Burden falls on other syndicates

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The Independent Online
MUCH of the liability to pay compensation to Gooda Walker names after Tuesday's High Court ruling will fall on names on other Lloyd's syndicates.

As the accompanying graphic demonstrates, the award payment will mean a massive shuffling of funds between names on Lloyd's syndicates and other insurers.

Gooda Walker agents took out insurance for their liability with a large number of other Lloyd's syndicates. These syndicates in turn reinsured with other Lloyd's syndicates and insurers outside Lloyd's - mainly specialist reinsurers on the Continent.

Doubts have been cast on whether this complex web of transactions will produce enough to meet all of the court's award to Gooda Walker names. On Tuesday, some errors and omissions syndicates warned there would be no more than pounds 300m available. Lloyd's analysts are broadly in agreement with this figure.

The other obvious source of finance for compensation is assets of agencies successfully sued. A year ago, at the time of the last global settlement offer, the agents contributed pounds 50m to the kitty. However, many of these agents have since gone into liquidation.

If there is not enough money the names will turn to other sources to make good the shortfall. They will seek to put pressure on Lloyd's authorities to use its assets to pay their compensation.

These assets include the Lloyd's Central Fund. This has been so depleted over recent years to pay the losses of names who have refused to meet claims from policyholders that there is not enough money left to meet any significant further claim on it.

It might be possible for the market to impose a levy on all its investors, including Gooda Walker names, but this would be highly unpopular. A further source of funds is the auditors who signed off the accounts of Gooda Walker syndicates. Gooda Walker names have issued writs against Littlejohn Frazer, the syndicate's auditors.

(Graphic omitted)

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