Lloyd's urged to change hardship

Click to follow
LLOYD'S of London is being urged to change its hardship rules by the Society of Names, one of the most prominent groups of investors in the insurance market, writes Diane Coyle.

Tom Benyon, the society's director, said: 'Most names are prepared to do a fair deal, if only to win certainty. But present hardship rules prevent deals being done.'

He said many names who would be willing to pay their losses were making complicated financial arrangements to keep their money out of the hands of Lloyd's because the terms under which they had to pay were so onerous. 'Instead of Lloyd's getting half a loaf, they get none and anything they do win will only be after protracted legal battles,' Mr Benyon said.

A name who opts for the hardship process is allowed to keep a modest house - worth up to pounds 150,000 - and annual income after tax of pounds 17,600 for a couple. The rules do not allow flexible rescheduling.

Many names prefer to declare bankruptcy or simply ignore cash calls. There have been fewer than 200 applications to the hardship committee, chaired by Mary Archer, since the beginning of this year, although a recent internal Lloyd's report by Lady Archer predicted a sharp increase. The report suggested about 2,500 names would apply eventually.

The report recommended more active encouragement to names to enter the hardship process.