Lloyd's may have considered pounds 2bn offer: Assurances were given to members at October meeting - Loan facility was rejected by internal panel

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The Independent Online
A pounds 2bn OFFER for 21,000 distressed underwriting members of the Lloyd's of London insurance market may have been under consideration by the market's authorities before Lloyd's decided to offer pounds 900m this week.

Documents seen by the Independent show that a range of assurances were given by David Rowland, Lloyd's chairman, and Peter Middleton, the market's chief executive, at a meeting in October, to representatives of up to 20,000 members that additional resources would be found for a satisfactory settlement.

Mr Middleton confirmed last night that a loan facility had been discussed by an internal financial panel to provide extra finance for the members and had been rejected. 'At no point have David Rowland and I prior to yesterday provided any figure for the offer and absolutely not a figure of pounds 2bn.'

He said that he had told members he was 'going to find every possible way' to find a financial guarantee or 'cap' to prevent members suffering further losses after accepting any offer, 'but at no point did I say that a 'cap' would definitely be part of the offer'.

At the beginning of November all chairmen of action groups fighting for financial help for the thousands of distressed members held a meeting to discuss a common position on how they would respond to Lloyd's attempts to reach a settlement. The meeting was convened by the Lloyd's Names Associations' Working Party, chaired by Christopher Stockwell, which attempts to co-ordinate the campaign for 17,000 members pursuing the most aggressive claims against Lloyd's companies through legal action in the courts.

Already thousands of members have begun legal action against hundreds of companies operating at Lloyd's over their losses. The members have alleged that the losses have arisen because of incompetence, negligence or fraud. In the past three years losses have totalled pounds 5.5bn with a further pounds 2bn deficit expected next year, bringing most of the Lloyd's community to the brink of financial ruin.

In the November meeting of Mr Stockwell's group, those present were told that Mr Middleton and Mr Rowland had said at an earlier meeting with the Lloyd's Names Associations' Working Party and the Association of Lloyd's Members, representing 8,000 members, that they were committed to 'achieving a satisfactory settlement'. Both Mr Rowland and Mr Middleton, according to records kept by those present at the meeting, committed themselves to finding additional resources to finance a settlement and to 'find a means of giving names (the members) as much certainty as possible'. That meant, according to those seeking help for the members, a financial guarantee that losses would not increase. That has not been offered as part of the settlement terms.

According to records of the meetings, Mr Middleton specifically assured the chairmen of the Lloyd's Names Associations' Working Party and the Association of Lloyd's Members that he was preparing proposals to provide a 'cap' for members against future losses. 'Both Mr Middleton and Mr Rowland knew the chairmen believed a settlement would require pounds 2bn or more. Their assurances were given in this context,' the records say.

The new disclosures will increase the tension between the Lloyd's authorities and the members. Lloyd's is desperately attempting to bring possible legal action to an end because it is causing widespread public embarrassment to the market as well as losing it business.

Lloyd's has been ordered to pay dollars 341m in punitive damages and dollars 34m compensatory damages by a jury in the US for failing to pay out on insurance claims.