Lloyd's pressed to find more cash for Equitas


Financial Editor

The Department of Trade and Industry is putting pressure on Lloyd's to find more money for Equitas, the giant re-insurance company that is to take over all old, loss-making policies.

The demand aggravates a tense situation for the insurance market's management as it faces further slippage in the recovery plans amid persistent difficulties in getting market participants to contribute the required funds to the rescue.

The DTI, which has to approve Equitas before it can start up, is concerned that the reserve requirements calculated by Lloyd's are insufficient given the enormous uncertainties. "This is the biggest insurance company authorisation the DTI has ever done, so it is being very conservative. It really wants it to be over-reserved," said a source close to the negotiations.

In its reconstruction and renewal plan, Lloyd's budgeted for Equitas with capital of nearly pounds 16bn, but now concedes that the DTI is looking at a range around that figure. Insiders say the DTI's wish for a "comfort margin" will require several hundreds of millions of pounds more.

The source said: "The DTI is telling Lloyd's it is trying to quantify the unquantifiable, millions of possible insurance claims over the next 25 years, dependent on decisions in the US Congress and courts. So it needs to err on the side of extra caution."

Lloyd's is unable to get more money from hard-pressed names, and is already embroiled in tense talks to get various groups of market professionals - such as brokers and errors & emissions insurers - to meet contributions earmarked in the recovery plan.

Now, with its adviser, NM Rothschild, it is stepping up the search for large corporate capital contributions. This was background to the recent rumour that Warren Buffett, the powerful US investor, was considering injecting sizeable funds into Equitas.

The giant re-insurance company is key to Lloyd's plans for survival. It is meant to start in June, taking over all outstanding liabilities for pre-1993 policies, mainly for US asbestos and pollution claims, leaving a "New Lloyd's" unburdened to trade profitably into the future.

Some 34,000 names will be asked to pay a final individual premium to Equitas, totalling some pounds 1.9bn, wiping their own liability slate clean. In return for this "finality" names will cease litigation against Lloyd's.

To ease the pain of these Equitas premiums, Lloyd's is working on putting together a pounds 2.8bn fund of credits and debt forgiveness as part of the reconstruction and renewal plan.

Names, who must vote on whether to accept this recovery plan, will receive their final premium bill only at the end of May or perhaps even June.

Lloyd's council is divided over whether to send out an early indication of Equitas premiums, which could be misleading, at the end of this month. Wednesday's council meeting may call for another delay. Negotiations with key contributors to the settlement plan, notably the insurers for the market professionals, still show no sign of resolution, complicating the calculations.

The search for money to make up the pounds 2.8bn fund for litigating and loss- making names received a boost with confirmation at the weekend of the sale of Lloyd's headquarters building in the City for pounds 180m to the German property fund Despa.

The award-winning building, designed by Richard Rogers, was built 10 years ago for pounds 200m as the symbol of the world's most prominent insurance market.

Having hit troubled times, wracking up losses of around pounds 9bn since 1988, Lloyd's has been forced to find money from whatever quarter it can. It is to lease the building back from the Germans.

Start your day with The Independent, sign up for daily news emails
ebooksA celebration of British elections
Tottenham legend Jimmy Greaves has defended fans use of the word 'Yid'
Life and Style
Arts and Entertainment
Kanye West, performing in New York last week, has been the subject of controversy as rock's traditional headline slot at Glastonbury is lost once again
Arts and Entertainment
The Ridiculous Six has been produced by Adam Sandler, who also stars in it
filmNew controversy after nine Native American actors walked off set
Life and Style
Google celebrates Bartolomeo Cristofori's 360th birthday
techGoogle Doodle to the rescue
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Recruitment Genius: Online Customer Service Administrator

£16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

Recruitment Genius: Digital Marketing Executive

£18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living