Time for Lloyd's to get tough over settlement

Lloyd's of London needs all the friends it can get. So it was with an audible murmur of surprise that the beleaguered establishment at Lime Street reacted to unexpected words of support for the insurance market's rescue plan from Chatset, the independent analysts. In the past, as Lloyd's condition turned from dire to disastrous, Chatset made its name for regularly laying bare, with figures and sharp analysis, the obfuscation, half-truths and downright lies behind which the insurance market sought increasingly to hide.

Now it has concluded that the rescue plan, and in particular the offer to names to put a final cap on all their old liabilities by re-insuring them in a special company, Equitas, is the best way forward.

The 34,000 names, most of whom have ceased trading in the market - but are still having to pay for their old liabilities as they roll in year after year - are being offered a stark choice. Find sufficient money now to pay one last bill, the premium to reinsure all the old policies into Equitas, and finally win peace of mind. Or take their chances with the uncertainty of bills that continue to roll in, as Lloyd's is forced to shut its doors to new business and just manages all its old liabilities.

Chatset's support for the former option as the cheapest way out for long- suffering names is something of a weathervane. It lends further credence to the view that a majority of names just want an end to the nightmare and will give their backing to a reasonable settlement deal. But Lloyd's still has to deliver that deal. The timetable continues to slip and negotiations with key market professionals meant to be contributing to the settlement drag on and on. Lloyd's should not just take comfort from Chatset's support, but also carefully heed the warning that it is high time to get seriously tough with the key market players. Their niggling over paying into the settlement pot has been the main reason for the hold ups. And yet it is they who stand to lose most if Lloyd's goes down.

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