ALM Lobbying in 2013

16 September, 2013

What happens behind the scenes at the ALM? Here Chairman Alan Lovell summarises some of the Association’s lobbying activities aimed at supporting Names’ interests.

Apart from its publications and conferences, five key issues have topped the ALM’s agenda in 2013. "Our most important current role is to support John Nelson’s ‘Private Capital Initiative’, and the goal, in Lloyd’s ‘Three Year Plan’, of boosting the amount of private capital supporting the market," Mr Lovell declared. A key step in this direction was achieved in July through the ALM’s special conference for the financial advisers to high net worth individuals, which attracted over one hundred delegates to hear from such market luminaries as John Nelson, Tom Bolt, David Shipley and Chris Hitchings, as well as ALM directors, Nigel Hanbury and Alan Lovell. It is hoped that this will result in the introduction some of the clients of these investment professionals to the members’ agents.

The second area of intense activity has been the ALM’s attempt to reverse the Treasury’s limitation of sideways income tax relief for losses to £50,000 per year. "Carrying back or forward is OK, but we all feel that the cap of £50,000, or 25% of income, whichever is greater, against other income of the same year, is very unfair for Lloyd’s underwriters who have made a genuine loss. We are not going to let this drop if we can help it."

The third activity is another "hard nut to crack": the ALM’s proposal to simplify ‘Part VII Transfers’ (ALM News, February 2013, p. 11). Part VII of the Financial Services and Markets Act 2000 allows insurance liabilities to be transferred between insurers, without the use of reinsurance, but only after an actuarial opinion and a court process. This occurred with Equitas when its assets, liabilities, and contractual commitments were transferred to Berkshire Hathaway. The ALM has launched discussions with Lloyd’s and HM Treasury about simplifying Part VII transfers for unlimited liability Names converting into limited liability vehicles, and for some other transfers within Lloyd’s. The simplified system would avoid some of the hassles and extra Funds at Lloyd’s requirements associated with interavailability, as well as expensive actuarial and court processes, which the ALM believes should be unnecessary as Lloyd’s central fund is the ultimate security behind every member of Lloyd’s. "We have some of our best men on the job, Adam Ridley and Paul Kelly. They will be resuming their pursuit of the question in the autumn, but I cannot pretend that it is an easy one", Mr Lovell said.

The fourth area of concentration for the ALM Board has been its contribution to a consultation by the Corporation of Lloyd’s on the redefinition of Non-Underwriting Working Members [ALM News, August 2013, pp. 14-15], the so-called NUWMs [pron. ‘numbs’ – ed.]. They are able to vote in Council elections, and even to stand for Council. This membership category was created after Lloyd’s ‘Reconstruction & Renewal’ (R&R), in order to retain the knowledge and experience of the many senior, influential individuals who were still working in the market, but who were no longer Names, or never had been. "I sat on the committee involved, and great work was done, by Michael Deeny in particular. We are very happy with the result," Mr Lovell said. The number of NUWMs will increase to 1,105, a limit which the ALM Board believes to be "very sensible." Going forward, NUWMs must be primarily occupied in the affairs of Lloyd’s, although past involvement may also be taken into account. Non-Underwriting Working Membership is to be mandatory for Managing Directors of members’ and managing agents. These and broking firms are entitled to nominate further NUWMs, within specified limits: in aggregate, 641 from managing agents, 383 from brokers, and 81 from members’ agents. "It was very important for us that the total number should not be too near to the number of representatives of private capital, roughly 2,000," because a numerical advantage may be very important when passing bye-laws at general meetings. "We’ve got the right sort of people as NUWMs, but the number of Names is liable to stay at a level greater than the number of NUWMs for the foreseeable future."

The fifth and final issue is a tricky one, and relates especially to non-UK residents (see page 21 of the June/July issue of ALM News). Some cedents and brokers in some countries have started to implement a withholding tax on premiums, as they have discovered that a small number of Names are not UK residents for tax purposes. This was raised first in India, since when it has spread to many other countries, and it could become very damaging, not only to non-resident Names, unless something is done. "Although some work remains to be done, and undoubtedly the situation will disadvantage those affected Names who are not UK resident, we have accepted that a change needs to be made," Mr Lovell reported. "We have concentrated our efforts on ensuring that the change is as painless and as cost-free as possible." It will not mean, Mr Lovell stressed, that all members of Lloyd’s will have physically to reside in the United Kingdom. However, from 1 January 2015 they will have to underwrite through a UK resident entity. "There was no choice but to participate in the discussion, to ensure as smooth and fair a transition as possible."

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