Lloyd's rescue package runs into more trouble

Click to follow
The Independent Online
THE Lloyd's rescue package is sinking into deeper trouble as the insurance market's financially ruined investors pick the proposal apart.

Bankrupt Lloyd's Names plan to demand details of the balance sheet of Equitas, the reinsurance vehicle to be chaired by David Newbigging, former deputy chairman of Provincial Group, that is at the centre of the package. A draft document seen by the Independent on Sunday shows that at least one action group of aggrieved Names - the private individuals who backed the market with all their personal wealth - has 11 serious questions about Equitas and dozens more relating to the rest of the proposal.

Unless Lloyd's is able to satisfy them, the Names could refuse to drop their legal claims, throwing the survival plan and the future of Lloyd's into doubt.

The proposed rescue package announced two weeks ago was designed to stop losses for Names hammered by unexpectedly large settlements in US courts for asbestosis and industrial pollution claims. Some of these, dating back more than half a century, were the main reason for the pounds 9bn of losses over five years that brought the market to its knees.

Lloyd's said when it revealed the package that Equitas would have enough reserves to last more than 15 years, but the Names fear it could collapse within five. If Equitas is unable to meet demands from the United States, the liability would revert to the Names - after they have renounced their right to sue the underwriters who signed them up for the policies.

"A large number of Names (thousands not hundreds) believe that they have been defrauded through their member- ship of Lloyd's and are seeking to prevent drawdowns on their funds at Lloyd's," according to the group.

They are particularly upset that it appears underwriters will be released from half their liabilities and are demanding to know why. Among other things, the action group wants to know how Lloyd's calculated the Names' debts, uncalled losses, the application of central fund cash and debt credits.

The action group also joined the call by the Treasury Select Committee for regulation of the market, saying the current system of self-regulation had been tantamount to no regulation.

q In a story about Lloyd's on 28 May we reported on Ted Benfield's belief that Names should renege on claims against them. Mr Benfield has asked us to make clear he was referring only to claims arising from environmental pollution and industrial disease and not all claims. We are happy to do so.

Comments