Names' leaders are increasingly confident that Lloyd's will find up to pounds 500m on top of the pounds 2.8bn fund it has earmarked to buy-off litigation and help with the cost of re-insuring all old liabilities into a new company, Equitas. The Names Committee advising Lloyd's said a further pounds 500m was needed to reduce the cost for the hardest hit, who tend to be the strongest litigants, and whose support is essential for the recovery plan to succeed. Another pounds 500m in the settlement pot would halve the maximum Equitas bill of pounds 100,000 currently facing some nine thousand names.
The loan is not believed to be as great as Lloyd's had initially hoped, because the society no longer has large security to offer the banks. It recently sold the Lloyd's building to a Germany property company. Lloyd's lead UK banker is NatWest Group, along with Citibank in the US.
Senior sources at Lloyd's said that an "agreement in principle" has already been reached with brokers over a pounds 100m contribution. The brokers' representatives are now faced with the complex task of dividing up the burden of the payment between their members, who range from large international houses to small brokers completely dependent on the society.
However, Anthony Howland-Jackson, who has been leading the negotiations for the Lloyd's Insurance Brokers Committee, said that talk of an agreement is premature. "The talks are at an advanced stage," he said, adding "there is considerable goodwill in the broking community to creating a healthy market in the future".
The focus has now switched to managing and members' agents, with names lobbying hard to have their pounds 200m contribution significantly increased. "This is one issue that unites all names, and there is not the slightest possibility of names accepting the global settlement if the agents do not contribute more," said Michael Deeny, a moderate action group leader.
Names are looking for an overall agents' contribution of between pounds 350 and pounds 400m, out of their profit commission for the years 1993 to 1995 estimated to be worth pounds 600m. Another action group leader, Christopher Messer, has written to David Rowland, Lloyd's chairman, threatening to call an EGM to force through a higher contribution. "This is not a route any of us want to go, we would rather agents recognise their obligations," said Mr Deeny.
Talks with the E&O underwriters, who insure the businesses of professionals inside the Lloyd's market, have now been concluded. Earmarked for pounds 800m, this ends some of the uncertainty in the rescue plan.Reuse content