Policy of Lloyd's syndicate 'was not sustainable': Survival depended on no catastrophes, admits Gooda Walker underwriter

Click to follow
DEREK WALKER, the senior underwriter of the collapsed Gooda Walker group, admitted in the High Court yesterday that the survival of his Lloyd's syndicate specialising in catastrophe insurance depended on no catastrophes occurring.

He said the underwriting policy of the syndicate had not been sustainable.

Giving evidence on the 16th day of the case brought by names on the Gooda Walker syndicates, Mr Walker was answering questions about the effect of Hurricane Hugo and other catastrophes on his syndicate 290.

Geoffrey Vos QC, counsel for the names, asked: 'Was your syndicate's business really dependent on there not being catastrophes?' Mr Walker said: 'Yes.'

Mr Vos continued: 'And when there are catastrophes the business is destroyed?' Mr Walker said this was correct. He added that it was the frequency of losses that made his underwriting policy unsustainable, with two British storms soon after Hugo struck the US and Caribbean in September 1989.

Mr Walker admitted that for up to a year after first Hugo and then the 1990 storm in Britain he expected the losses to be lower than the reinsurance he had bought to protect his syndicate. 'As it turned out the loss was greater than I expected.'

He was asked to leave the Gooda Walker group in 1991. He said: 'The basic position was that if I did not leave Lloyd's would close the group down.' Syndicate 290 ceased trading when he left.

Stan Andrews, the underwriter for Gooda Walker syndicate 298, also gave evidence yesterday. He made a statement apologising to names for the 'unimaginable' losses they had suffered.

Mr Andrews said: 'Underwriters are also names and indeed we have suffered losses . . . this is not a plea for sympathy. I merely wish to take this opportunity to express our sincere honest regrets to all names.' He said it was 'absolute nonsense' to suggest that such losses could have been foreseen.

Under cross-examination by Jonathan Gaisman, also acting for the names, Mr Andrews said he understood why they criticised his underwriting but the scale of losses had been unthinkable. 'We were proved wrong,' he said.

Syndicate 298's cumulative losses for the years 1989-91 had reached pounds 332.5m by the end of last year. Mr Walker's syndicate 290's losses stood at pounds 351.9m while its losses on Hurricane Hugo - total cost of which was about dollars 5bn - were pounds 241m at the prevailing exchange rate by the end of 1993.

The hearing continues today.