Names to accept Lloyd's rescue plan
A key group of investors in the Lloyd's of London insurance market - so-called Names - have signalled that they are ready to accept a rescue plan aimed at putting an end to its huge losses.
Lloyd's 'reconstruction and renewal' plan will face a crucial vote next Monday among the market's 34,000 Names in a bid to give 'finality' to an issue which has plagued the market since the beginning of the decade.
Lloyd's has offered the Names a GBP3.1 billion (about HK$37.3 billion) compensation package as part of a complex plan to make up for the worst of the Names' losses, racked up after an GBP8.9 billion loss hit the market between 1988 and 1992. It involves reinsuring old liabilities into a new company, called Equitas, and ending the bulk of litigation against the Lloyd's agents, who were responsible for placing the capacity.
Last week, the Association of Lloyd's Members said it had decided to recommend that its 9,000 members accept the settlement package offered to them.
The association's backing is vital because its membership makes up the bulk of the about 13,000 who are still actively underwriting business.
The market itself already looks like recovering. It is expecting underwriting capacity for the next year to be GBP10.17 billion, compared with GBP9.99 billion this year, and is on course to make GBP1 billion profit in 1993.
It is an important boost because the increased capacity means that the market will be able to underwrite more business in terms of premium income.
A successful vote on Monday is important to finally remove the stigma of the loss-making years.
More than 12,000 Names are taking legal action against their agents and can potentially block the reconstruction plan while their cases are decided by the court.
The plan intends to set up Equitas to reinsure outstanding liabilities.
In addition, a GBP150,000 cap on Names' losses is to be set.
Names that have fully paid existing losses will have liabilities of no more than GBP75,000, while those with no money left will be offered assistance to meet obligations.
The association said that it had 'concluded overwhelmingly that Lloyd's final settlement offer . . . is to be commended to Names'.
'The terms are substantially better than those offered in 1994 and the offer will secure many of the objectives and concessions that Names have sought . . . your committee sees no scope for further improvement,' it said in a letter to members.