US court overturns injunction forced on Lloyd's

A US appeals court last night overturned an injunction granted by a judge last week that threatened the pounds 3.2bn rescue of the Lloyd's insurance market.

The ruling came as David Rowland, chairman of Lloyd's, said that acceptances of the rescue offer totalled 82 per cent last night compared with 75 per cent on Saturday, and the numbers in favour were still rising.

Mr Rowland said he was "encouraged by the steady flow of acceptances we have received since midday on Saturday. I am confident that the acceptance level will have increased again by the time our deadline is reached."

Last Friday, a court in Baltimore issued a temporary injunction ordering Lloyd's to give 2,700 US investors the option of an extra two months to review the settlement proposal and ordered Lloyd's to provide more detailed financial information in the form of a financial prospectus.

The court also said that American investors should have their cases tried in US courts and found evidence that Lloyd's was violating US securities laws in trying to sell the settlement.

Harvey Pitt, Lloyd's lead US attorney, complained in yesterday's appeal hearing that US District Judge Robert E Payne, of Richmond, Virginia, had overstepped his authority.

"The effect of what the judge did was to insert himself into the regulation of an international insurance market. If that order is allowed to stand, the plan cannot go forward... the reason is the banks will not put up the money."

His statement came as insurance regulators on both sides of the Atlantic hinted that they were prepared to give Lloyd's a breathing space if legal delays in the US prevented it pushing through the rescue plan this week. But as they prepared the ground for a possible delay, the appeal ruling appeared to haul Lloyd's back from the brink yet again and clear the way for the rescue to be approved by the market's ruling council tomorrow.

Lloyd's has imposed noon today as the deadline for members to accept the settlement offer and has said the timing is urgent because it must prove its solvency to the Department of Trade and Industry and US regulators over the next few days if it is to continue trading.

However, the DTI said the end-of-August deadline was a myth and did not appear in insurance legislation, which provides only that Lloyd's must prove its solvency on an annual basis. John Calagna, spokesman for the New York Insurance Department, Lloyd's lead regulator in the US, also said there was no fixed deadline for Lloyd's to prove its solvency to US regulators.

The widely assumed deadline of 1 September for approval of the rescue plan by the department was not a fixed date but was based on the timetable set by Lloyd's and the DTI.

The New York Insurance Department was prepared to go to court to take control of Lloyd's assets in the US. But any action would await the outcome of the Baltimore appeal and the deliberations of the DTI. Mr Calagna said seizure of assets had always been a possibility in the event of Lloyd's becoming insolvent.

Comment page 17