For the majority of names, the cost of drawing a line under their affairs at Lloyd's will be substantially more affordable. "After this information, I think we'll see the settlement process developing a strong, final head of steam," said one leading names activist.
A number of the 9,000 names who faced paying the maximum pounds 100,000 premium into Lloyd's special reinsurance vehicle, Equitas, in order to cover all their old loss-making liabilities, will now find the cap halved to pounds 50,000.
But Lloyd's sources said the extra funds would be spread around nearly all the names on a sound commercial basis to ensure maximum support for the settlement. Recent weeks have seen the emergence of an angry lobby among those names who have continued to pay their debts to Lloyd's throughout the disastrously loss-making years, arguing that the focus of funds for assisting a settlement was too much in favour of litigating "won't pay" names.
Lloyd's has reached agreement in principle with the Department of Trade and Industry over the reserving requirements for Equitas, the result of which is that instead of needing an extra pounds 1.9bn from names in final premiums, the amount will be just under pounds 1bn.
In addition, Lloyd's negotiations with market professionals have enabled it to increase the pounds 2.8bn pot for easing the settlement cost to names by at least a further pounds 300m. Lloyd's is also near agreement with banks on a syndicated loan worth around pounds 250m that it will keep as a standby facility.
The final individual statements on the Equitas premiums will be sent out in mid-June, with a vote on whether to accept the settlement package in July. If names support the rescue, Lloyd's, which has lost over pounds 8bn in the last five years, will be able to cut itself loose from all its pre-1993 policies, forming a New Lloyd's to trade profitably into the future.Reuse content