LLM5190 | Names: other Lloyd’s-related expenditure: Estate Protection Plans

Background

Estate Protection Plans were first introduced in 1982 and from 1993 have been underwritten by Centrewrite Ltd. They provide immediate unlimited cover against underwriting losses that may need funding after death. The terms of the Estate Protection Plan policies have changed over the years and policies for 1996 and after provide cover for syndicate losses declared in the year of death and in subsequent years. The terms that apply are those of the policy in force for the year of death. For instance, if a Name dies in November 2005, the 2005 policy applies. This covers the estate for losses declared in 2005 and following years - that is, losses declared for the 2002 and subsequent accounts.

Deposit

The advantage of an EPP is that the deceased Name’s Lloyd’s Deposit can be released to the personal representatives at an early stage. If a bank guarantee or letter of credit has been issued to meet the deposit requirement, it can be cancelled and the collateral released for distribution along with the balance of the estate, since the EPP ensures no cash calls or losses will have to be met out of the estate.

Personal Reserves

Unlike its operation in relation to assets in the Lloyd’s Deposit, the EPP does not allow automatic release of assets in personal reserves. These funds are held at the discretion of the regulating trustees (currently Lloyd’s) and can only be released when they decide that this is appropriate under the terms of the deed governing the premiums trust fund, or when all open years are closed.

EPP policies may have an excess that the estate must itself settle before recoveries can be made from the insurers. On death, an amount equivalent to the original policy excess must be retained in Funds at Lloyd’s to provide for the eventuality of loss. Any surplus is available for release.