Members of Lloyd’s must lodge funds with Lloyd’s in order to support their underwriting. These are known as Funds at Lloyd’s (FAL). FAL are usually, but not always, 40% of the total amount that the Member of Lloyd’s may underwrite in a given year. This amount is known as their capacity and represents their right to participate on syndicates in a given year. The minimum amount of FAL that needs to be shown by a new Member is £350,000.

As their underwriting business goes forward, the amount of FAL that Members need to provide for each successive underwriting year is determined by the amount that the Member wishes to underwrite and economic capital assessment (ECA) ratios. ECA is an actuarial model which determines different capital requirements for various syndicates, and largely depends on what classes and proportions of various classes of business they underwrite. This test is carried out by Lloyd’s twice a year.

FAL can be provided in the form of cash, approved stocks and shares, gilts, bonds or by way of a bank guarantee.