{"id":"F2017L00435","name":"Lloyd’s security trust fund instrument No. 1 of 2017","slug":"lloyd-s-security-trust-fund-instrument-no-1-of-2017","collection":"legislative_instrument","jurisdiction":"commonwealth","status":"in_force","isInForce":true,"actNumber":null,"makingDate":null,"administeringDepartment":null,"currentVersion":{"id":439167,"registerId":"F2017L00435-fast-fetch-1775955285123","compilationNumber":null,"startDate":"2026-04-12","status":"InForce","reasons":null,"registeredAt":null},"sections":[{"sectionNumber":"1","sectionType":"section","heading":"Lloyd’s security trust fund instrument No. 1 of 2017","content":"---\nmeta-content-style-type: text/css\nmeta-content-type: application/xhtml+xml; charset=utf-8\nmeta-generator: Aspose.Words for .NET 20.2\nmeta-keywords: \"[SEC=UNCLASSIFIED]\"\ntitle: Lloyd's Security Trust Fund Instrument No. 1 of 2017 - post-consultation\n---\n\n?xml version=\"1.0\" encoding=\"utf-8\" standalone=\"no\"?>\n\n![](image.001.png)\n\nLloyd’s security trust fund instrument No. 1 of 2017\n\nInsurance Act 1973\n\n \n\nI, Heidi Richards, delegate of APRA, under subsection 68(1) of the Insurance Act 1973 (the Act), REQUIRE Lloyd’s to comply with the document that forms the Schedule to this instrument, titled “Lloyd’s Security Trust Fund Arrangements”.\n\n \n\n \n\nThis instrument takes effect on the date of registration on the Federal Register of Legislation.\n\n \n\nDated: 12 April 2017\n\n \n\n \n\n[Signed]\n\n \n\n \n\n_________________________________\n\n \n\nHeidi Richards\n\nGeneral Manager\n\nPolicy & Advice Division\n\n \n\nInterpretation\n\nIn this instrument:\n\nAPRA means the Australian Prudential Regulation Authority.\n\nLloyd’s has the meaning given in subsection 3(1) of the Act.\n\n \n\nSchedule\n\n \n\nLloyd’s Security Trust Fund Arrangements comprises the 23 pages commencing on the following page.\n\n\n\n\n \n\n##### Lloyd’s Security Trust Fund Arrangements\n\n\n\n\nTable of contents\n\n \n\n[Name of instrument](#_Toc474765634)\n\n[Commencement](#_Toc474765635)\n\n[Authority](#_Toc474765636)\n\n[Application](#_Toc474765637)\n\n[Interpretation](#_Toc474765638)\n\n[Security trust funds](#_Toc474765639)\n\n[Approval of trust deeds](#_Toc474765640)\n\n[Approval of trustees](#_Toc474765641)\n\n[Funding](#_Toc474765642)\n\n[Information](#_Toc474765643)\n\n[Records](#_Toc474765644)\n\n[Notices](#_Toc474765645)\n\n[Agreements](#_Toc474765646)\n\n[Review of APRA’s decisions](#_Toc474765647)\n\n[Determinations made under previous instrument](#_Toc474765648)\n\n[Attachment A – Security trust funds](#_Toc474765649)\n\n[Equitas fund](#_Toc474765650)\n\n[Interim fund](#_Toc474765651)\n\n[New business fund](#_Toc474765652)\n\n[Reserve fund](#_Toc474765653)\n\n[Attachment B – Funding requirements](#_Toc474765654)\n\n[Attachment C – Accounts and statements](#_Toc474765655)\n\n[Part 1 - Commentary](#_Toc474765656)\n\n[Part 2 - Forms](#_Toc474765657)\n\n[Attachment D – Audited accounts and statements](#_Toc474765658)\n\n[Part 1 - Commentary](#_Toc474765659)\n\n[Part 2 - Forms](#_Toc474765660)\n\n# Name of instrument\n\n1. This instrument is the Lloyd’s Security Trust Fund Arrangements. \n\n\n# Commencement\n\n2.             This instrument commences on the date of registration on the Federal Register of Legislation. \n\n# Authority\n\n3.             This instrument is made under subsection 68(1) of the Insurance Act 1973 (the Act). \n\n# Application\n\n4.             This instrument applies to Lloyd’s.\n\n# Interpretation\n\n5.             In this instrument:[[1]](#_ftn1)\n\n‘1992 and prior business’ means, in relation to an underwriter, all liabilities under contracts of insurance underwritten at Lloyd’s (other than Life Business) and originally allocated to the 1992 year of account or any earlier year of account including, without limitation, any such liabilities reinsured to close into the 1993 or any later year of account, but excluding any liabilities re-signed, or re-allocated pursuant to a premium transfer, into 1993 or any later year;\n\n‘Australian Auditing Standards’ is a reference to the Australian Auditing Standards issued by the Auditing and Assurance Standards Board (AUASB) as in force from time to time;\n\n‘bank’ means an authorised deposit-taking institution within the meaning of subsection 5(1) of the Banking Act 1959 (the Banking Act), but does not include a building society, credit union, provider of purchased payment facilities or an authorised non-operating holding company within the meaning of subsection 5(1) of the Banking Act;\n\n‘final judgment’ includes an order of an Australian court made to enforce:\n\n(a)                a judgment of a court of another country; or\n\n(b)               in Australia, an award of an arbitrator following an arbitration held in Australia or elsewhere;\n\n‘Life Business’ has the same meaning as “long term business” in the Insurance Companies Act 1982 of the United Kingdom, as in force on 3 September 1996;\n\n‘Lloyd’s Agent in Australia’ means the person appointed by Lloyd’s in accordance with section 95 of the Act;\n\n“Lloyds Security Trust Fund Rules” means a legislative instrument, as in force from time to time, made under subsection 70(1) of the Act; and\n\n‘reinsurance to close’ means an underwriting agreement or arrangement treated by the practices of Lloyd’s as reinsurance to close.\n\n# Security trust funds\n\n6.             At all times while this instrument is in force, Lloyd’s must ensure that security trust fund arrangements, and ancillary or incidental arrangements, in accordance with this instrument are in existence.\n\n7.             Lloyd’s must maintain the security trust funds specified in Attachment A, except where APRA approves, in writing, the termination of any security trust fund to which this paragraph applies.  APRA may do so if it is satisfied that:\n\n(a)          all insurance liabilities secured by the security trust fund are secured by another security trust fund; or\n\n(b)          there are no longer any insurance liabilities to be secured by the security trust fund.