Chain of Security
The Lloyd’s Chain of Security provides excellent financial security and gives comfort to policyholders. This is the name given to the Lloyd’s unique capital structure, which has 3 links. All the Lloyd’s policies are backed by the chain of security.
The first link of the chain of security is formed by the Premium Trust Funds of each Lloyd’s Syndicate. Mainly comprising of premiums received, these funds are used to pay the majority of claims of each Syndicate.
The second link is formed by certain capital(in cash or readily realisable assets) that each member must provide to support its underwriting at Lloyd’s. It is used when the first link is not enough to meet claims.
Finally, the third link contains the central assets of Lloyd’s, which are available to meet claims that cannot be met by the resources of any member.
Lloyd’s unique capital structure, provides excellent financial security to policyholders and a large yield of capital to the members.
Chain Security provides financial strength that ultimately supports the insurance policies of Lloyd's and it is this which strengthens common security market ratings and network licenses.
The funds from the first and second links are held in trust, primarily for the protection of policyholders whose policies are underwritten by the members concerned. Members underwrite for their own account and not responsible for the losses of other members do. The third link comprises the active mutualized held by the Corporation and, subject to the approval of the Council, they are available to meet insurance liabilities of any member.
The Corporation is responsible for overseeing both the capital of the member and central capital to reach a solid level of capitalization, but also enable members to obtain higher performance.
