View from City Road: Offer is just a redistribution of Lloyd's wealth

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After years of betting on high- risk - and ultimately loss- making - insurance syndicates, many Lloyd's of London members are to be offered some of their money back. The bulk of 21,000 underwriting members will receive less than pounds 100,000, while around 350 of the high rollers stand to receive between pounds 100,000 and pounds 1m.

Should they accept? The first thing to remember is that Lloyd's need not have made the offer. The deal has been proposed as an expedient measure to clear up past problems and public rows, which were threatening to spoil its image and marketability.

In making the offer, Lloyd's may have laid a new minefield for itself. For instance, in apportioning the money it has assessed the strength of individual claims made by the members for financial restitution in the wake of the losses. By Lloyd's own admission, many of the cases appear to be strong, although the documentation naturally omits any assessment of damages that might result from legal action.

The prospects of judicial success are one reason for the members turning down the present offer. Another is that there is no certainty that losses will not go beyond the present levels. Indeed, the trends are gloomy, with daily deterioration in trading reported within the market. Without a financial guarantee or 'cap' on losses, there is little incentive for members to take an average 30p- 40p in the pound payback on current losses.

Equally, members should recognise that they are largely financing their own offer. Up to half the pounds 900m comes from Lloyd's errors and omissions underwriters. Many members who would gain from the settlement have invested in errors and omissions syndicates. So money is merely being transferred from one pocket into another.

A further pounds 300m to pounds 400m of the offer comes from the central fund, into which all Lloyd's members pay a levy each year. That will be redistributed to the needy, including those who have paid into the fund. There is no 'new' money forming part of the settlement.

Redistribution of the members' wealth may be one way of solving immediate problems, but it seems likely that many aggrieved members will have other ideas and will fight on.