Names to vote 'blind' for rescue package

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The Independent Online

Financial Editor

Lloyd's Names are to vote at the end of November on whether they support plans to rescue the insurance market, but without an indication of how much this could cost them.

David Rowland, Lloyd's chairman, confirmed yesterday that the society has abandoned its earlier commitment to provide individual Names at the end of the month with an indication of the sum they must pay to end their liabilities for old loss-making policies. He is not sure now that there will an indicative statement, as Lloyd's fudged its recovery timetable saying it needs more time to sort out the highly complex calculations and negotiations.

But Mr Rowland said the goal will be met of setting up, by next spring, Equitas, a giant re-insurance company taking over all the old policies, enabling a new Lloyd's to trade profitably into the future. "We have seen nothing that leads us to be concerned about not meeting our deadline next spring. It would be foolish, if not morally wrong, to say that if it were not true,'' said Peter Middleton, chief executive.

Lloyd's also said its finances are in better shape than the forecasts contained in the reconstruction and renewal plan at its launch in May.

In a letter to members yesterday, Mr Rowland said Lloyd's still aims to seek authorisation for Equitas from the Department of Trade and Industry before the end of the year. A key part of the reconstruction plan is that Names will be able to buy final resolution to all their liabilities with this contribution to Equitas. In return all litigation against Lloyd's will cease.

To ease the pain for Names, the overall settlement package includes pounds 2.8bn of debt forgiveness and credits to reduce individual contributions. Lloyd's has been engaged in past months on complex computer calculations to establish the "finality premiums."

But instead of giving Names an indication during October of their Equitas premium, Lloyd's is now talking only of providing "a good flow of information." Negotiations with several of the parties that will influence the size of the Names' contributions are unresolved. In particular, Lloyd's is still battling with so-called personal stop-loss underwriters, who insured Names against losses. "This is the last piece of the jigsaw," said Mr Middleton.

Because most of the stop-loss insurance has been written at Lloyd's and so involves Names covering other Names, it means that when these policies are fed into the overall calculation, some Names will have their Equitas premiums reduced while others will pay more.

Lloyd's is also trying to agree with auditors, managing agents and brokers how much they are prepared to contribute to the overall settlement.

Mr Rowland conceded yesterday that the stop-loss talks are unlikely to be completed by the time Names are asked to voice their support for the rescue proposals next month.