Lloyd's syndicate acts over rogue transactions

A LLOYD'S of London insurance syndicate yesterday mounted an urgent damage limitation exercise after two of its employees had quit over allegations of selling unauthorised insurance cover worth more than $150m (pounds 91m).

Hiscox PLC issued out a statement to the Stock Exchange to squash speculation that it had been left exposed to huge losses because of the unauthorised sales at one syndicate, known as syndicate 33.

David Edwards, an underwriter at the syndicate, and his immediate boss, Paul Hunt, resigned after it emerged that Mr Edwards had written insurance business with no authority and failed to record it in the syndicate's records.

Mr Edwards had rushed to sell lucrative insurance contracts to buyers of Chinese and Korean-built ships - business which a separate team in the syndicate was trying to secure. However, he insured the shipyards against credit risks when he was only authorised to insure against physical damage. He also failed to enter the risks on to Hiscox's recording system - meaning the risk did not figure in the company's accounts.

Hiscox, which specialises in non-marine risks such as kidnap and ransom insurance, said it had issued a statement because of speculation the contracts had left the firm exposed to heavy losses if the ship contracts went wrong.

Bronek Masojada, managing director of Hiscox, said: "We believe the speculation has had an impact on trading in Hiscox shares." Shares yesterday stood at 192p, down from a high of 205p in January. Hiscox insisted the business had not left it exposed because it was covered by reinsurance. Hiscox would only have to pay a maximum of pounds 1m.

Mr Masojada said: "There is no hint of impropriety - my view is that [Mr Edwards] thought he had done the right thing. What normally happens is that people only realise what was happening when the claims come in."