The recommendation is in a report prepared by Michael Lickiss, senior partner of Grant Thornton, the chartered accountants. Mr Lickiss had been asked by Lloyd's to probe the circumstances surrounding losses involving two pure personal stop-loss insurance syndicates, 134 and 184, managed by PSL Services, formerly Mackinnon Hayter & Co.
The syndicates had insured other members against possible large losses. Instead the syndicates, of about 240 members, sustained losses of more than pounds 30m.
In the 100-page report Mr Lickiss - together with Robin Wilshaw, a director of the R J Kiln underwriting agency, and Frank Guaschi, a partner of Bacon and Woodrow, consulting actuaries - said: 'Our review was not a disciplinary investigation. It has not been part of our responsibility to apportion blame.'
The investigators noted that there had been a big concentration of personal stop-loss risks at syndicates 134 and 184 as a result of the professional underwriter Colin Mackinnon buying what transpired to be insufficient insurance protection to provide for large losses that might have fallen on the two syndicates.
The losses largely fell on the two syndicates' 1983 trading accounts. Mr Mackinnon told the investigators that prior to 1986 his organisation did not have a computer facility to run claims projections through on individual policies. 'It was me doing it manually with a pocket calculator and handwritten schedules,' he said.
The investigators observed that the auditors Neville Russell did not question some of Mr Mackinnon's assumptions on the likely level of claims and the auditors told the investigators that ' we are satisfied that . . . at the time this was the right approach.'
The investigators recommend that personal stop-loss syndicates should lay off part of their risks outside the market in order to prevent losses spiralling within the market. They also recommend Lloyd's to give clear guidelines the information it expects to see in a professional underwriters' report.
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