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.