Lloyd's group studies contract: Late reinsurance deal under scrutiny

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The Independent Online
AN ACTION group representing 1,750 Lloyd's members suffering losses of around pounds 130m is studying the impact of the late booking of a reinsurance contract by syndicate 745 on their trading position, writes John Moore.

Experts are studying how a reinsurance contract was arranged with Frankona, the German reinsurance group, by David King, the professional for syndicate 745, where the losses arose.

The contract was accepted by Frankona on 29 April 1992, a month before the books for the 1989 underwriting account were formally closed on 27 May. 1992. The contract was arranged to cover mounting losses from Hurricane Hugo in 1989. But the losses rose steadily in the 1990 account mainly due to claims from European storm damage.

The syndicate's accounts indicate that a policy was arranged to provide cover in excess of a specified limit. According to the contract, payment would be made in excess of dollars 239m on individual claims of up to dollars 15m.

Members of the working party, led by the insurance broker Edward Benfied, have been arguing that the 1989 underwriting account was improperly closed by syndicate managers.

They say there may have been a serious miscalculation of estimates of the syndicate's profitability or losses in the 1989 and 1990 trading accounts.

Ken Randall, a former chief executive of the Merrett organisation, the troubled Lloyd's agency, is considering making a takeover bid for the company. In any deal he would hive off the insurance syndicates and retain the loss-adjusting interests.