\n\n8.             The trust deed for a security trust fund must provide for payment in Australia of final judgments obtained in Australia for insurance liabilities secured by the fund.\n\n9.             However, the trust deed does not have to provide for payment of exemplary or punitive damages or damages for which a contract of insurance does not expressly provide.\n\n10.         A contract of insurance or reinsurance that is mentioned in Attachment A in relation to a security trust fund may be covered by another security trust fund if APRA thinks it is reasonable, having regard to the reinsurance to close or other underwriting arrangements of Lloyd’s.\n\n# Approval of trust deeds\n\n11.         The trust deed for a security trust fund, or an alteration of such a trust deed, must be approved, in writing, by APRA.\n\n12.         In deciding whether to approve a trust deed, or an alteration of a trust deed, APRA must have regard to the following matters:\n\n(a)          the right of a holder of a contract of insurance covered by the fund to enforce payment of a final judgment;\n\n(b)          the operation, accounting and other practices and reinsurance arrangements of the insurance market conducted by Lloyd’s;\n\n(c)          the provision made for:\n\n(i)                 management of the fund if the fund is placed under judicial trusteeship or is wound up or dissolved under the Act; and\n\n(ii)               payment of claims if the fund is wound up or dissolved under the Act;\n\n(d)          whether the fund is established under Australian law and subject to Australian law and the jurisdiction of Australian courts;\n\n(e)          arrangements for custody and investment of the fund’s assets; and\n\n(f)           any other matter that APRA considers relevant.\n\n13.         Without limiting the terms of a trust deed for a security trust fund, it may include terms that deal with the following matters:\n\n(a)          making payment, without final judgment, of a claim in Australia under a contract of insurance covered by the fund;\n\n(b)          periodic release of assets representing amounts more than the funding needed by the fund;\n\n(c)          releasing investment income derived from fund assets; and\n\n(d)          suspending payment, in whole or part, of a final judgment or claim if:\n\n(i)                 the obligations of Equitas Reinsurance Limited are suspended in whole or part; and\n\n(ii)               the suspension cannot affect the operation of a scheme for winding up or dissolution of the fund. \n\n# Approval of trustees\n\n14.         A trustee of a security trust fund must be approved by APRA.\n\n15.         Before approving a trustee of a security trust fund, APRA must be satisfied that:\n\n(a)          the trustee is a qualified corporation;\n\n(b)          the trustee can perform the duties of a trustee of a security trust fund in a proper manner; and\n\n(c)          the sum of the amount of a bank guarantee, if any, in respect of the trustee’s duties as trustee and the value of the net tangible assets of the trustee is at least $5 million.\n\n16.         For subparagraph 15(c), a guarantee must be:\n\n(a)          given by a bank;\n\n(b)          given in a form approved by APRA; and\n\n(c)          subject to a condition that it cannot be revoked unless APRA approves.  \n\n# Funding\n\n17.         The assets of a security trust fund must: \n\n(a)          be assets in Australia;\n\n(b)          be unencumbered, except for fees and expenses of:\n\n(i)                 the trustee in accordance with the trust deed; or\n\n(ii)               investment transactions on ordinary commercial terms; and\n\n(c)          have a value that meets the funding requirement mentioned in Attachment B for the trust.\n\n18.         For paragraph 17, an asset must be valued in accordance with the Lloyd’s Security Trust Fund Rules.\n\n# Information\n\n19.        Lloyd’s must ensure the trustee of a security trust fund is given enough information to allow the trustee to operate the trust according to its terms and the requirements of the Act.\n\n20.        Lloyd’s must ensure there are arrangements that allow it to provide information, accounts, statements and actuarial reports required by the Act.\n\n# Records\n\n21.         Lloyd’s must ensure records that allow accounts and statements to be prepared and audited properly and conveniently are kept for 7 years after the completion of the transactions to which they relate.\n\n22.         Lloyd’s must give or cause to be given to APRA the accounts and statements mentioned in Attachment C in the form, for the periods and within the time mentioned in Attachment C.\n\n23.         Lloyd’s must ensure:\n\n(a)          the accounts and statements referred to in Attachment D are audited by an auditor who is approved by APRA; and\n\n(b)          an audit certificate is given to APRA in a form approved by APRA and within the time mentioned in Attachment D.\n\n# Notices\n\n24.         Lloyd’s must give or cause to be given to APRA written notice of the following matters:\n\n(a)          intention to change a trustee of a security trust fund;\n\n(b)          failure of a security trust fund to comply with paragraph 17; and\n\n(c)          default of more than 30 days in payment to the trustee of the security trust fund for its services.\n\n25.         For the purposes of subparagraph 24(b), a breach of subparagraph 17(c) is taken to have occurred if, and only if:\n\n(a)          for a syndicate year of account in the new business fund—the deficiency is more than $1,000 and is also more than 5% of the funding requirement for the syndicate year of account;\n\n(b)          for any security trust funds other than the reserve fund—the deficiency is more than $500,000;\n\n(c)          for the reserve fund—the deficiency is more than $10,000.\n\n# Agreements\n\n26.         Lloyd’s must give or cause to be given to APRA on request a copy of every agreement about the operation of a security trust fund.