Loan to Lloyd's agency refused

New cash crisis for market, as Sturge seeks funds to make up for refusal of 5,200 names to pay £54m

THE crisis at the Lloyd's insurance market deepened this weekend as it emerged that one of its biggest underwriting agencies, the listed Sturge, has had a cash request turned down by its bankers.

Sturge's cash problem comes hard on the heels of revelations in last week's Independent on Sunday that the Lloyd's market is suffering a liquidity crisis that threatens it with closure, unless a rescue plan is put in place by the end of the summer.

A letter written by a director of Sturge reveals that Sturge's bankers turned down a request for cash to meet claims from policyholders whose names - Lloyd's investors - are refusing to pay.

The 5,200 names on Sturge syndicate 210 have refused to hand over £54m, forcing the agency to cash in investments that had been set aside to meet claims expected to arise after 1997.

The letter says the syndicate has had to meet claims earlier than expected. It adds that the situation has been compounded by the refusal of names to meet cash calls.

The letter states: "Nearly 40 per cent of the amount called in on the 1990 account and nearly 30 per cent on the 1991 account remains outstanding."

It adds: "To avoid the need for an immediate cash call, we investigated all other possible sources of funds, including bank borrowing, which the syndicate's bankers were unable to provide."

Prematurely cashing the investments cost the syndicate a £1.6m penalty. New sources of cash will need to be found to meet these later claims. "Unless a significant proportion of these outstanding amounts is received over the next few months," the letter continues, "we may still have no alternative but to make a further cash call before July 1995."

It is understood that Lord Poole, the chief executive of Sturge, met Peter Middleton, the chief executive of Lloyd's, to discuss the problem and a request for help from Lloyd's central resources was turned down.

Lloyd's insiders have said the problems caused at Sturge by names refusing to meet their debts are also hitting large parts of the rest of the market.

Last week, we revealed that Lloyd's is concerned that it may fail its 1996 solvency test and be forced to shut it doors before the January start of the 1996 trading year.

Lloyd's problems are caused by up to 9,000 names defaulting on debts worth £1bn. To prevent closure, Lloyd's needs to ask names to put in more cash, over and above that needed to meet the losses of £8bn already reported by Lloyd's.

An insider said: "The problem we have is essentially one of cash, but that has an effect on our solvency position, too. To pass solvency in 1996, we must collect debt from members. We have to extract money from the 'won't pays'." He expected Lloyd's to ask names for £600m to bail it out.

Last week, Lloyd's market analysts, Chatset, predicted that the market would have to raise £1.5bn either from names or the Bank of England. Lloyd's denied that it would need to go to the Bank.

The insider commented: "This figure assumes Lloyd's failing to collect any of the outstanding debts."

Lloyd's has also embarked on an aggressive new debt-collection programme. The plan is to sue the "won't pay" names, bankrupting them if necessary. It is threatening Lloyd's agents with expulsion from the market if they failed to pursue names.

The insider said the rescue proposals will be announced well before the Lloyd's annual general meeting, due at the end of May.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
tvGame of Thrones season 5 ep 4, review - WARNING: contains major spoiliers!
Arts and Entertainment
tvThe C-Word, TV review
Arts and Entertainment
The Ridiculous Six has been produced by Adam Sandler, who also stars in it
filmNew controversy after nine Native American actors walked off set
Danny Jones was in the Wales squad for the 2013 World Cup
rugby leagueKeighley Cougars half-back was taken off after just four minutes
Life and Style
The original ZX Spectrum was simple to plug into your TV and get playing on
techThirty years on, the ZX Spectrum is back, after a fashion
Tiger Woods and Lindsey Vonn are breaking up after nearly three years together
peopleFormer couple announce separation in posts on their websites
Life and Style
Google celebrates Bartolomeo Cristofori's 360th birthday
techGoogle Doodle to the rescue
Arts and Entertainment
Haunted looks: Matthew Macfadyen and Timothy Spall star in ‘The Enfield Haunting’
tvThe Enfield Haunting, TV review
The Mattehorn stands reflected in Leisee lake near Sunnegga station on June 30, 2013 near Zermatt, Switzerland
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Recruitment Genius: Online Customer Service Administrator

£16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

Recruitment Genius: Digital Marketing Executive

£18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living