Final push for a global settlement begins

Lloyd's has at last begun the final push. Much of the talk to date has been pretty theoretical; now the cold, hard figures are on the table, and the real bargaining can get under way. Lloyd's never tires of emphasising that these bills are only estimates of how much it will cost every one of the 34,000 names so they can hive off all their liabilities from old policies into the special re-insurance company, Equitas. The final bills will go out in late May.

But Lloyd's none the less claims that for the vast majority of names, little change should be expected. Time is very short, as the wodge of documents and letters accompanying the indicative Equitas bills makes plain. The cash must be paid up in July, or the whole, daring enterprise to keep Lloyd's from toppling over the brink will fail.

Lloyd's management, headed by Ron Sandler, the chief executive, has been in overdrive making the case to names up and down the country for accepting the settlement, and describes the plan for ending the nightmare as the least worst of all alternatives.

The seriousness with which Lloyd's has gone about this job has impressed many of the sceptics, and there are plenty of those in the twisted and scarred world of the insurance market. Such is the mistrust, and in some areas, downright hatred, that getting any sort of consensus for survival is a remarkable achievement. None the less, there are signs of one emerging. The chances of pulling off a global settlement of Lloyd's problems are probably now better than 50-50.

However, Lloyd's urgently needs to find up to pounds 500m more money to improve the odds. It could come from brokers or auditors or from a reduction in the very tough reserving requirements for Equitas. Every unnecessary extra pound going into Equitas is in effect taken out the pockets of the names the settlement is meant to benefit.

One of these possibilities, or a combination, would reduce the cost to names of putting the nightmare behind them. For the key group of names that must be won over - the hardest hit who also make up the bulk of the fiercest litigants - the choice between accepting the offer or saying to hell with it remains too close a call for comfort. Some have already been awarded handsome sums by the courts which the offer cannot fund anything like in full.

Lloyd's is hinting privately that more money will be forthcoming; that the final bills for the 9,000 facing the maximum losses should be significantly lower. To be confident of success, it will need to deliver - and it is in the DTI's interest to ensure it does, because the loss of a market as prestigious as Lloyd's would be a severe blow to London.

Some good economic news ... and some bad

Bad news on the British economy - interest rates fell again yesterday. Those who rely on their savings for current income can be forgiven for exasperation over the way mortgage rates receive all the attention in the headlines. Investors in variable interest rate savings have lost up to a fifth of their income over the last year or so and for many older people that can lead to a painful cut in living standards.

Luckily, the news is not all bad this time round. In recent weeks there have been clear signs that savings institutions have been prepared to take some of the fall in base rates on the chin by cutting their own margins, which have been as high as two percentage points.

Nationwide cut its lending rates and increased its savings rates last month, Bradford & Bingley cut mortgage rates and held savings steady and several other building societies have followed. They can afford to do this because the high margins of the past few years have left them with healthy reserves.

Some look on this largesse as a way of giving the benefits of mutuality directly to borrowers and depositors. Without dividends to pay to shareholders, societies can afford to cut their profits by giving a better deal directly to their owners, the customers. But even those that are becoming banks are cutting their margins.

Nevertheless, this may not be enough to prevent the latest fall in base rates leading to some modest further fall in savings rates, even even though banks and building societies are likely to absorb some of the reduction. National Savings may be affected, too.

So what should savers do? One reaction would be to grab the highest fixed- rate offers around to lock in today's savings rates. Another would be to accept more risk, perhaps by switching to a five-year corporate bond PEP paying 7.5 per cent or more.

But there are signs in the markets that the fall in the shortest term savings rates could be quite brief, and will probably not be sustained for long - certainly not beyond the election.

Longer term rates for three- to five-year money in the swaps market are already edging up again, in the opposite direction to base rates. Professional investors are focusing on what may happen well beyond the election.

There is no sign yet that longer term savings rates, which are influenced by these money market rates, are moving upwards. But they should certainly be much more stable than base rates and short term savings such as 90 day deposits. There is no need to panic.