\n\n# Review of APRA’s decisions\n\n27.         Part VI of the Act applies to a decision of APRA under this instrument.\n\n# Determinations made under previous instrument\n\n28.         Any exercise of APRA’s discretion under the Lloyd’s Security Trust Fund Determination No 1 made on 9 June 2000 continues to have effect as though exercised pursuant to a corresponding power (if any) exercisable by APRA under this instrument.\n\n \n\n# Attachment A – Security trust funds\n\n### Definitions\n\n1. In this Attachment, ‘registered office’ has the meaning given by the Corporations Act 2001. \n\n\n## Equitas fund\n\n2.             The Equitas fund is a security trust fund in respect of the liabilities under contracts of insurance or reinsurance of the kind mentioned in paragraph 3 of this Attachment.\n\n3.             Paragraph 2 of this Attachment applies to a contract if:\n\n(a)          it covers liabilities that are:\n\n(i)                 1992 and prior business that is reinsured by Equitas Reinsurance Limited; or\n\n(ii)               other business that is reinsured (directly or indirectly) from time to time by Equitas Reinsurance Limited;\n\n(b)          Division 15 of Part III of the Income Tax Assessment Act 1936 as in force immediately before1 July 2000, as modified by paragraph 10 of the Schedule to the Act as in force immediately before 1 July 2000, applied to the premiums; and\n\n(c)          the premiums were not paid or payable in United States of America dollars. \n\n## Interim fund\n\n4.             The interim fund is a security trust fund in respect of liabilities under contracts of insurance or reinsurance of the kind mentioned in paragraph 5 of this Attachment.\n\n5.             Paragraph 4 of this Attachment applies to a contract if:\n\n(a)          it is written, or has a date of inception of risk, before 1 July 1998;\n\n(b)          it is not business of a kind mentioned in subparagraph 3(a) of this Attachment;\n\n(c)          Division 15 of Part III of the Income Tax Assessment Act 1936 as in force immediately before 1 July 2000, as modified by paragraph 10 of the Schedule to the Act as in force immediately before 1 July 2000, applies to the premiums;\n\n(d)          the underwriter is liable, as a member of a syndicate for a year of account of the syndicate, to members of the syndicate, or another syndicate, for an earlier year of account under reinsurance to close; and\n\n(e)          the premiums were not paid or payable in United States of America dollars.\n\n## New business fund\n\n6.             The new business fund is a security trust fund in respect of the liabilities under contracts of insurance or reinsurance of the kinds mentioned in paragraphs 7 and 8 of this Attachment.\n\n7.             Paragraph 6 of this Attachment applies to a contract if:\n\n(a)          it is expressed, and the premium is payable, in Australian dollars;\n\n(b)          it has a date of inception of risk on or after 1 July 1998;\n\n(c)          it is a contract:\n\n(i)                 that is underwritten for a year of account on or after 1 July 1998; or\n\n(ii)               for which the underwriter is liable, as a member of a syndicate, for a year of account of the syndicate, to members of the syndicate or any other syndicate for an earlier year of account under a reinsurance to close; and\n\n(d)          it is:\n\n(i)                 a contract for the insurance of real property, fixtures or buildings in Australia;\n\n(ii)               a contract for the insurance of any other property or risk if the insured is:\n\n(A)        a body corporate that has a registered office or principal place of business in Australia; or\n\n(B)        a person, other than a body corporate, that has a residential address or place of business in Australia; or\n\n(iii)            a contact or reinsurance and:\n\n(A)      the registered office of the ceding company that has reinsured with Lloyd’s underwriters is in Australia; or\n\n(B)      the ceding company that has reinsured with Lloyd’s underwriters is not incorporated in Australia but the contract is entered with a branch office in Australia of that company.\n\n8.             Paragraph 6 of this Attachment also applies to a contract that is initially covered by the interim fund and reinsured under reinsurance to close with a syndicate for the 1998, or a subsequent, year of account.\n\n## Reserve fund\n\n9.             The reserve fund is a security trust fund in respect of:\n\n(a)          the same liabilities as the new business fund;\n\n(b)          liabilities under contracts of insurance or reinsurance of the kind mentioned in paragraph 10 of this Attachment; and\n\n(c)          rights the Treasurer would have been entitled to exercise under section 94 of the Act (as in force immediately before 1 July 2000) in relation to rights acquired or accrued under the Act immediately before 1 July 2000. \n\n10.         Subparagraph 9(b) of this Attachment applies to a contract if:\n\n(a)          it would be a contract of the kind mentioned in paragraph 5 of this Attachment if paragraph 5 of this Attachment were amended by omitting “before 1 July 1998” and substituting “before 1 July 2000”; and\n\n(b)          it is not a contract of the kind mentioned in paragraph 5, 7 or 8 of this Attachment.\n\n\n\n\n# Attachment B – Funding requirements\n\n### Definitions\n\n1. In this Attachment:\n\n\n(a)                ‘quarter’ means 3 months starting on 1 January, 1 April, 1 July or 1 October; and\n\n(b)               ‘year’ means 12 months starting on 1 January.\n\n### Equitas fund\n\n2.             Following the end of a rebalancing period:\n\n(a)                further funding must be arranged within 60 days to meet any shortfall between the value of assets and the funding requirement; and\n\n(b)               funds in excess of the funding requirement can be released from the trust.\n\n3.             