The get-tough move will be formally announced by the market's authorities next month. Until now, Lloyd's has deliberately stopped short of bankrupting names, preferring instead to negotiate settlements through the Members' Hardship Committee.
It now believes it has no choice but to pursue some non- paying names through the bankruptcy courts. Graeme King, head of Lloyd's financial review department, has initially targeted a hard core of up to 100 individuals who, over a period of three or four years, have avoided contacting the market about paying their losses.
The change in policy is a response to an escalating trend of non-payment by names. In February, a letter was sent to 2,700 names who owe pounds 500m in unpaid losses. The letter demanded that the names either contact Lloyd's or face legal action; 1,100 names failed to reply. Recently Peter Middleton, Lloyd's chief executive, admitted that between 15,000 and 16,000 names owe Lloyd's money.
Two weeks ago, Lloyd's appointed two debt collectors, one of whom is Phillip Holden, a solicitor with Dibb, Lupton & Broomhead, a law firm that specialises in debt collection. His role will be to advise Lloyd's on locating assets hidden away by names. Staff from the firm will call on names at their homes.
Lloyd's hopes it can cut out the need for protracted, costly legal processes.
However, Michael Freeman, a lawyer representing aggrieved names, said: 'They can talk about bankruptcy and debt collectors as much as they like, but they can't do anything without a judgment. And that they will not get so long as I am here in their way.'
Lloyd's has lost patience with its previous strategy, which was to wait until two key cases currently going through the courts are resolved. The cases have been brought by names who are claiming they should not pay debts because, they allege, they are the victims of fraud.
Although the names lost the initial case in the commercial court last year, an appeal will be heard in theautumn. The cases may then be taken to the European Court of Justice. The process could take four years.
The Members' Hardship Scheme, run by Lady Archer, helps names unable to meet all their losses to negotiate a settlement that allows them to keep a house valued at up to pounds 150,000, together with an income of pounds 17,000 a year for a married name.
Until recently, only 29 hardship agreements had been signed by names. Lloyd's claims 350 names agreed a settlement with it in the last three months.
Richard Slowe, a partner with lawyers S J Berwin & Co, said: 'I thought it was a real joke for Lloyd's to talk about debt collectors. It doesn't matter how many rottweilers they employ, they will all be stuck chomping at the bit. Names should do nothing until the test cases are out of the way.'
Next week, the Lloyd's market board will issue a statement warning that named underwriting capacity is likely to fall by up to pounds 3bn for the 1995 accounting year as names, smarting from pounds 8bn of losses in previous years, pull out of the market. At present, named capacity is pounds 9.3bn.
David Rowland,chairman of Lloyd's, says he does not expect corporate capital to increase its underwriting enough to make up for the fall in names' capacity. (Photograph omitted)Reuse content