Lloyd's moves to outwit rebels: Extraordinary meeting called to allow corporate capital plan to go ahead

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The Independent Online
LLOYD'S of London, the insurance market, is calling an extraordinary meeting in a bid to forestall rebel members who may seek to oppose its plans to admit corporate capital.

Lloyd's has delayed publication of the detailed proposals and requirements for corporate capital until 9 September to allow it time to pass the enabling byelaws at the previous day's council meeting.

Under the 1982 Lloyd's Act, members are entitled to challenge byelaw changes. If dissidents sought to use this power - which seems likely from recent skirmishing - the introduction of corporate capital could be delayed by a crucial three months.

This would mean the merchant banks working on investment vehicles to back Lloyd's syndicates would have insufficient time to finalise their plans and attract investors by the start of the 1994 underwriting year on 1 January. The introduction of corporate capital would be delayed until 1995.

Lloyd's aims to pre-empt any opposition by calling an EGM on 20 October. In a letter to members at the weekend, David Rowland, Lloyd's chairman, said: 'I am most reluctant to burden the membership with yet another meeting . . . But I cannot allow the implementation of (our) plans to be put at risk by a three-month delay.

'Therefore I am relying on the goodwill and common sense of the vast majority of the members to ensure that we can clear the way for new capital with certainty by the end of October.'

Lloyd's is turning to limited liability corporate capital because names - the individuals whose wealth supports the market - are leaving by the thousand in the face of losses exceeding pounds 6bn in recent years.

Mr Rowland makes it clear that Lloyd's will allow corporate capital to be supplied by stock market-listed companies. Merchant banks are working on vehicles similar to investment trusts, which will diversify their risks by backing a range of syndicates.

Corporate members will have to pay an annual levy of 1.5 per cent of their premium limit towards Lloyd's policyholder guarantee fund. Any special levy beyond this cap would require a supportive vote by members.

A working party has recommended that voting rights should be weighted according to underwriting capacity - a fundamental break with Lloyd's traditional principle of one member, one vote. Mr Rowland is inviting comments before next month's council meeting, which will decide the issue.

The working party is considering whether the use of weighted voting should be more widely extended.

A Lloyd's spokesman said there was plenty of interest in corporate capital, with 'a lot of window shoppers. We don't know how much of that we are going to change into real money. We don't expect a flood. We expect a few people to test the waters and see how it works.'