Chatset, the influential insurance analysts yesterday joined the row over Lloyd's of London's controversial Equitas survival plan, calling for an extra pounds 1bn compensation to loss-making names to make sure it has any chance of success.
The research firm also slated Lloyd's over missed deadlines and "sham" consultation over the pounds 16bn rescue with the insurance market's investors, known as names. The comments will add to Lloyd's headaches as Chatset has so far supported the plans, which are bogged down in squabbling between agents, brokers and auditors over contributions to Equitas and amid wave of lawsuits in the UK and US.
"There is clearly a huge amount of work Equitas still has to do," Chatset director Charles Sturge said. "It seems Lloyd's ploy is not to involve the names in the consultative process, but to stretch it out as far as possible and present names with a take it or leave it proposal," he said.
Chatset estimates that the market - which has traditionally reported three years in arrears - will show a profit later this year of around pounds 1bn for 1993, its first for six years. Thousands have already been ruined by pounds 8bn of losses racked up from 1987 to 1992 and the rescue plan aims to shunt all the market's old liabilities into the new Equitas insurance vehicle, in return for an intended one-off payment from names.
Only last week, however, Lloyd's revealed that a vote on the plan, scheduled for March would not now take place until June, after names receive final bills for Equitas.
Interim guidance, due at the end of this month, was pushed back to March and Chatset believes it is now unlikely to appear at all.
Lloyd's is currently offering names pounds 2.8bn in compensation in return for an end to lawsuits alleging fraud and negligence, which names' action groups have already rejected as too little.
The market has approached brokers to cough up pounds 100m, but Chatset now believes they should stump up pounds 300m and managing agents another pounds 350m. Errors and omissions underwriters - who will bear the brunt of the pounds 1bn of court negligence findings so far - should also find an extra pounds 300m to add to the pounds 800m they are being asked for. Fat salaries could also be trimmed to cut Equitas' costs, the firm believes.
"Names are being asked to take all the pain. It looks as though insiders are not yet frightened enough to stump up," Chatset's John Rew said."If they want Equitas to fly then the market professionals should be digging deep," he said.
Lloyd's also faces other major hurdles in getting the plans to add up. US names, owing pounds 700m-pounds 1bn, may simply walk away if lawsuits there gain further success. Around 2,600 names, owing pounds 1.6bn, are also reckoned to be unable to pay up, leaving a pounds 900m hole after pounds 700m of intended help from Equitas.Reuse content