The money from errors and omissions insurers is one part of a complex offer being drawn up in the insurance market to compensate names hit by pounds 2bn of losses, which are threatening to drive many of them into bankruptcy. The total offer from all sources is thought likely to be about pounds 1bn.
The Lloyd's Names Associations' Working Party, an umbrella organisation for 37 action groups representing aggrieved underwriting members, said that if fair criteria were applied 'the exposure of the E&O insurers could be as high as pounds 1.5bn'.
The working party added that a reported offer of pounds 300m by the four leading errors and omissions underwriters 'appears derisory. Anything less than pounds 900m would be unacceptable.'
The errors and omissions underwriters insured members' agents. Many of the agents are being sued by Lloyd's names over the losses they made on the syndicates to which they belonged.
The working party said almost all names had exposure to some of the 96 syndicates providing errors and omissions cover. It accepted that the insurers could only pay out where they had a clear commercial and legal obligation as a result of the submission of valid claims.
It added: 'There is much room for argument over what has constituted a valid claim and the working party believes that on the precedent of recent decisions the courts would lean over backwards to secure that names who had established liability and quantum will be able to collect from the defendants' insurers.'
This was particularly important given that many agents would become insolvent if the action groups were to win their cases, the working party added.
The working party said research it had undertaken suggested that theoretical total cover provided for the agents amounted to pounds 5bn or more compared with what it believed was a total of pounds 3.5bn of claims for past losses.
However, it is believed that Lloyd's proposals are directed at losses amounting to pounds 2bn.Reuse content