Lloyd's needs Bank rescue, Chatset says

BY WILLIAM GLEESON

Lloyd's of London will need to rely on support from the Bank of England if is to continue trading, according to Chatset, a firm of independent insurance-market analysts.

Chatset, which has a track record of accurately forecasting Lloyd's results, made the claim as it revealed predictions that the insurance market would report a loss just short of £1.5bn for the 1992 year when it announces syndicate results in a few weeks. If this figure is correct, it will bring the total loss over the last five years to £9.5bn.

Chatset's predictions that a Bank of England loan will be necessary follow concerns that Lloyd's is facing difficulty in passing its annual statutory solvency test, which all insurers must pass to be able to continue trading. The problem stems from the refusal of up to 9,000 names to meet their share of the £8bn losses run up in the last four years. Debts are said to be worth over £1.2bn.

Lloyd's needs to put together a refinancing and restructuring plan this summer if it is be able to carry on trading

names still trading at Lloyd's to hand over more cash to the market to pay defaulters' debts.

Chatset analyst Charlie Sturge said: "What we are talking about is a cash crisis. Lloyd's is worried about whether it has enough cash to survive the next 12 months." He added: "Once a claim cannot be paid, the balloon goes up. A levy has to be imminent."

He said the hole in Lloyd's funding was about £1.5bn. He thought the market unlikely to try to raise so much extra money from names and estimated there would be a call for £600m instead. "The rest would have to come from a soft loan from the Bank of England."

David Rowland, chairman of Lloyd's, said: "Lloyd's is not in discussion with the Bank of England about any rescue package, nor do I foresee the need for any such talks."

On Chatset's trading predictions, Mr Rowland said: "Lloyd's is trading very successfully and all independent forecasts indicate substantial profits for the 1993 and 1994 years of account."

Names were alarmed by Chatset's predictions. Michael Deeny, chairman of the Gooda Walker Action Group, which represents more than 3,000 names, said: "Some of my sources tell me the loss is £1.7bn. It is truly depressing to face the fifth year of enormous losses, the great majority of which were not the result of natural catastrophes, but gross negligence and poor regulation by Lloyd's."

Mr Deeny added: "There have been earthquakes, hurricanes and ships sinking ever since Lloyd's was set up 300 years ago without it losing money like this."

Chatset said it expected the market to return to profit next year, when Lloyd's, which reports its results three years in arrears, unveils 1993 results. Chatset said: "1993 and 1994 are both showing very promising results of around £1bn for 1993 and £800m for 1994."

Start your day with The Independent, sign up for daily news emails
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
peopleMathematician John Nash inspired the film Beautiful Mind
News
Richard Blair is concerned the trenches are falling into disrepair
newsGeorge Orwell's son wants to save war site that inspired book
Life and Style
Audrey Hepburn with Hubert De Givenchy, whose well-cut black tuxedo is a 'timeless look'
fashionIt may be a paradox, but the industry loves it
Arts and Entertainment
The pair in their heyday in 1967
music
Life and Style
fashionFrom bathing dresses in the twenties to modern bikinis
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

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine