Lloyd’s Europe will implement a Reinsurance Collateral Deposit (RCD) from 1st January 2026 for the 2026 Year of Account (YoA) onwards to meet regulatory expectations, following market engagement with support from the LMA.
The RCD will be maintained at the level of notified outstanding claims reserves, adjusted quarterly, with investment returns and income credited to deposit balances.
“The RCD will be held in a Lloyd’s Europe bank account as a static fund. The RCD will be invested in a fund structure managed by Lloyd’s Treasury & Investment Management (LTIM). Income generated from the investments will be added to the balance and reflected in the value of the RCD at the quarterly rebalancing process,” stated Lloyd’s.
If there is a shortfall in the required amount to be held, additional monies will be collected from the syndicate on a per YoA, per currency basis. Conversely, if there is a surplus, monies will be returned to the syndicate.
To support the balancing process and ensure transparency, Lloyd’s will provide managing agents with accurate and timely balance statements. Further reporting will be completed regarding collateral management and the investment of the RCD.
Lloyd’s outlined the legal framework for the RCD: “The implementation of the RCD arrangement will be effected through changes to the terms of the QS Reinsurance Agreement for the 2026 YoA. The RCD is used to cover reinsurers’ liabilities (specifically the amount of outstanding case reserves) under their reinsurance agreements with Lloyd’s Europe.
“The RCD arrangements will apply to all syndicates entering into a QS Reinsurance Agreement with Lloyd’s Europe for the 2026 (and subsequent) YoA.”
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