Too far, too hard for US market

At risk of sounding like Michael Fish, the investor who asked whether this was the beginning of a stock market hurricane should be advised to relax. These regular little panics in New York are, however, telling us something: the US market has been pushed too far and too hard and is vulnerable to correction whenever there is any unwelcome news.

The shock over the employment figures in the US was actually rather positive for the economy, in the sense that it was caused by a realisation that growth may be running faster than the consensus believed possible.

That is bad news only in the sense that the markets are now looking towards eventual higher interest rates to cool the expansion. It is a commonplace that investors have felt more comfortable with sluggish growth, low inflation and stable policy than with the prospect of a boom that might be followed by bust. They can no longer be sure that this scenario will last.

The yield curve on bonds has already been moving steadily upwards. The markets have now seen apparent confirmation that the Federal Reserve may have been wrongly identifying a pause in the growth cycle as an early warning of recession.

The last time that happened was in 1986 when the Fed had to go heavily into reverse, after mistakenly stoking up a rip roaring boom. But though there may be a change of perception about growth prospects and there is a growing risk of quite a sharp downward correction in the markets, it is hard to see this as the beginning of a long bear market.

Start your day with The Independent, sign up for daily news emails
There will be a chance to bid for a rare example of the SAS Diary, collated by a former member of the regiment in the aftermath of World War II but only published – in a limited run of just 5,000 – in 2011
charity appealTime is running out to secure your favourite lot as our auction closes at 2pm tomorrow
Arts and Entertainment
Mark Wright and Bianca Miller in the final of The Apprentice
tvMark Wright and Bianca Miller fight for Lord Sugar's investment
Arts and Entertainment
X Factor winner Ben Haenow has scored his first Christmas number one
Arts and Entertainment
James May, Jeremy Clarkson and Richard Hammond in the Top Gear Patagonia Special
File: James Woods attends the 52nd New York Film Festival at Walter Reade Theater on September 27, 2014
peopleActor was tweeting in wake of NYPD police shooting
Claudia Winkleman and co-host Tess Daly at the Strictly Come Dancing final
peopleLiam Williams posted photo of himself dressed as Wilfried Bony
Martin Skrtel heads in the dramatic equaliser
SPORTLiverpool vs Arsenal match report: Bandaged Martin Skrtel heads home in the 97th-minute
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Arts and Entertainment
The Apprentice finalists Mark Wright and Bianca Miller
tvBut who should win The Apprentice?
The monkey made several attempts to revive his friend before he regained consciousness
Elton John and David Furnish will marry on 21 December 2014
peopleSinger posts pictures of nuptials throughout the day
Life and Style
A still from the 1939 film version of Margaret Mitchell's 'Gone with the Wind'
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Day In a Page

The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

The 12 ways of Christmas

We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
Birdwatching men have a lot in common with their feathered friends, new study shows

The male exhibits strange behaviour

A new study shows that birdwatching men have a lot in common with their feathered friends...
Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

Famous diaries: Christmas week in history

Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
From noble to narky, the fall of the open letter

From noble to narky, the fall of the open letter

The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

A Christmas ghost story by Alison Moore

The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'
Marian Keyes: The author on her pre-approved Christmas, true love's parking implications and living in the moment

Marian Keyes

The author on her pre-approved Christmas, true love's parking implications and living in the moment
Bill Granger recipes: Our chef creates an Italian-inspired fish feast for Christmas Eve

Bill Granger's Christmas Eve fish feast

Bill's Italian friends introduced him to the Roman Catholic custom of a lavish fish supper on Christmas Eve. Here, he gives the tradition his own spin…
Liverpool vs Arsenal: Brendan Rodgers is fighting for his reputation

Rodgers fights for his reputation

Liverpool manager tries to stay on his feet despite waves of criticism
Amir Khan: 'The Taliban can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'

Amir Khan attacks the Taliban

'They can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'
Michael Calvin: Sepp Blatter is my man of the year in sport. Bring on 2015, quick

Michael Calvin's Last Word

Sepp Blatter is my man of the year in sport. Bring on 2015, quick