The move will lead to the reduction of Mr Merrett's influence and loss of his personal control of the family agency company that he dominates.
The sensational development comes after months of personal criticism of Mr Merrett by underwriting members whose affairs he looked after and who are facing millions of pounds of losses. Last month he bowed to the pressure and stepped down from his post as deputy chairman of the market, arguing that his own company Merrett Holdings faced 'challenges and opportunities' and he had decided to reduce his workload.
In a short statement issued yesterday Mr Merrett said that his company had approached Lloyd's with the outline of its plans to secure the future of the Lloyd's syndicates it manages. 'The proposals are based on the formation of a new managing agency with substantially new shareholders which would acquire the business from the group,' Mr Merrett said.
It is intended that the existing business is transferred to a new agency that will be able to underwrite both for Lloyd's members and a consortium insurance company. The insurance company is understood to be Travelers, which last month agreed to a bid from Sanford Weill's financial services group Primerica.
As part of the deal Travelers and Primerica will take a significant equity interest in the new Merrett agency company. That could be more than 50 per cent but the final figure has yet to be agreed. Other shareholders would be current Merrett staff, JP Morgan, the US investment bank, and Marsh & McLennan Risk Capital Corporation, part of the Marsh & McLennan insurance broking group.
Mr Merrett said Merrett Holdings was working to ensure that the sale would represent a satisfactory transaction both for its shareholders and for the underwriting members for whom the group has acted as managing agent. 'We hope that the proposals will prove acceptable to Lloyd's, and in the meantime provide improved security for the employees of the underwriting division,' he said.
The rescue plan has been prompted by the exodus from the Merrett group's syndicates of 1,500 members, reducing its numbers to 3,500 next year. In the mid-1980s the organisation looked after the affairs of 10,000.
With the flight of its individual investors in the wake of huge losses and a loss of confidence by Lloyd's professionals, the Merrett organisation has had to seek a further pounds 200m of capital elsewhere in order to go forward next year with the same amount of financial resources of pounds 384m with which it carried out business this year.
The result of the move is the possible loss of control of the business, which Mr Merrett's father, Roy, founded in 1935. Financial and insurance interests in the US are now set to control what was once one of the largest underwriting operations in the Lloyd's community.Reuse content