Select Committee on Regulatory Reform Sixth Report

2  Background

Governance of Lloyd's


2.  The first statutory constitution for Lloyd's was established by the Lloyd's Act 1871. Under that Act, the organisation was managed by a Committee of Lloyd's members subject to the control of the members in general meeting, who retained the power to make bye-laws. A number of further Lloyd's Acts followed, but by the time of the Lloyd's Act 1982 ("the 1982 Act") making byelaws in general meetings was no longer deemed practical. The 1982 Act therefore established a Council of Lloyd's with power to make byelaws.[1]


3.  Unlike the Committee, which could consist only of Lloyd's working members, the 1982 Act provided for there to be three types of Council member: [2]

a)  Council members drawn from Lloyd's working members (working members being members of Lloyd's who occupy themselves principally with the conduct of business at Lloyd's by a Lloyd's broker or underwriting agent, or retired members of Lloyd's who were so occupied immediately before retirement); [3]

b)  Council members drawn from Lloyd's external members (external members being members in the sense of providing capital, who are not, however, working members; they include corporate members);

c)  Nominated members (akin to independent, non-executive directors in that they must not be Lloyd's members; nominations are processed through the Lloyd's Nominations, Appointment and Compensation Committee which approves a short list prior to interview of candidates and Council voting).

4.  The 1982 Act gave the Council power to change the numbers of members in each category of membership.[4] The Council now consists of a maximum of 18 members—six in each of the three categories of "working", "external" and "nominated".[5]


5.  The working members on the Council are elected from among all the working members by vote of those members, and the same principle applies to election of the external members. Working members are elected on a one member, one vote basis.[6] Voting rights in elections for external members are based on the amount of underwriting capacity attributable to the voting member.[7] Nominated members are appointed by the Council by special resolution.[8] At present, their appointment is subject to confirmation by the Governor of the Bank of England.[9]

6.  Under section 4 of the 1982 Act, the Council must currently conduct an annual election for a Chairman, together with two or more Deputy Chairmen. The same section provides that the Chairmen and Deputy Chairmen must be chosen from among the working members of the Council.

7.  Corporate members were admitted to Lloyd's for the first time in the mid-1990s, and individual membership has been in the process of being phased out since 2003. The byelaws provide that, because the amount of external underwriting capacity attributable to corporate external members now stands at between 64 and 90 per cent, four of the six external members on the Council must be corporate external members.[10]


8.  The current normal term of office of all three categories of Council member is three years;[11] the terms of office of Council members cannot be extended during their term of office,[12] and working members of the Council are not eligible for re-election sooner than one year after the expiry of their previous term.[13] There is an exception: if the Council so decides, the Chairman and Deputy Chairmen can be re-elected immediately after the expiry of the term of office, but only once.[14] The current maximum term of office of the Chairman is therefore six years.

1   The 1982 Act did not abolish the Committee, however, and the Committee's existence and membership were restated by section 5 of that Act. Section 5 provides that the Committee is made up of the working members on the Council.  Back

2   See 1982 Act, section 3(2) Back

3   See 1982 Act, section 2(1) Back

4   See 1982 Act, section 3(3) Back

5   See Council and Committee byelaw 1(1) Back

6   See Council and Committee byelaw 13(3). The byelaws are found at: Back

7   See Council and Committee byelaw 13(4) and (5) Back

8   The definitions section of the 1982 Act defines a special resolution as a resolution passed by separate majorities of: (a) all the working members of the Council; and (b) all the other members of the Council, including the existing nominated members. Back

9   See 1982 Act, section 3(2) Back

10   See Council and Committee byelaw 1(4) Back

11   See Council and Committee byelaw 17 Back

12   See section 3(5)(i) of the 1982 Act and Council and Committee byelaw 17(3) Back

13   See section 3(5)(ii) Back

14   See section 3(5)(iii), although the subsection further stipulates that this applies only in respect of one of their number at a time Back

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