The authorities of the market are trying to finalise the offer to 17,000 underwriting members hardest hit by pounds 2bn worth of insurance losses, which have brought them to the brink of financial ruin. The members claim that the losses were due to negligence and are taking legal action. Lloyd's is making the offer in an attempt to settle legal action out of court.
In its original plans Lloyd's intended to fund an offer by a contribution of pounds 300m from errors and omissions underwriters, the insurers that provided financial protection for the companies the members are suing; a contribution from the sued companies, the underwriting agencies which looked after the members' affairs; and a contribution from Lloyd's central fund, designed to protect the interests of policyholders.
The central fund was expected to pay out pounds 300m to match the contribution from errors and omissions underwriters. A further pounds 100m was expected to come from underwriting agencies as part of their individual contribution.
Now, after behind-the-scenes pressure, it is expected that errors and omissions underwriters will contribute an extra pounds 100m, bringing their proposed contribution to pounds 400m. That could be matched by a similar amount from Lloyd's central fund. The balance may come from companies operating in the market, such as auditors and other advisers, but this seems unlikely.
Lloyd's may choose to make up the remainder of the contribution through loan arrangements.
Lloyd's intends to send out the 200-page offer document next Tuesday to the thousands of underwriting members affected by the losses.
Resistance to accepting any offer is mounting as members will have to give up their rights to take legal action if they accept and, as disclosed in yesterday's Independent, when they face a further pounds 2bn of losses next year. When the results are published next year the members will have suffered losses of pounds 7.5bn over four trading accounts.Reuse content