In chapter 2 page 26, the notes describe Centrewrite's role in accepting RITC from troubled syndicates. Since Centrewrite is a Lloyd's subsidiary, does this mean Lloyd's itself takes on the run-off liabilities? Or is Centrwrite just a form of broker and the liability ends up somewhere else?
This is a tough one Daniel, and I suspect you're going way beyond what is required for SA3. My own (admittedly vague) notion of this is that Centrewrite was set up to provide closure for Lloyd's Names participating on syndicates that couldn't obtain RITC in the normal way, but that legally, it couldn't provide sufficient finality to allow a Name to wind-up his / her affairs at Lloyd's. (See the book "Risky Business: An Insider's Account of the Disaster at Lloyd's of London" by Martin Mayer and Elizabeth Luessenhop.) In other words, I think the Names remain ultimately liable. Remember though that Centrewrite was reinsured into Equitas, so there are several layers of protection. I also have a vague notion that Centrewrite is winding-up, see:http://www.insuranceinsider.com/centrewrite-bids-adieu-to-new-lloyd-s-run-off . I'm pretty hazy about this though, so comments welcome from anyone else ....
I may be able to flesh this out a bit although to a large extent I share Katherine's feeling of vagueness on this. Centrewrite certainly seems to have the dubious honour of being so shrouded in mystery that even the mighty Google fails to turn up much useful information on the subject. A few further insights can be gathered from the book "Lloyd's: Law and Practie" by Julian Burling. According to paragraph 2.74, the difficulty that Lloyds was facing was how to allow troubled syndicates or individual Names to leave the market without exposing the Central Fund to potentially huge liabilities in a way that would be unfair to continuing Names whose syndicates were still functioning properly. Centrewrite was therefore set up as a Lloyds subsidiary, thereby legally ringfencing its activities and avoiding exposing the Central Fund. Presumably this means that the majority, if not all, of the capital injection came from Lloyds. In a sense this would mean that Lloyds is taking on the run-off liabilities. The issue that Katherine is referring to though is that, because Centrewrite isn't a syndicate, the reinsurance is not proper RITC and is therefore not the legally irrevocable transfer of liabilities that RITC would be and has certain tax implications too. I think Katherine is right in saying that Centrewrite has been actively trying to find proper RITC for certain troubled syndicates it took on that have now been brought back under control, thereby slimming its operations back down again.