For the Equitas fund:\n\n(a)                the rebalancing period is each quarter; and\n\n(b)               the funding requirement is:\n\n(i)            on 1 July 2000—the amount worked out in accordance with paragraph 4 of this Attachment for the last quarter that ended more than 30 days before 1 July 2000; and\n\n(ii)          for a quarter ending after 1 July 2000—the amount worked out in accordance with paragraph 4 of this Attachment for that quarter.\n\n4.             The funding requirement for a quarter is:\n\n(liabilities  scaling factor%) + $2 million\n\nwhere:\n\nliabilities means the reported gross of reinsurance outstanding claims liabilities on the last day of the rebalancing period.\n\nscaling factor is an amount determined by APRA so that the result of the formula is a reasonable estimate of the value of aggregated secured liabilities on the last day of the rebalancing period:\n\n(a)                gross of reinsurance;\n\n(b)               discounted to allow for the time value of money; and\n\n(c)                including liabilities incurred but not reported.\n\n### Interim fund\n\n5.             For the interim fund:\n\n(a)                the rebalancing period is each year; and\n\n(b)               the funding requirement is:\n\n(i)            on 1 July 2000—the amount worked out in accordance with paragraph 6 of this Attachment for the last year that ended more than 30 days before 1 July 2000; and\n\n(ii)          for a year ending after 1 July 2000—the amount worked out in accordance with paragraph 6 of this Attachment for that year.\n\n6.             The funding requirement for a period is:\n\n(liabilities  scaling factor1%) + (premium income  scaling factor2%)\n\nwhere:\n\nliabilities means the reported gross of reinsurance outstanding claims liabilities on the last day of the rebalancing period.\n\npremium income means premium income, net of brokerage but gross of reinsurance ceded, for the years of account for which the liabilities are secured by the fund.\n\nscaling factor1 and scaling factor2 are amounts determined by APRA so that the result of the formula is a reasonable estimate of the value of aggregated secured liabilities on the last day of the rebalancing period:\n\n(a)                net of reinsurance;\n\n(b)               discounted to allow for the time value of money; and\n\n(c)                including liabilities incurred but not reported.\n\n### New business fund\n\n7.             For the new business fund:\n\n(a)                the rebalancing period is each quarter;\n\n(b)               the funding requirement is:\n\n(i)            on 1 July 2000—the amount worked out in accordance with paragraph 8 of this Attachment for the last quarter that ended more than 30 days before 1 July 2000; and\n\n(ii)          for a quarter ending after 1 July 2000—the amount worked out in accordance with paragraph 8 of this Attachment for that quarter.\n\n8.             The funding requirement for a quarter is, in respect of each syndicate year of account with liabilities secured by the fund (other than a closed year of account of a syndicate):\n\n(liabilities  scaling factor1%) + (premium income  scaling factor2%)\n\nwhere:\n\nliabilities means the reported gross of reinsurance outstanding claims liabilities for the year of account of the syndicate on the last day of the rebalancing period.\n\npremium income means premium income, net of brokerage but gross of reinsurance ceded, for the syndicate for the open year of account of the syndicate for which the liabilities are secured by the fund.\n\nscaling factor1 and scaling factor2 are amounts determined by APRA so that the result of the formula is a reasonable estimate of the value of aggregated secured liabilities on the last day of the rebalancing period:\n\n(a)                net of reinsurance;\n\n(b)               discounted to allow for the time value of money; and\n\n(c)                including liabilities incurred but not reported.\n\n9.             For paragraph 8 of this Attachment, a syndicate year of account is closed if all the liabilities of the syndicate for that year of account have been reinsured under reinsurance to close.\n\n### Reserve fund\n\n10.         For the reserve fund:\n\n(a)                the rebalancing period is each year; and\n\n(b)               the funding requirement is:\n\n(i)            on 1 July 2000 – $3 million; and\n\n(ii)          for a year ending after 1 July 2000 – the greater of:\n\n(A)        6% of the aggregate funding requirement of the new business fund; or\n\n(B)        $3 million.\n\n\n\n\n# Attachment C – Accounts and statements\n\n## Part 1 - Commentary\n\n1. The accounts and statements required for paragraph 22 are:\n\n\n(a)          Form L1—Underwriting Account for Insurance Business in Australia (to be lodged annually within four months of the balance date);\n\n(b)          Form L2—Underwriting Analysis by Class of Insurance Business (to be lodged annually within four months of the balance date);\n\n(c)          Form L3Q—Quarterly Statement of Reported Claims Outstanding for 1992 and Prior Business—“Equitas Fund” (to be lodged for each quarter defined in paragraph 1 of Attachment B and within 45 days of the quarter end);\n\n(d)          Form L4Q—Quarterly Statement of Premiums and Claims for 1/1/93 to 30/6/98 Business—“Interim Fund” (to be lodged for each quarter defined in paragraph 1 of Attachment B and within 45 days of the quarter end); and\n\n(e)          Form L5Q—Quarterly Statement of Premiums and Claims for Aggregate Business on and from 1/7/98—“New Business Fund” (to be lodged for each quarter defined in paragraph 1 of Attachment B and within 45 days of the quarter end);\n\nas set out in Part 2 of this Attachment.\n\n2.             Dollar amounts are to be rounded to the nearest multiple of $1,000.  For example, $10,500 is to be rounded down to $10,000 and $10,501 is to be rounded up to $11,000.\n\n3.             The statements are to be completed in accordance with any directions noted on the form and are to be signed by Lloyd’s Agent in Australia.  \n\n\n## Part 2 - Forms\n\nFORM L1\n\n- Insurance Act 1973 LLOYD’S - UNDERWRITING ACCOUNT\n- Form L1 INSURANCE BUSINESS IN AUSTRALIA\n- Year Ended 31/12/.......\n- Second year First year Current year\n- immediately immediately of account\n- preceding preceding\n- current year current year\n- of account of account\n- $A’000 $A’000 $A’000\n- 1. Premium income (gross) in:\n- First year\n- Second year\n- Third year\n- 2. Total\n- 3. Claims paid in:\n- First year\n- Second year\n- Third year\n- 4. Reserve at end of third year of account\n- 5. Total (items 3 + 4)\n- 6. Commission, Fire Brigade charges & stamp duty (not including income tax)\n- 7. Other expenses\n- 8. Total (items 5 + 6 + 7)\n- 9. Underwriting surplus or deficit * *\n- (item 2 less item 8)\n- Notes\n- 1. Item 7: Expenses may be determined as a proportion of global management expenses according to the ratio of Australian premium income to global premium income.\n- 2. * Interim result for open years of account.\n- Lloyd’s Agent in Australia:\n- Name: Signature: Date:\n\n\n \n\n\n\n\nFORM L2\n\n- Insurance Act 1973 LLOYD'S - UNDERWRITING ANALYSIS\n- Form L2 INSURANCE BUSINESS IN AUSTRALIA\n\n\nYear Ended 31/12/.......\n\n- Direct Premiums Inward Treaty Total Premium Commission Income Tax Claims Paid Gross Premiums\n- Class of Business including Inward Reinsurance Income Expenses and all (Gross) less Claims\n- Facultative Reinsurance Premiums (Gross) other and Expenses\n- (Gross) (Gross) (1) + (2) Expenses (3) - (4) - (5) - (6)\n- (1) (2) (3) (4) (5) (6) (7)\n- $A '000 $A '000 $A '000 $A '000 $A '000 $A '000 $A '000\n- A. Accident and Health\n- Current Year\n- First Preceding Year\n- Second Preceding Year\n- B. Motor Vehicle Damage and Liability\n- Current Year\n- First Preceding Year\n- Second Preceding Year\n- C. Aircraft Damage and Liability\n- Current Year\n- First Preceding Year\n- Second Preceding Year\n- D. Ships' Damage and Liability\n- Current Year\n- First Preceding Year\n- Second Preceding Year\n- E. Goods in Transit\n- Current Year\n- First Preceding Year\n- Second Preceding Year\n- F. Property Damage\n- Current Year\n- First Preceding Year\n- Second Preceding Year\n- G. General Liability\n- Current Year\n- First Preceding Year\n- Second Preceding Year\n- H. Pecuniary Loss\n- Current Year\n- First Preceding Year\n- Second Preceding Year\n- Total for all classes and years of account\n- Note: For Column 5, the amount of management expenses may be determined as a proportion of global management expenses according to the ratio of Australian Premium Income to Global Premium Income. These expenses are to be further allocated to class of business on a basis to be specified.\n- Lloyd's Agent in Australia\n- Name: Signature: Date:\n\n\n \n\n \n\n\n\n\nFORM L3Q\n\n- Insurance Act 1973 QUARTERLY STATEMENT OF REPORTED CLAIMS OUTSTANDING\n- Form L3Q 1992 AND PRIOR BUSINESS (“EQUITAS FUND” AS DEFINED)\n- Report for Quarter Ended: ..................................\n- GROSS KNOWN RESERVING NOMINAL BASE PLUS $A2M TOTAL NOMINAL\n- OUTSTANDING FACTOR RESERVE RESERVE\n- CLAIMS (at quarter end)\n- ($A’000) ($A’000)\n\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n- Lloyd’s Agent in Australia:\n- ................................................................................ ......................................................................................... ....................................\n- Name Signature Date\n\n\n \n\n\n\n\nFORM L4Q\n\n- Insurance Act 1973 QUARTERLY STATEMENT OF PREMIUMS AND CLAIMS\n- Form L4Q 1/1/93 TO 30/6/98 BUSINESS (“INTERIM FUND” AS DEFINED)\n- Report for Quarter Ended: ..................................\n- Originating Long tail business Short tail business Total business\n- PARTICULARS (pure) year Reserving Nominal Reserving Nominal Nominal\n- of account ($A’000) Factor Reserve ($A’000) Factor Reserve ($A’000) Reserve\n- DETAILS OF 1998*\n- NET PREMIUMS# 1997*\n- 1996*\n- 1995*\n- 1994*\n- 1993*\n- TOTAL\n- GROSS KNOWN 1998*\n- OUTSTANDING 1997*\n- CLAIMS (at quarter end) 1996*\n- 1995*\n- 1994*\n- 1993*\n- TOTAL\n- NET PREMIUMS\n- SIGNED IN CALENDAR\n- YEAR (to date)\n- GROSS CLAIMS\n- PAID IN CALENDAR\n- YEAR (to date)\n- # Cumulative net premiums to the report date since commencement of the particular years of account\n- * Only report information in respect of these years to the extent that they HAVE NOT been closed into a 1999 or subsequent year of account\n- Lloyd's Agent in Australia:\n- ............................................................................... .................................................................................................... ..............................\n- Name Signature Date\n\n\n\n\n\nFORM L5Q\n\n- Insurance Act 1973 QUARTERLY STATEMENT OF PREMIUMS AND CLAIMS\n- AGGREGATE BUSINESS ON AND FROM 1/7/98\n- Form L5Q (“NEW BUSINESS FUND” AS DEFINED)\n- Report for Quarter Ended: ..................................\n- Originating Long tail business Short tail business Total business\n- PARTICULARS (pure) year Reserving Nominal Reserving Nominal Nominal\n- of account ($A’000) Factor Reserve ($A’000) Factor Reserve ($A’000) Reserve\n- DETAILS OF Current yr\n- NET PREMIUMS# Previous yr\n- 2 yrs previous\n- (etc)\n- 1998*\n- 1997*\n- 1996*\n- 1995*\n- 1994*\n- 1993*\n- TOTAL\n- GROSS KNOWN Current yr\n- OUTSTANDING Previous yr\n- CLAIMS (at quarter 2 yrs previous\n- end) (etc)\n- 1998*\n- 1997*\n- 1996*\n- 1995*\n- 1994*\n- 1993*\n- TOTAL\n- NET PREMIUMS\n- SIGNED IN\n- CALENDAR YEAR\n- (to date)\n- GROSS CLAIMS\n- PAID IN CALENDAR\n- YEAR (to date)\n- # Cumulative net premiums to the report date since commencement of the particular years of account\n- * Only report information in respect of these years to the extent that they HAVE been closed into the year of account being reported on this return\n- Lloyd's Agent in Australia:\n- .................................................................. .................................................................................. .........................................