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Lloyd's: Law and Practice

23. FSMA PART VII: INSURANCE BUSINESS TRANSFERS TO OR FROM MEMBERS OF LLOYD’S FSMA PART VII: INSURANCE BUSINESS TRANSFERS TO OR FROM MEMBERS OF LLOYD’S 23.1 Until the full implementation for the Lloyd’s market of the EU Insurance Directives portfolio transfer provisions, members of Lloyd’s, like guests at the Hotel California, could check out but could never leave. When their last year of account was closed by RITC their resignation from membership was allowed to take effect, and, more recently, when they purchased an Exeat policy their membership was declared to have ceased, but they (and their estates) retained the reinsured liabilities to extinction. From 1 September 1980 a series of legislative provisions 1 transposing article 21 of the First Non-Life Insurance Directive (73/239/EEC) enabled statutory transfers of general business to and from, but not between, members of Lloyd’s, subject to the approval of the Secretary of State. There was a court approval procedure for life business, dating from 1870, which became applicable to Lloyd’s business in 1980. No court procedure was necessary in respect of general business under the transposed directives. The pre-FSMA provisions were used only once in the Lloyd’s market, for a transfer of motor business from an insurance company to a Lloyd’s syndicate. The pre-FSMA legislation contained no provision for the transfer of outwards reinsurances covering the transferred business; this necessitated negotiations with each reinsurer concerned for the contractual novation of such outwards contracts. For that reason, and also because there was no certain mechanism for obtaining the recognition of such transfers outside the EEC/EU, statutory transfers were not used for the PCW settlement in 1987 or for the R&R arrangements with the Equitas group companies in 1996.

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