Lloyd's names 'will reject pounds 1bn offer': Leader of action group representing 1,500 members says their success is guaranteed

Click to follow
The Independent Online
MOST of the 17,000 underwriting members of the Lloyd's insurance market facing pounds 2bn of losses will reject a pounds 1bn offer of compensation from the insurance authorities, according to the leader of one of the largest action groups.

Michael Deeny, chairman of the Gooda Walker action group representing more than 1,500 underwriting members - the 'names' - who have lost more than pounds 900m, urged members at the annual meeting to be 'implacable at the negotiating table'.

'We must go forward united together,' he said. 'We are implacably opposed to any settlement. Our case is so strong that success is also guaranteed.' Mr Deeny's action group has already begun the early stages of litigation against companies operating in the Lloyd's insurance market over the losses, some of the largest ever to fall on a small group of underwriting members.

Many members of the Gooda Walker syndicates have been hit by losses of more than pounds 1m and face financial ruin.

They are alleging that the losses arose from negligence and poor management of their affairs by those who formally managed the agency.

A Serious Fraud Office investigation is being carried out into the circumstances of the losses. The SFO, which examines allegations of extensive financial malpractice, is studying claims by caretaker managers appointed by Lloyd's to the agency when the losses erupted.

The allegations centre on suggestions that past profits had been misrepresented to members, encouraging them to join syndicates under the Gooda Walker management.

Behind the scenes at Lloyd's, the market's authorities and two panels, one led by Sir Michael Kerr and another by Sir Jeremy Morse, former chairman of Lloyds Bank, are attempting to arrive at an out-of- court settlement to ward off the anger of the members and encourage new investors into the market.

In an impassioned appeal to the 400 members of the Gooda Walker action group who attended the meeting at the Grosvenor House Hotel in London, Mr Deeny said that his group 'was not in the business of compromise'.

He warned that although Lloyd's chief executive, Peter Middleton, had indicated that Lloyd's might arrange a financial 'cap' on future losses for anyone accepting the settlement offer, 'it is a promise he may be unable to keep. The whole settlement is being done in an appalling rush.'

Mr Deeny said he was 'sceptical' of the assessments being carried out in the legal panel at Lloyd's led by Sir Michael Kerr. Sir Michael is assessing the claims of the members as strong, upper medium, lower medium, weak or hopeless in terms of chances of success in the courts.

A separate panel led by Sir Jeremy Morse is assessing the possible payout that might be made to the members under any offer.

Lloyd's is insisting that agency companies that introduced members to Lloyd's business units which subsequently turned out to be loss-making should contribute to the settlement. Many agency companies are examining the possibility of insolvency rather than attempting to finance the cost.

Lloyd's hopes to announce full terms of the offer at the end of this month and have any out-of-court settlement resolved by the end of this year or beginning of next.

If members accept the offer, which could mean an average distribution of 30p in the pound, they will be required to surrender their legal rights to sue against any company participating in the settlement.

Other action groups have yet to consider the position, but Lloyd's is attempting to stop public discussion of the terms that are emerging and that were reported in yesterday's Independent.

Yesterday's intervention of Mr Deeny, head of one of the largest of the 30 action groups fighting for compensation, casts a cloud over the likelihood of an out-of-court outcome. He said that a possible offer to Gooda Walker of pounds 165m was 'way below' one that could be recommended to the membership.

Leading article, page 17