Lloyd's may extend rescue scheme for Names

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LLOYD'S is considering a plan to help Names that it claims would end the financial uncertainty hanging over individuals whose assets back the troubled insurance market.

Lloyd's latest idea would reinsure more of the loss-making business that has ravaged the market in recent years into its new limited liability company, Newco.

Peter Middleton, Lloyd's chief executive, said this would bring 'finality' to the losses borne by names. Currently, they have unlimited liability and face huge cash calls from Lloyd's to meet the market's losses.

The creation of Newco was announced when Lloyd's launched its business plan last April. But until now, it had been expected that the company would only take on losses arising from insurance business written prior to 1986.

These stem from health claims against asbestos manufacturers in the US and from claims to cover the cost of cleaning up polluted industrial sites in the US.

If Newco's role is extended to cover business written in 1986 and subsequent years, Names on syndicates that have suffered losses from claims for storm damage and other catastrophes would pay a once-and-for-all premium to Newco that would buy them out of any future liabilities.

The plan to extend the scope of Newco follows the apparent failure of another vehicle set up three years ago by Lloyd's to reinsure syndicate losses. The vehicle, known as CentreWrite, has stopped writing new business.

According to Robin Jackson, CentreWrite's chairman, syndicate managers are unwilling to place business with the operation.

Mr Jackson said: 'In theory we are still here to take on the 1986 and subsequent years' business. In practice, nobody wants to do it at the quotations we are offering'.

Mr Jackson added that Lloyd's was considering several options. 'The best way forward is to do the work through Newco and produce quotations for the '86 and subsequent years at the end of '95, or perhaps a year later.' He said that paying a once-and-for-all premium would 'crystallise' the Names' losses and give them a definite indication of their position.

Mr Jackson claimed that Names, who are currently suing the market's professionals over the losses, would find that reinsuring into Newco would bring a faster resolution to the uncertainties they face than litigation.

'Newco will be resolved at the end of '95. The litigation will go on for several years more.'

One reason Names rejected Lloyd's pounds 900m offer to settle the litigation was concern that there was no provision in the proposal to cap their future liabilities.

However, there is considerable scepticism about Newco among Names.

Christopher Stockwell, chairman of the Lloyd's Names Associations Working Party, said: 'The theory of getting all the losses into one company is great, but it is completely unrealistic to think Newco is capable of quoting a premium.

'Even if they do, I don't think Names will be able to afford it. We're going to have trouble paying this year's losses, never mind the reinsurance into Newco.

'The more the scope of Newco is extended, the more money it will need from Names to capitalise it.'