View from City Road: Lloyd's timetable looks optimistic

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The Independent Online
If Lloyd's is to be believed, queues of eminent companies are making earnest supplication to invest in a market that has produced the largest series of losses in modern commercial history - pounds 6bn or more over four trading accounts.

Corporate investment is being sought by Lloyd's to compensate for the disenchantment of the individual membership - the so-called 'names' - who are leaving in droves. From a peak of more than 30,000 members there are now barely 20,000. Because of the defection of members the ability of Lloyd's to write insurance business has shrunk from more than pounds 11bn to pounds 8.8bn.

Lloyd's capital-raising initiatives are being carried out against a difficult background. The Serious Fraud Office is conducting its first full-scale inquiry into a group of Lloyd's insurance syndicates facing more than pounds 900m losses. The SFO's findings could have a significant impact on custom and practice in the Lloyd's market, since the SFO may not share the same idea as Lloyd's about what is right and what is wrong.

A combination of dissident members facing financial ruin, countless legal campaigns and questions about the management of the market is not an ideal environment in which to frame a prospectus to raise new money, with the spectre of endless contingent liabilities.

Lloyd's argues that everything that went wrong in 1985 and before will be 'ring fenced' so that new corporate investors will not suffer loss from past history.

But what about the missing seven trading years of account - the horror shows that have run on from 1986 to the end of this year?

Then there is the tax situation for the new corporate investors. Lloyd's has not yet reached agreement with the Inland Revenue about the treatment of corporate entities participating in its market. To say that Lloyd's relations with the Revenue have been cool is an understatement and they show little sign of thawing in spite of the market's predicament.

Moreover, corporate members will expect more of a say in the form of a reasonable voting structure reflecting their size, which will annoy Lloyd's traditional membership, based on individuals. The London Stock Exchange saw similar tensions in the run-up to Big Bang and the restructuring of its own market in the mid-1980s.

Lloyd's hopes to admit corporate members at the beginning of next year. Despite the apparent interest of between 50 and 100 commercial interests that timetable looks unrealistic.

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