Lloyd's agency near collapse

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TALKS were taking place late last night at the Lloyd's of London insurance market to find ways to stop the collapse of the Merrett underwriting agency.

A small steering group led by Richard Keeling, deputy chairman of Lloyd's, who is a leading executive with the Murray Lawrence underwriting agency, has been set up to ensure that if the Merrett group falls all policyholders who have sought cover with it will receive payment on any insurance claims.

Separate talks were taking place between executives of the Merrett organisation and other companies at Lloyd's to see whether it would be possible to gain sufficient investment in the group to ensure that it could continue trading next year.

However, it is understood that other underwriting agency groups are insisting that if they are to support the Merrett organisation through the introduction of more underwriting members, Stephen Merrett, who dominates the company as its leading executive, must step down as chairman and relinquish all executive responsibilities.

The crisis has cast doubts over Lloyd's ability to provide a satisfactory settlement for the 17,000 underwriting members facing pounds 2bn worth of losses.

Lloyd's was expected to ratify details of a pounds 1bn offer yesterday in an attempt to reach an out-of-court settlement with the members, who are suing over losses that have brought them to the brink of financial ruin.

In any settlement it was expected that errors and omissions underwriters, which include the Merrett organisation, would contribute pounds 300m. Errors and omissions insurers provide financial protection to companies against suits for damages.

However, syndicates under the management of the Merrett group are reckoned to account for 40 per cent of the entire errors and omissions market at Lloyd's. Uncertainty surrounding the Merrett organisation could delay a settlement.

A spokesman for the Merrett group confirmed that Merrett's chief executive, Dennis Purkiss, and underwriters Ken Barrett and Stewart Laderman had left the group to join Zurich Re, the largest Swiss reinsurance company.

The spokesman also confirmed that financial support on the group's main syndicate, 418, had tumbled from pounds 150m to around pounds 50m, while on the group's other syndicates it had slumped from around pounds 230m to around pounds 90m.

Confidence in the Merrett group has ebbed at Lloyd's since syndicate 418 reported large losses over the past few years.