Lloyd's American Trust Fund (LATF)

In July 2020, Lloyd's announced it would give up its only US admitted licenses, in Illinois, Kentucky and the US Virgin Islands, and it has taken no new admitted business there since July 1, 2021. Its syndicates therefore write surplus lines or reinsure local cedants as an unauthorized reinsurer, and an insurance commissioner in Florida or New York has no hold on an asset sitting in London. The answer goes back to a deed of August 26, 1939: a premiums trust fund held in New York, the Lloyd's American Trust Fund, which received the premiums of US dollar business and pays its claims. Since August 1, 1995, it carries only business written before that date; more recent dollar premiums go to the Lloyd's Dollar Trust Fund. A US trustee holds it, under the law of a US state. Two security funds sit beside it. The Surplus Lines Trust Fund secures surplus lines policyholders and keeps Lloyd's on the list of alien insurers kept by the NAIC International Insurers Department, a condition for a surplus lines broker to place business with it. The Credit for Reinsurance Trust Fund serves US cedants: without that collateral, they could not take balance sheet credit for what they cede to syndicates. Its size has come down as states adopted certified reinsurer status, then the reciprocal jurisdiction rules born of the covered agreements; the calculation runs state by state and remains heavy. The cost is liquidity. After a large US hurricane, syndicates have to fund these trusts in dollars, often before collecting their own recoveries, and that money is no longer available in London. Not to be confused with a Regulation 114 trust, a bilateral arrangement between one reinsurer and one cedant, nor with the excess and surplus lines market itself.