David Rowland, Lloyd's chairman, told 1,800 members at the Royal Festival Hall in London that the Charity Commissioners had raised objections that meant the scheme could not go ahead to help members meet the pounds 5.5bn worth of losses that have flooded into the market in the past three years.
He was announcing losses of pounds 2.9bn for the 1990 underwriting account, the largest in Lloyd's 305-year history. Lloyd's had planned to seek contributions to a 'support fund' from all the companies operating in its market or associated with its business, in an effort to help the members.
The initiative was launched last year. But many companies operating at Lloyd's made it clear, following legal advice, that they would only contribute to a recognised charity. Tax recoveries for the fund are possible only if it has charitable status.
Lloyd's has held lengthy exchanges with the Charity Commissioners in order to meet their conditions. 'Following many exchanges apparently leading us close to agreement, we heard last week that the commissioners had finally turned down our application,' Mr Rowland said. 'We understand that their principal reservation is that the rules may not constitute a trust in the legal sense for the relief of poverty.'
He warned: 'We must insist . . . that where members have the resources to pay their debts they must do so. We must at all times preserve our chain of security, so we will enforce payment from those who can pay. For those who cannot, understanding and assistance to come to sensible arrangements through our hardship committee will continue.'
Lloyd's said that it was pressing ahead with plans to raise new capital from companies that would be invited to invest in Lloyd's.
Mr Rowland received broad approval for the new plans, but some members were less complimentary. Geoffrey Wilkinson, a member for 40 years who has resigned, said that Lloyd's management was talking 'a lot of tripe and lot of platitudes'.
Tim Powell, who with his wife lost pounds 800,000, said introducing corporate capital would do nothing to help members who have already suffered.
Another angry member, Alan Price, who warned that members would not rule out forcing the closure of Lloyd's if it was in their best interests, blamed professional underwriters for the heavy losses.
'These underwriters should count themselves lucky that Lloyd's is not based in the Middle East,' he said. 'If it were, a large number of these wretches would now be walking around minus one hand. Some would also be missing an arm and a leg.'
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