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Principle 9: Liquidity

Managing agents should ensure syndicates have contractual access to sufficient liquidity in order to withstand a severe liquidity event (defined by Lloyd’s), underpinned by a robust liquidity risk management framework.

To support this, managing agents should ensure their syndicates:

Identify and assess their key sources of liquidity risk​ and have appropriate monitoring and reporting in place

Conduct and consider the outcomes of stress tests, including Lloyd’s defined stress test and syndicates’ own 1:200 stress test​​​

Have clearly defined liquidity risk appetites

Conduct regular assessment of liquidity buffers above expected cashflow projections

Have thorough liquidity contingency plans in place including articulation of what management actions and steps are open to alleviate liquidity strain

Have robust governance over liquidity risk

Liquidity Maturity Matrix

The Maturity Matrix for Liquidity is available within the Principles and Maturity Matrix document, which can be found on our Principles for doing business at Lloyd’s page.

FAQs

The template is sent out in December with any amendments sent out prior to submission at the end of April of the following year.

We treat FIS the same way as FAL.

We get the results in by syndicate we can allocate the syndicate and their results to the members and apply the FAL and FIS to calculate any net residual central fund strain.

Yes if they are in trust funds, they would not be considered free assets

If Syndicates could exclude FIS when we allocate the syndicate level results to members we can bring in all of the FIS and FAL at that point.

The stress test is intended to be this strong. Please feel free to share views with Lloyd’s.

Yes

If the Lloyd’s defined stress test is appropriate to liquidity then use it, but we appreciate that some syndicates may not be able to use this, in which case they should use something more appropriate to them.