Lloyd’s is not an insurance company. It is a market in
which independent insurance underwriters join together in
syndicates to sell insurance, mainly through brokers, under the
umbrella of the Lloyd’s brand name.
Lloyd’s began in the seventeenth century when ship
owners and merchants, who met in a London coffee house owned by
Edward Lloyd, got together to share the risk of losing their ships
and cargoes, insuring that no single person could suffer a
catastrophic loss. They signed the foot of slips signifying
acceptance of part of the risk. As time went by they attracted
capital from outsiders to help support this
“underwriting” activity in a “subscription”
market, the latter signifying that a series of underwriters will
assume shares of the risk. Lloyd’s is now the world’s
leading specialist insurance market, and writes a wide range of
insurance business on a worldwide basis. It is particularly strong
on marine and aviation insurance, and in reinsurance, but writes
very little life insurance. It was known as Lloyd’s of London
until 1997 when the name was changed to Lloyd's.
The Society of Lloyd’s is a statutory corporation
incorporated by Lloyd’s Act 1871. The objects of the Society
include “the carrying on by Names of the Society of the
business of insurance of every description including guarantee
business”. The Society is an ‘authorised person’
under the Financial Service and Markets Act 2000, and has
permission to arrange the conduct of insurance business in the
market. It does not itself underwrite insurance business.
The Council of Lloyd’s (established by Lloyd’s
Act 1982) is Lloyd’s governing body, and has power to make
such byelaws as it thinks fit to further the objects of the
Society. The Council provides a framework of regulation,
supervision and commercial standards which aims to ensure that
underwriters operate in a way that benefits the whole market.
Underwriting at Lloyd’s is an insurance business, and as
such members of Lloyd’s are taxed as traders on the basis of
their profits or losses from underwriting. The normal rules that
apply to the computation of trade profits under Case I of Schedule
D (ICTA88/S18) and in Part 2 of the Income Tax (Trading and Other
Income) Act 2005 apply generally to Lloyd’s members. However,
the Lloyd’s market has a number of unique features and tax
rules have to be adapted to reflect these features. The special tax
legislation for Lloyd’s members is set out in Finance Act
1993 (FA93/S171 to FA93/S184) and Finance Act 1994 (FA94/219 to
FA94/S230), and in secondary legislation.
In order to understand the Lloyd’s tax rules it is
necessary to explain the basic structure of the market, and this is
set out in
LLM1020 onwards. Terms used in the tax
legislation are defined in FA93/S184 and FA94/S230, and these in
turn derive from terms and concepts used in the Lloyd’s
market.
LLM1040 onwards explain these terms and
concepts.
