Lloyd's names hear an unfamiliar word

Profit is not a word that long-suffering Lloyd's names have heard much of in recent years. So they will be amazed to hear today that they could be in line at some point to profit from the scheme for a grand reinsurance company, Equitas, to take over responsibility for all those old policies, notably pollution and asbestos in the US, that have brought ruin and misery to thousands of Names.

It sounds almost too good to be true, as unfortunately, it does seem to be. The best names can hope for is one day to get back a share of any surplus from the funds they are being asked to put into Equitas to cover all liabilities for policies at Lloyds written before 1993. However, that day could be a long time coming, so only the more youthful and patient among the hordes of loss-making names can even contemplate their Equitas windfalls.

One of the big problems facing N M Rothschild, the merchant bank charged with the thankless task of attracting outside investors to Equitas, has been the difficulty of projecting a claims pattern for all the outstanding liabilities.

Without this, it is very hard to satisfy investors' need to know what sort of returns they can expect.

Some of the latest policies which would go into Equitas were written less than five years ago, which means having to wait another 30 for the claims against them to be run off.

It may not take quite as long as that to assess whether the pounds 16bn proposed for Equitas is sufficient to cover the liabilities, but it will require a good many years.

Moreover, the history of American attempts to set up special re-insurance funds to cover potential liabilities suggests that, far from ending up with a surplus, they usually find the level of claims has in the meantime risen, and the funds provided to cover them turns out to be inadequate. Equitas claims to be different, in that it is trying something on a scale not done before. Hope springs eternal, but don't hold your breath.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

Gaping hole at the heart of the European Union

Treatment of Greece has shown up a lack of genuine legitimacy
Number of young homeless in Britain 'more than three times the official figures'

'Everything changed when I went to the hostel'

Number of young homeless people in Britain is 'more than three times the official figures'
Compton Cricket Club

Compton Cricket Club

Portraits of LA cricketers from notorious suburb to be displayed in London
London now the global money-laundering centre for the drug trade, says crime expert

Wlecome to London, drug money-laundering centre for the world

'Mexico is its heart and London is its head'
The Buddhist temple minutes from Centre Court that helps a winner keep on winning

The Buddhist temple minutes from Centre Court

It helps a winner keep on winning
Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate
Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'