\n- Name Signature Date\n\n\n\n\n\n# Attachment D – Audited accounts and statements\n\n## Part 1 - Commentary\n\n1.           The accounts and statements required for subparagraph 23(a) are:\n\n\n(a)          Form L3—Annual Statement of Reported Claims Outstanding for 1992 and Prior Business—“Equitas Fund” (to be lodged within 4 months of the balance date;\n\n(b)          Form L4—Annual Statement of Premiums and Claims for 1/1/93 to 30/6/98 Business—“Interim Fund” (to be lodged within 4 months of the balance date); and\n\n(c)          Form L5—Annual Statement of Premiums and Claims for Aggregate Business on and from 1/7/98—“New Business Fund” (to be lodged within 4 months of the balance date);\n\nas set out in Part 2 of this Attachment.\n\n2.             Dollar amounts are to be rounded to the nearest multiple of $1,000.  For example, $10,500 is to be rounded down to $10,000 and $10,501 is to be rounded up to $11,000.\n\n3.             The statements are to be completed in accordance with any directions noted on the form and are to be signed by Lloyd’s Agent in Australia.\n\n4.             An audit certificate in the form approved under subparagraph 23(b) must be lodged within 4 months of the annual balance date.\n\n\n\n\n## Part 2 - Forms\n\nFORM L3 (AUDITED)\n\n| Insurance Act 1973 | ANNUAL STATEMENT OF REPORTED CLAIMS OUTSTANDING |\n| --- | --- |\n| Form L3 (Audited) | 1992 AND PRIOR BUSINESS   (“EQUITAS FUND” AS DEFINED) |\n\n\n \n\n| Report for Year Ended:  .................................. |\n| --- |\n\n\n \n\n| GROSS KNOWN | RESERVING | NOMINAL BASE | PLUS $A2M | TOTAL NOMINAL |\n| --- | --- | --- | --- | --- |\n| OUTSTANDING | FACTOR | RESERVE |  | RESERVE |\n| CLAIMS (at year end) |  |  |  |  |\n| ($A’000) |  |  |  | ($A’000) |\n|  |  |  |  |  |\n|  |  |  |  |  |\n|  |  |  |  |  |\n\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n- Lloyd's Agent in Australia:\n- ............................................................................ ......................................................................................... ..............................................\n- Name Signature Date\n\n\n\n\n\nFORM L4 (AUDITED)\n\n- Insurance Act 1973 ANNUAL STATEMENT OF PREMIUMS AND CLAIMS\n- Form L4 (Audited) 1/1/93 TO 30/6/98 BUSINESS (“INTERIM FUND” AS DEFINED)\n- Report for Year Ended: ..................................\n- Originating Long tail business Short tail business Total business\n- PARTICULARS (pure) year Reserving Nominal Reserving Nominal Nominal\n- of account ($A’000) Factor Reserve ($A’000) Factor Reserve ($A’000) Reserve\n- DETAILS OF 1998*\n- NET PREMIUMS# 1997*\n- 1996*\n- 1995*\n- 1994*\n- 1993*\n- TOTAL\n- GROSS KNOWN 1998*\n- OUTSTANDING 1997*\n- CLAIMS (at year end) 1996*\n- 1995*\n- 1994*\n- 1993*\n- TOTAL\n- NET PREMIUMS\n- SIGNED IN CALENDAR\n- YEAR\n- GROSS CLAIMS\n- PAID IN CALENDAR\n- YEAR\n- # Cumulative net premiums to the report date since commencement of the particular years of account\n- * Only report information in respect of these years to the extent that they HAVE NOT been closed into a 1999 or subsequent year of account\n- Lloyd’s Agent in Australia:\n- .......................................................................... .................................................................................. ....................................................\n- Name Signature Date\n\n\n\nFORM L5 (AUDITED)\n\n- Insurance Act 1973 ANNUAL STATEMENT OF PREMIUMS AND CLAIMS\n- AGGREGATE BUSINESS ON AND FROM 1/7/98\n- Form L5 (Audited) (“NEW BUSINESS FUND” AS DEFINED)\n- Report for Year Ended: ..................................\n- Originating Long tail business Short tail business Total business\n- PARTICULARS (pure) year Reserving Nominal Reserving Nominal Nominal\n- of account ($A’000) Factor Reserve ($A’000) Factor Reserve ($A’000) Reserve\n- DETAILS OF Current yr\n- NET PREMIUMS# Previous yr\n- 2 yrs previous\n- (etc)\n- 1998*\n- 1997*\n- 1996*\n- 1995*\n- 1994*\n- 1993*\n- TOTAL\n- GROSS KNOWN Current yr\n- OUTSTANDING Previous yr\n- CLAIMS (at year end) 2 yrs previous\n- (etc)\n- 1998*\n- 1997*\n- 1996*\n- 1995*\n- 1994*\n- 1993*\n- TOTAL\n- NET PREMIUMS\n- SIGNED IN CALENDAR\n- YEAR\n- GROSS CLAIMS\n- PAID IN CALENDAR\n- YEAR\n- # Cumulative net premiums to the report date since commencement of the particular years of account\n- * Only report information in respect of these years to the extent that they HAVE been closed into the year of account being reported on this return\n- Lloyd’s Agent in Australia:\n- ....................................................................................... ........................................................................................ ......................................\n- Name Signature Date\n\n\n \n\n---\n\n\n[[1]](#_ftnref1) Note, in accordance with paragraph 13(1)(b) of the Legislation Act 2003, expressions used in this instrument have the same meaning as in the Act.  In particular, ‘covered’, ‘insurance liability’, ‘Lloyd’s’, ‘qualified corporation’, ‘secured’ and ‘security trust fund’ have the same meaning as in the Act.\n","sortOrder":0}],"analysis":{"flash_summary":{"complexity_score":6,"scope_assessment":{"changed":false,"description":"This instrument restates and consolidates Lloyd’s Security Trust Fund arrangements and the reporting/audit framework for Australia-specific liabilities. It carries forward existing supervisory powers (and preserves prior determinations per section 28). It does not materially expand the kinds of liabilities to be secured beyond the categories set out in Attachment A. The primary changes are administrative and technical (formalising trust deed and trustee approval, funding formulas and reporting forms) rather than an expansion of the instrument’s original subject-matter scope."