Lloyd's scraps plans to buy out Names

The Lloyd's of London insurance market suffered a severe setback yesterday when its chairman, Sax Riley, admitted he had been forced to scrap plans to buy out wealthy individual investors.

The 300-year-old market, facing nearly £2bn of net losses from the World Trade Centre attacks on 11 September, had offered to pay off the 2,500 active Names if they agreed to give up unlimited liability, a practice that entitles them to large tax benefits.

Mr Riley has had to admit defeat after five months' talks, conceding that the two sides "were as wide as the Grand Canyon and were never going to meet". He now wants to allow any of the 2,400 names who do not want to become corporate members to buy shares or bonds in new companies and invest in the market without being members. A vote will be held in September.

Mr Riley told a conference of Names that while Lloyd's would still welcome private investors to the market, from the start of next year there should be no new Names with unlimited liability. "Although private capital is not the issue, we still hold to the view that the concept of unlimited liability is no longer viable in this era of ever increasing risk," he said.

Lloyd's corporate members, who provide 80 per cent of its capital but hold just a tiny fraction of the market's voting rights, complain that it is costly and complicated to do business at Lloyd's, which is consequently losing business to rival insurance centres such as Bermuda. This has confined its underwriting capacity to £12bn a year, compared with the £20bn analysts believe it could handle.

There are 13,000 Names, most of whom have stopped trading in the market but retain voting rights, and only 830 corporate members. "Many Names continue to underwrite at Lloyd's because they are trapped," said Christopher Stockwell, chairman of the Lloyd's Names Association.

Lloyd's has asked the Government to let Names carry forward tax losses if they convert to limited liability. The Lloyd's management believes that many Names will convert, particularly as a large proportion are in their sixties and older.