Under the scheme each name will be able to transfer all existing underwriting business into his or her own new company, known as a Nameco.
At present Lloyd's names risk their entire personal wealth to meet claims from policyholders. Under Citibank's scheme names will be liable only to predetermined limits.
Citibank expects to attract 5,000 names over the next three years. In the past four years many names have been ruined as a result of the huge losses hitting the market.
Namecos must deposit a minimum of pounds 100,000. Under Lloyd's corporate capital rules Namecos can write premiums worth twice their deposits.
However, names can increase their underwriting-to- deposit ratio to three-to-one by taking out a letter of credit secured against an excess of loss insurance policy. The use of letters of credit is being restricted to 50 per cent of the value of the initial deposit.
The scheme is open only to existing Lloyd's names. Anyone else wishing to establish a Nameco will have to make a minimum deposit of pounds 1.5m in line with Lloyd's current rules for corporate capital.
Names are now allowed to write four times their deposits if they participate in a members' agents pooling arrangement. These allow names to pool their investments and spread their underwriting across a wide range of syndicates in a similar way to unit trusts.
Patrick Hanratty, of Citibank, said: 'There is a trade- off between limited liability and investment return. Who knows what disasters lie around the corner? For many the extra return will not be worth the risk from unlimited liability.'
Citibank expects set-up costs to be pounds 300 per Nameco, with annual administration charges of pounds 500. Names will have to pay a premium for letters of credit and excess of loss insurance policies.
Citibank expects the scheme to be approved by Lloyd's regulatory board next week.