Lloyd’s carries out two annual solvency tests 1. Lloyd’s as a whole (as if a single insurance company) must demonstrate that the total eligible assets of members, coupled with centrally held assets such as the Lloyd’s central fund, exceed their liabilities by the required minimum margin. 2. Lloyd’s must also show that each member has sufficient assets to meet his liabilities and that any shortfall can be covered by centrally held assets. Also each member’s assets must exceed its liabilities by the prescribed margin. This is the higher of 16 per cent of total annual premiums or 23 per cent of average claims, incurred over a three-year period, less a credit for reinsurance recoverables. Lloyd’s must show that it has sufficient central assets to cover any aggregate shortfall from this test. See MEMBER’S MARGIN.