Lloyd's has been desperately trying to reach an out-of-court settlement with members over the losses, which have brought more than 22,000 to the brink of financial ruin, to head off years of legal action. Most of the members are suing hundreds of companies that looked after their affairs.
At a packed meeting at the Central Hall in Westminster, London, 1,650 members voted overwhelmingly to reject the current offer and to fight for better terms while pursuing legal action. They are members of the former Feltrim Underwriting Agency who are seeking to recover pounds 599m plus interest that they suffered in losses. So far, those taking legal action over the Feltrim losses have been offered pounds 237.5m as part of their share of the Lloyd's offer.
Lloyd's said last night after the Feltrim meeting: 'Both the structure and the quantum of the offer will not be modified.'
The decision of the Feltrim members follows similar moves by members whose affairs were looked after by the Gooda Walker agency earlier this week. Gooda Walker members voted to reject the offer and fight on for more money. Another large group of members whose affairs were managed by the Merrett agency has also voted to reject the offer.
Lloyd's had been hoping that it would receive acceptances from enough members who were entitled collectively to receive 70 per cent of the offer to guarantee its success. But with Gooda Walker and Feltrim members rejecting pounds 500m of their entitlements the offer, which closes on 14 February, looks doomed to failure. Lloyd's authorities do not propose to proceed with the deal unless they receive a substantial majority in acceptances.
However, the Feltrim members adopted a softer approach to the deal than other sections of the market. They voted overwhelmingly to continue talks with Lloyd's to try to get a better offer.
'We will carry on talking with action groups like Feltrim if they so wish,' a Lloyd's official said as he stressed that the current offer would not be improved.
Colin Hook, chairman of the Feltrim Names Association, told the meeting 'personal considerations apart, the amount offered is not enough to outweigh the risks and disadvantages of acceptance. It is considered essential to meet with Lloyd's to negotiate sufficient improvements to the offer which would enable us to recommend acceptance.'
He added: 'It is vitally important for the membership to act together. United we can win. Divided we shall fail.'
Mr Hook warned the meeting that if they accepted the deal, members would be forced to give up their legal rights to sue companies that looked after their affairs and Lloyd's itself. 'You also give up all your rights against parties above for fraud even though you may not yet know about the fraud.'
He pointed out that Lloyd's could claim against members for any unpaid losses or for the consequences of any further worsening of the financial position of the insurance syndicates into which they were grouped.
He stressed that the Lloyd's offer contained no financial guarantee that the members' losses would not go beyond their current levels.
Lloyd's has warned that members would be worse off if they sued because early successful actions could deplete limited funds for subsequent claimants.
Mr Hook told the meeting that although they were seeking to recover pounds 599m in the courts, a court would be 'unlikely to award damages as large as that. Any monetary judgment is a few years away.'
The losses at Lloyd's are the largest in its 306-year history and have arisen from a combination of man- made and natural disasters. Many members also allege mismanagement and lack of regulation within the market.
A further pounds 2bn loss is expected to be reported later this year for the last completed trading account.
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