Lloyd's members face pounds 100m drop in cash offer: pounds 900m rescue package declines in value, threatening hopes of settlement

Click to follow
The Independent Online
THOUSANDS of individuals on the brink of financial ruin in the Lloyd's of London insurance market face a pounds 100m disappointment in the ambitious rescue offer mounted by the market authorities.

Instead of receiving their share in cash of the pounds 900m offer, many will be receiving a share of an actual offer worth only pounds 800m.

The new details will dismay members who have been hit by losses amounting to pounds 5.5bn over the past three trading accounts. It will also threaten the chances of a deal that Lloyd's hopes will end years of possible litigation.

Part of the settlement proposal mounted by Lloyd's comprises a contribution from Lloyd's central funds and money from other insurers in the market which is to be utilised to help the members.

However, up to pounds 100m of the settlement will be paid to insurance syndicates rather than direct to individual members. The syndicates, which have insured the members in the form of 'stop loss policies', will receive the money and give the policyholders - the members - a credit for future years.

In Lloyd's, many members regard this as a bookkeeping exercise designed to deprive them of cash to which they should be entitled.

Edward Benfield, a leading insurance broker, is seeking financial help for members on the troubled insurance syndicate 745. He described the situation as 'disgraceful' yesterday.

Professionals within the market have been told that no cover is available to members under stop loss policies as a result of any levy imposed on underwriting members to finance a settlement. They have also been informed that rights are reserved on any payments currently being made.

Mr Benfield said 'stop loss policies were bought in good faith and should be honoured'. If stop loss insurers had a potential problem, they should deal with the Lloyd's authorities and 'not policyholders', he said.

Henry Colthurst, managing director of the specialist insurance broker Holman Wade, defended the arrangements of stop loss underwriters in the settlement agreement. 'Many underwriting members who are subject to the settlement already form part of stop loss insurance syndicates and will be receiving the benefit through that route,' he said.

However, the latest situation - which has led to court action in the past when other settlements have been reached with underwriting members who have disputed their losses - will cause fresh difficulties for Lloyd's.

Last week the market announced that it had extended the deadline for members to accept its settlement plan by a further 14 days to 14 February, because of a pounds 20m error in its calculation of the figures.

Many of the 22,921 members being offered money to help them with their losses are planning to reject the offer. Lloyd's has warned them that there would be no improvement in the terms.

One leading action group seeking restitution for the members has warned: 'We can only express our considerable reservation about names (the members) accepting the offer when they are not aware of the full extent of the liabilities and when they have received no assurance about the likely level of future deterioration.'

Comments