Lloyd's Premiums Trust Funds
The trust funds in which the managing agent holds the premiums a syndicate collects for its members; only claims, reinsurance, permitted expenses and profit released at closing come out.
Among the documents a member signs to join Lloyd's is a trust deed, the Lloyd's Premiums Trust Deed. From then on, the premium the syndicate collects on that member's behalf is no longer the member's to use freely: the managing agent holds it in trust, first for the policyholders who have claims against that member. It is the first link in the chain of security, ahead of the funds the member deposits directly and ahead of the Central Fund. The deed says what can come out. Claims, reinsurance premiums, the syndicate expenses the rules allow, and profit once the year of account closes. Releasing profit before closing is possible in cases the Corporation sets out; lending to the managing agent never is. Investments are limited to admissible assets, and investment income stays in the fund. There is not one fund but several, by currency and by where the risk sits: the general fund in sterling and other currencies, the Lloyd's Dollar Trust Fund for US dollar business written since August 1, 1995, the Lloyd's American Trust Fund for business written before that date, and funds specific to a few other territories. For the managing agent this is a daily cash constraint: a premium collected in US dollars for a Texas risk cannot pay a sterling claim in Manchester without going through the rules on transfers between funds. The arrangement earns its value on the day the managing agent fails, since the agent's creditors have no claim on what is held in trust. When a year of account costs more than its premiums, the fund runs dry and the agent calls on the members. Not to be confused with funds at Lloyd's, the second link, deposited by the member rather than drawn from premiums, nor with the Central Fund.
Textbook case: a syndicate collects 80 million pounds of premium on a year of account. Over thirty-six months, the premiums trust fund pays 46 million of claims, 9 million of reinsurance premium and 13 million of expenses and commissions; it earns 2 million of investment income. That leaves 80 - 46 - 9 - 13 + 2 = 14 million. The RITC, which takes over the remaining reserves, costs 10 of it, and that sum moves to the next year. The remaining 4 million is the profit released to members, and only then does it leave the trust.
Premiums Trust Funds, PTF, Lloyd's Premiums Trust Deed, syndicate premium trust, syndicate level assets
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