minimum regulatory arrangements consistent with the law. Effectively, these will require only the return of an annual notification of the address of names for communications purposes. Names are, in any case, likely to want to keep in touch with Lloyd's in order to obtain any repayment from surplus funds which might arise in Equitas. I intend to appoint Lloyd's as my agent for the receipt of these returns. In the hypothetical situation of Equitas or Lloyd's ceasing to be solvent, these arrangements will facilitate 211W introduction of such regulation of the former names' insurance activities as I consider will best protect the interests of policyholders at the time.
These arrangements will apply to all those whose resignation from membership of Lloyd's takes effect after today, whether or not they have already given Lloyd's notice of their intention to resign. It would, however, be disproportionate to introduce such arrangements for those who have already effected resignation from Lloyd's, and the requirement to provide annual confirmation of their address will therefore not apply to them. This distinction relates to regulatory requirements only. It does not change the residual contingent responsibilities for insurance of any names, whether or not they have already resigned from Lloyd's.