Lloyd's names to match capital put up by corporate members

Click to follow
The Independent Online
Lloyd's of London yesterday confirmed plans to force traditional names to put up the same amount of capital as the insurance market's new corporate members do to support their underwriting.

It bowed to pressure from individual members, however, to extend the time period over which it plans to level the playing field.

The plans are part of a package of measures designed to strengthen the financial security that underpins Lloyd's. The proposals have been criticised as being the latest move to encourage corporate capital to the market at the expense of traditional names, a charge Lloyd's denied yesterday.

Names are now to be given three years rather than two to meet new requirements to show evidence of assets worth 50 per cent of the premium income they want to underwrite. The change was made after responses to a consultation document on the proposals published last month.

Currently names only have to lodge funds representing as little as 20 per cent of their underwriting limit at the market whereas corporate members have to put 50 per cent in trust. By 2000, names will have to hold 40 per cent of premium capacity at Lloyd's with a further 10 per cent backed by other personal wealth.

The time for names to increase their minimum level of means to pounds 350,000 has also been extended by three years to five years and will now come into force in 2002. Allowances for reaching these levels are being made for names who have fallen below the minimum level of capital as a result of the disastrous losses at Lloyd's in the five years to 1992.

Lloyd's is pressing ahead with a proposal to prevent names from using their principal private residence as collateral for underwriting. It has decided, however, to allow names to continue using letters of credit backed by their homes if the arrangement was in place before the end of 1994.

The decision to strengthen Lloyd's so-called chain of security follows the near collapse of the market after an accumulated pounds 8bn of losses between 1988 and 1992. Last week the market announced a pounds 1bn profit for the 1994 year of account following a similar surplus in 1993.