},"complexity_factors":["23 pages plus four substantive attachments (A–D) containing definitions, funding formulas and reporting forms","Multiple defined terms and cross-references to other statutes (Insurance Act 1973, Banking Act 1959, Corporations Act 2001, Income Tax Assessment Act 1936, and the Lloyd’s Security Trust Fund Rules)","Four distinct named trust funds (Equitas, Interim, New business, Reserve) each with different coverage rules and rebalancing periodicity (Attachment A and B)","Funding formulas that use APRA-determined scaling factors and different periodicity (quarterly vs yearly) across funds (Attachment B)","Approval and eligibility tests for trustees and trust deeds (ss11–16) including a $5 million net-tangible-assets/bank-guarantee threshold (s15(c))","Reporting and audit regime with multiple bespoke forms (L1–L5) and differing lodgement frequencies and audit certificate requirements (Attachments C and D)","Numeric notice thresholds and differing materiality thresholds by fund (s25) introducing conditional triggers for APRA notification","Several discretionary gateways awarded to APRA (approval of deed alterations, termination of funds, determination of scaling factors, interpretation whether contracts may be covered by alternate funds), creating interpretive complexity","Historical/date-based eligibility rules referencing years of account and transitional tax law conditions, which complicate application to particular contracts (Attachment A paragraphs with multiple date cut-offs)","References to external standards for valuation and audit (Australian Auditing Standards; Lloyd’s Rules), so practical application requires alignment with other technical documents"],"plain_english_summary":"**What this instrument does (mechanically)\n\n- Requires Lloyd’s to operate and maintain specific \"security trust funds\" for certain categories of insurance and reinsurance business that relate to Australia (see sections 6–7 and Attachment A).\n- Forces trust deeds and any changes to them, and the trustees who run the trusts, to be approved by APRA (the Australian Prudential Regulation Authority) (see sections 11–16).\n- Sets where and how the trust assets must be held: assets must be in Australia, largely unencumbered, and valued under the Lloyd’s Security Trust Fund Rules (see section 17 and section 18) and funding formulas in Attachment B.\n- Establishes funding tests and rebalancing periods for four named funds (Equitas fund, Interim fund, New business fund, Reserve fund) with specific formulas and periodicity for when additional funding is required or when excess can be released (Attachment B).\n- Prescribes reporting, record-keeping and audited statements (Forms L1–L5 and related schedules in Attachments C and D) and requires APRA-approved auditors and audit certificates (sections 21–23 and Attachment D).\n- Requires notice to APRA of specified events (change of trustee, funding shortfalls above set thresholds, trustee payment defaults) and gives APRA power to approve termination of a fund in limited cases (sections 24–25 and 7).\n- Preserves the ability to review APRA decisions under Part VI of the Insurance Act (section 27) and preserves earlier determinations where applicable (section 28).\n\n\nWho this affects\n\n- Lloyd’s as an institution (the instrument applies to Lloyd’s — section 4).  \n- Lloyd’s syndicate underwriters and members whose insurance/reinsurance liabilities are the subject of the specified trust funds (Attachments A and B describe which classes and years of account are covered).  \n- The appointed trustee(s) of the funds (trustee approval requirements in sections 14–16).  \n- Lloyd’s Agent in Australia (forms and statements must be signed/endorsed by the Agent — Attachments C and D).  \n- APRA, which makes supervisory decisions (approvals, scaling factors, custodial and valuation oversight) and enforces compliance.\n\n\nWhy it matters (stated purpose and practical effects)\n\n- Stated purpose: to ensure there are continuing security arrangements in Australia that back liabilities of Lloyd’s business that relate to Australia, so that final judgments and claims can be paid in Australia (see sections 6–9 and Attachment A).\n\n- Practical effects and mechanics: \n  - It creates legally enforceable obligations on Lloyd’s to maintain funded trusts with Australian assets available to meet covered liabilities (s17; Attachment B funding formulas). That means a portion of assets that would otherwise be available to Lloyd’s globally is ring-fenced in Australia.  \n  - APRA controls key design choices: approval of trust deeds and trustees (ss11–16), setting scaling factors used in the funding formulas (Attachment B), and whether a fund can be wound up or terminated (s7).  \n  - It imposes an ongoing compliance and reporting burden (quarterly and annual returns, audited statements, record retention for seven years — ss21–23 and Attachments C/D).  \n\n\nCosts, incentives and trade-offs (mechanisms, not judgments)\n\n- Who pays: the economic cost falls on Lloyd’s underwriters/members (or Lloyd’s central structures acting on their behalf) because they must provide the assets that meet the funding requirements (s17; Attachment B).  \n\n- Who decides: APRA has substantial discretion over approval of deeds and trustees, valuation rules by reference to the Lloyd’s Security Trust Fund Rules, and the scaling factors used in the funding calculations (ss11–16, 18; Attachment B).  \n\n- Behavioural incentives and effects on private choice:\n  - Locking assets in Australia (s17(a)) reduces the liquidity and global investment flexibility of the funds’ owners; that may change how Lloyd’s underwriters allocate capital or price Australian risks.  \n  - The ability to release excess assets (s13(b) and Attachment B) creates an incentive to over-fund temporarily but allows recovery of surplus capital when appropriate.  \n  - APRA-determined scaling factors introduce regulatory uncertainty that can raise the cost of capital for the covered business lines because trustees/underwriters must hold capital to the regulator’s test rather than purely actuarial measures.