David Rowland, chairman of Lloyd's of London, yesterday warned 2,000 investors at the insurance group's annual meeting that the alternative to the pounds 5.9bn rescue plan launched last week was some form of insolvency or administration.
Mr Rowland said that since January, when it was realised a rescue plan was needed, Lloyd's had asked "What are the alternatives? What does it mean if Lloyd's goes into run-off?Would it be better?"
But Mr Rowland said: "There is one certain truth, nobody knows the answer. We are not like any other animal. It would not be like any other insolvency or administration."
"Any alternative would be substantially worse. Whatever the form of administration, the duty of those who would be in charge of the society would be to discharge its contracts. There would be no other duty, no sympathy."
A rescue plan is necessary because thousands of names are unable or unwilling to meet their share of the pounds 9bn trading losses reported by Lloyd's over the past five years. Latest figures are that about 8,000 names owe pounds 2.2bn.
The plan envisages raising billions from investors and market professionals to clear the pounds 5.9bn of liabilities that the market expects to have by the end of this year. The market is also trying to ringfence its future investors from liabilities still accruing on business written prior to 1993.
Another aspect of last week's plan is a pounds 2.8bn settlement of all the litigation dogging the market as names sue Lloyd's professionals for negligence.
One investor, James McKay, was applauded when he asked why the market's professionals were being asked to contribute only pounds 200m. He said pounds 400m would be more reasonable in the light of the profits they are likely to earn in the next 12 months.
Mr Rowland said that it was a "difficult judgement call as to how much we can take from the market" while continuing to keep Lloyd's together and not losing key people to the competition.
Mr Rowland made a vigorous defence of Sir Alan Hardcastle, the head of Lloyd's regulatory board, who was singled out for criticism in a report published by the House of Commons Treasury and Civil Service select committee.
Referring to Lloyd's regulators, Mr Rowland said; "However immaculate their reputations they will within a short period of a couple of weeks be regarded as bad.
"I think they are extraordinarily good. Their devotion and the quality of what they do is remarkable. I do not regard bludgeoning from the select committee as any yardstick for measuring [Sir Alan's] performance."