All 22,800 underwriting members of the troubled insurance market have been told that their deposits will be seized. All Lloyd's members have to desposit funds at Lloyd's before they can begin underwriting.
In a letter to members, sent via their agency companies, Lloyd's has said that its ruling council 'wish to bring your Lloyd's deposit into a state of readiness such that if a withdrawal is necessary this can be made without unacceptable delay'.
The warning notice says: 'It is a fundamental principle of insurance, and the policy of Lloyd's, that all valid claims are met expeditiously. The high level of losses which will be encountered in respect of the 1989 account together with the unacceptable level of outstanding cash calls requires that special action be taken to ensure that all syndicates are adequately funded.'
Lloyd's is worried about the high level of resistance to cash calls by underwriting members, many of whom have taken legal action to prevent their deposits being drawn down by Lloyd's.
With pounds 2bn of claims flooding into Lloyd's, the authorities, in their letter dated 6 July, have given members 30 days' notice to draw upon the deposits unless other funds are made available.
If the members do not pay up fully, through their deposits or from their private wealth, Lloyd's will use its central fund of last resort, which amounts to pounds 1bn. It will then seek to recover the money from underwriting members in default.Reuse content