\n\n- Compliance burden and implementation risk:\n  - Frequent reporting (quarterly for some funds, annual for others) and audited statements impose recurring cost and administrative overhead (Attachments C and D).  \n  - Valuation depends on Lloyd’s Security Trust Fund Rules and APRA’s determinations of scaling factors; differences between actuarial estimates and regulator-prescribed measures can create disputes and require remedial funding (ss18; Attachment B).  \n\n- Concentrated benefits vs diffuse costs:\n  - Benefit concentration: Australian judgment creditors and policyholders receive clearer, local legal recourse to trust assets (ss8–9 require payment in Australia of final judgments).  \n  - Costs are diffuse across Lloyd’s underwriters/members who must provide and maintain the assets and comply with reporting and trustee-approval processes.\n\n\nKey conditional, limiting or exceptional provisions to watch (by section)\n\n- APRA may approve termination of a fund only if liabilities are otherwise secured or there are no remaining liabilities (s7).  \n- Trust deeds need not cover exemplary/punitive damages or damages not provided for in the insurance contract (s9).  \n- A trustee must have either net tangible assets plus bank guarantee totalling at least $5 million (s15(c)–16).  \n- Notice thresholds for shortfalls differ by fund and are quantitatively specified (s25): very small per-syndicate thresholds for new business fund years vs large global thresholds for other funds.  \n- Certain suspensions of payment are allowed where Equitas Reinsurance Limited’s obligations are suspended, subject to not prejudicing winding-up schemes (s13(d)).\n\n\nPractical compliance checklist (brief)\n\n- Maintain the specified trust funds in Australia and ensure assets meet the funding formulas and timing in Attachment B.  \n- Get APRA approval for the trust deed and any alterations, and for each trustee (ss11–16).  \n- Keep required accounts and audited statements in the prescribed Forms (L1–L5) and lodge them on schedule (Attachments C and D).  \n- Notify APRA promptly of change-of-trustee intentions, significant funding shortfalls (per s25 thresholds), and trustee-payment defaults (s24).  \n\n\nWhere the instrument points to discretion and judgement\n\n- APRA’s role in approving deeds/trustees, setting scaling factors and interpreting whether a contract may be covered by a different trust fund (s11–12 and s10; Attachment B) means some of the most important operational rules depend on regulatory determinations rather than fixed formulae.\n\n\nSources in the instrument: see sections 6–18 for the core obligations; Attachments A–D for which business the funds cover, the formulas that determine funding, the reporting forms and audit requirements; and sections 21–28 for records, notices and review rights."},"flash_summary_failed":{"failed":true,"reason":"A positive credit balance is required for all requests, including BYOK, so fallback providers remain available. Add credits at https://vercel.com/d?to=%2F%5Bteam%5D%2F%7E%2Fai%3Fmodal%3Dtop-up to continue.","source":"analysis-cron"},"kimi_summary":{"content_quality":"ok","complexity_score":7,"scope_assessment":{"changed":false,"description":"The legislation appears consistent with its original purpose of establishing prudential requirements for Lloyd's Australian operations. While it replaces an earlier 2000 instrument and contains detailed technical provisions, this reflects the inherent complexity of regulating a unique insurance market structure (Lloyd's syndicates, years of account, reinsurance to close) rather than scope creep. The four-fund structure and reporting requirements align with the core objective of ensuring Australian policyholder protection."},"complexity_factors":["Multiple nested definitions and cross-references (e.g., '1992 and prior business' defined by reference to reinsurance arrangements, years of account, and exclusions)","Four distinct trust funds with different funding formulas, rebalancing periods (quarterly vs annual), and applicability rules based on historical cut-off dates (1 July 1998, 1 July 2000)","Mathematical funding formulas with multiple variables and APRA-determined scaling factors (e.g., '(liabilities × scaling factor%) + $2 million')","Extensive conditional logic determining which fund covers which contracts based on inception dates, currency (USD exclusions), reinsurance arrangements, and tax law references (Division 15 of ITAA 1936)","Detailed reporting requirements with 5 different forms (L1, L2, L3/L3Q, L4/L4Q, L5/L5Q) requiring specific data breakdowns by year of account and business class","Interaction with multiple other statutes: Insurance Act 1973, Banking Act 1959, Corporations Act 2001, Income Tax Assessment Act 1936, and UK Insurance Companies Act 1982","Transitional provisions preserving decisions made under previous 2000 instrument","Nested exceptions in payment requirements (exempting exemplary/punitive damages and damages not expressly covered by contract)"],"plain_english_summary":"This law requires Lloyd’s to maintain four Australian trust funds holding sufficient assets for its different eras of insurance business, with APRA approval of trust deeds, trustees, and funding formulas. It mandates audited reporting and gives Australian courts enforceable access to the funds.  \n\nIt affects Lloyd’s, its trustees, APRA, and Australian policyholders by ensuring locally held money is available to meet claims and protect consumers if overseas underwriters fail."}},"importantCases":[],"_links":{"self":"/api/acts/lloyd-s-security-trust-fund-instrument-no-1-of-2017","history":"/api/acts/lloyd-s-security-trust-fund-instrument-no-1-of-2017/history","analysis":"/api/acts/lloyd-s-security-trust-fund-instrument-no-1-of-2017/analysis","conflicts":"/api/acts/lloyd-s-security-trust-fund-instrument-no-1-of-2017/conflicts","importantCases":"/api/acts/lloyd-s-security-trust-fund-instrument-no-1-of-2017/important-cases","documents":"/api/acts/lloyd-s-security-trust-fund-instrument-no-1-of-2017/documents"}}