Lloyd's is an insurance market of corporate and individual members who conduct their insurance business in syndicates run by managing agents.
The membership of Lloyd's is currently made up of body corporates, individuals, Scottish Limited Partnerships and Limited Liability Partnerships. Individual members tend to support a number of syndicates, whereas some corporate members only underwrite through a single syndicate. The term 'corporate member' is used to describe all types of member other than individual members.
Members of Lloyd's, or capital providers as they are often known, accept insurance business through syndicates on a several basis for their own profit or loss (in other words, members of Lloyd's are not jointly responsible for each other's losses).
While the basic principle of insurance is that the total premium income exceeds the cost of claims, sometimes claims exceed premiums, and so capital is required to underwrite insurance and, if necessary be available to pay outstanding claims.
The membership of Lloyd's includes a number of different types of member:
- Individual members or 'Names' are high net worth individuals whose exposure to the insurance risks they underwrite is unlimited. Individual's can no longer be elected to unlimited liability membership.
- Corporate members comprise body corporates (including limited companies and limited liability partnerships) and Scottish limited partnerships formed exclusively to underwrite insurance business at Lloyd's.
- Corporate members which are limited companies can be owned by other corporate entities or individuals. Those owned by an individual or a group of connected individuals are often known as 'Namecos' they are frequently formed as a mechanism for individual members to convert their underwriting from unlimited liability to limited liability status.
- Scottish limited partnerships ('SLPs') which are limited partnerships established in Scotland are another type of corporate member. Unlike in other jurisdictions, a limited partnership established in Scotland has separate legal personality and is therefore capable of being a member of Lloyd's. As with Namecos, they are often set up by individual members wishing to convert to underwriting on a limited liability basis.
- Group Conversion Vehicles take the form of limited companies or SLPs and are formed to enable groups of individual members to convert to underwriting on a limited liability basis through the same vehicle.
- Limited liability partnerships ('LLPs') is the newest category of corporate member at Lloyd's and became effective from 1 January 2007. An LLP is a type of corporate entity formed by being incorporated under the Limited Liability Partnerships Act 2000. As with Namecos and SLPs, individual members can convert to underwriting on a limited liability basis through an LLP, or they can be set up by new individual and corporate capital providers wishing to participate at Lloyd's for the first time.
The number of members of Lloyd's has been contracting since the mid-1990s. Changes in corporate membership reflect the balancing effects of rationalisation and conversion of individual members to limited liability underwriting.