A single individual or a group can participate in a Nameco.
A Nameco provides capital to support its underwriting which is lodged at Lloyd’s as funds at Lloyd’s (FAL). The level of FAL required is determined by (a) the overall capacity underwritten by the Nameco and (b) the Nameco’s economic capital assessment ratio which is set by Lloyd’s. Most new and converting Namecos are required to deposit FAL equivalent to a capital ratio of c40% of their overall underwriting capacity, subject to a minimum capital requirement. This capital ratio will increase over subsequent years as the Nameco’s FAL is used also to support additional years of account.
The minimum capital requirement for a new-money Nameco is £350,000 or 40% of the premium income limit, whichever is the higher. The minimum capital requirement for a single unlimited member converting to a Nameco is £100,000.
Namecos can be set up new, or can be purchased from existing owners, subject to availability.
Namecos are liable to pay corporation tax on any profits or capital gains realised during an accounting period at the normal corporation tax rates.
The Nameco can choose to retain its underwriting profits or pay some or all of them out as dividends or salary. In each tax year, an individual is entitled to a £500 tax-free allowance on their dividend income (total from all sources). If dividends received in a tax year are less than £500, the income will not be liable to income tax. However, where dividends received exceed £500, the excess income above the £500 will be taxed at the dividend income tax rates of 8.75%, 33.75% and 39.35% for basic rate, higher rate and additional rate taxpayers respectively.
Losses sustained by the underwriting activities of the Nameco can be carried back for one year or carried forward and offset against future profits of the company. They cannot be relieved against non-Lloyd’s income of the shareholders.
Ownership of the Nameco can be bequeathed on death so that the company can continue to underwrite at Lloyd’s.
If the owner of the Nameco wishes to resign from the market, then the entire company can be sold, subject to demand. The potential price of such a sale would include the value of the syndicate capacity and a proportion of the pipeline profits.
When a Nameco ceases to underwrite, Lloyd’s requires the company to remain in existence as a dormant entity. If this stage is reached, then Fidentia are able to arrange this administrative service for a one-off fixed fee at the time.
Business Asset Disposal Relief (BADR) may be available to shareholders on the sale of their entire stake in a Nameco. Please see tax section for more information regarding disposals.
Shares in a Nameco can be gifted and bequeathed. Holdover relief for gains may be available on gifts.
Lloyd’s no longer charge an application fee to set up a Nameco, instead, a “Prospect Fee” of £1,000 per new individual, company or other entity applying will be charged. We will clarify the cost for you once we have examined your proposed structure. Members’ agents also charge fees for new applications.
LLPs
LLPs were introduced for the 2007 account, so that individuals could underwrite at Lloyd’s within an English Limited Liability Partnership.
A single individual or a group can form a LLP.
An LLP provides capital to support its underwriting which is lodged at Lloyd’s as funds at Lloyd’s (FAL). The level of FAL required is determined by (a) the overall capacity underwritten by the LLP and (b) the LLP’s economic capital assessment ratio which is set by Lloyd’s. Most new and converting LLPs are required to deposit FAL equivalent to a capital ratio of 40% of their overall underwriting capacity, subject to a minimum capital requirement. This capital ratio will increase over subsequent years as the LLP’s FAL is used also to support additional years of account.
The minimum capital requirement for a new-money LLP is £350,000 or 40% of the premium income limit whichever is the higher, with each individual member in the LLP providing a percentage share in accordance with the member’s percentage loss share in the LLP.
Underwriting profits are deemed to be earned income and are taxed as such. Earnings from the LLP are pensionable subject to any maximum contribution levels which may appertain to an individual’s circumstances at the time and are dealt with and taxed at individual partner level and not at LLP level.
A partner’s trading losses can be offset against a partner’s share of gains and future profits made by the LLP, or against the individual member’s other income in the current or previous tax year.
If a partner wishes to resign from the LLP, the share is first offered to the other underwriting partners. If all underwriting partners wish to cease involvement, then the LLP may be sold to a third party, subject to demand. Alternatively, the capacity can be sold at auction and the LLP liquidated with cash from realised assets and pipeline profits, as they are paid out by Lloyd’s, being distributed to the partners.
When an LLP ceases to underwrite, Lloyd’s requires it to remain in existence as a dormant entity. If this stage is reached, then Fidentia can arrange this administrative service for a one-off fixed fee at the time.
Under existing rules Lloyd’s underwriting qualifies for business property relief, which has historically made the IHT bill on Lloyd’s Underwriting £nil. The 30 October 2024 budget proposed changes to that, whilst still lower than the 40% rate charged for listed investments or property investments, inheritance tax will now be charged at 20% above an individual’s first £1m of BPR assets. The IHT changes are due to come in from April 2026.
When a partner disposes of the entire interest in an LLP, BADR may be available. Please see the tax section for more information.
Lloyd’s no longer charge an application fee to set up an LLP, instead, a “Prospect Fee” of £1,000 per new individual, company or other entity applying will be charged. We will clarify the cost for you once we have examined your proposed structure. Members’ agents also charge fees for new applications.
