Lloyd's of London

D. False Accounting

E. Unilateral Mistake/Non Est Factum/Recission

RITC in 1979

Lloyd's Act 1871 receives Royal Assent. In this Act, Parliament said that one of the objects of the Society of Lloyd's was "the advancement and protection of the interests of the Members of the Society"'. The Bye-law made under Lloyd's Acts 1871 to 1951 in relation to General Meetings states "Ordinary General Meetings shall be held twice in each year; in June, for the purpose of receiving the Report and examining the accounts of the Committee; and in November for election of Members of the Committee, as required by Lloyd's Acts 1871 to 1925, and for general purposes. Every other General Meeting shall be an Extraordinary General Meeting, and no Extraordinary General Meeting shall be held unless by a summons of the Committee or in consequence of a requisition in writing addressed to the Committee, signed by sixteen Members at least, and expressing the nature of the business intended to be brought forward.

Marine (Gambling Policies) Act 1906 receives Royal Assent. Section 1 of the Act states:-

Lloyd's permitted reinsurance to be placed "not in good faith" and contrary to the above Act i.e. "Tonner policies", where nobody involved had any bona fide interest in the safe arrival of ships. There was no genuine reinsurance, the object being to shunt profits from one syndicate to another or to an offshore identity.

Christopher Moran, the Lloyd's broker expelled by the Society, was the main broker of "tonners"; officially known as Tonner & Value Policies, tonners were a popular form of laying off risk in the late 1970's until they were banned by Lloyd's. They were a form of gambling, used especially by Aviation underwriters, who would take out a policy which would respond if, let us say, the number of total; losses for Western Airlines exceeded a certain figure. As there was no "interest" as such in the crashes, the policy would be stamped "Policy is Proof of Interests" (PPI).

H Montague Murray, a physician at Charing Cross Hospital, testified at an inquiry of a British Governmental Commission into occupational disability compensation that he had seen a man in 1898, very short of breath, who had worked in an asbestos factory. The man's lungs were badly scarred at autopsy. Murray considered that the workroom dust produced the scarring. Perhaps because the death was recorded in a governmental commission hearing, it did not arouse medical concern nor did other scattered references in the United States, Great Britain, Germany, Italy and France. It was not until 1924, when W E Cooke published a clear-cut case of a woman who had died with pulmonary fibrosis after working for 20 years in an asbestos textile factory, that attention was attracted to the disease potential of the dust. The Cook publication was in the British Medical Journal entitled "Fibrosis of the lungs due to the inhalation of asbestos dust" reference 11:147, 1924.

Lloyd's Act 1911 receives Royal Assent.

HMSO publication entitled "Report on the Effects of Asbestos Dust on the lungs and Dust Suppression in the Asbestos Industry: 1. Occurrence of Pulmonary Fibrosis and Other Pulmonary Affections in Asbestos Workers", written by E R A Merewether & C W Price, published.

Although the period between 1906 - 24 saw the publication of a number of reports documenting the association between asbestos and pulmonary disease, the seminal point occurred in 1930 when Dr. ERA Merewether and C W Price, respectively, medical and engineering inspectors of factories in Great Britain, presented a report to Parliament establishing the fact that "inhalation of asbestos dust over a period of years results in the development of a serious type of fibrosis in the lungs."

The Asbestos Industry Regulations, Statutory Instruments 1931, ( SR EO 1931), Reference No. 1140, enacted under the Factories Act. These Regulations had three drawbacks: they did not apply to all occupations carrying a risk of exposure to asbestos; they took no account of the mesothelioma and lung cancer hazards (which were then known); and they did not attempt to control any public health risks that might exist. To endeavour to rectify the first two drawbacks, new asbestos regulations were introduced under the Factories Act in 1969.

New safety regulations were introduced under the Asbestos Industry Regulations Instrument 1931 requiring the use of extractor fans in all factories where workers were exposed to asbestos dust on more than an "occasional" basis. But the regulations were often ignored or evaded. Mr Turner, the founder of the leading asbestos producer, Turner & Newall, wrote in 1932 to his co-founder, Mr Newall, saying: "I feel the definition of occasional is rather too strict. We must take a small risk by stretching the regulations for our own ends."

Twenty years later, Turner & Newall sought to suppress a study it had commissioned from Sir Richard Doll showing that asbestos workers were ten times more likely to contact lung cancer. It claimed that "the conclusions reached were not supported by medical evidence." Sir Richard Doll was so outraged that he published the study himself.

In January 1941, the American Insurance industry introduced the Comprehensive General Liability policy form (the "CGL"). This policy automatically covered all the liability exposures of the insured excepting Employer's Liability and initially, Automobile. The self proclaimed purpose of the policy was to provide complete protection to insureds in respect of their party liability exposures. The essential premise was that if a hazard was not specifically excluded it was included. There was until 1970 no restriction on pollution or contamination coverage contained in the CGL policy. Between 1970 and 1985, coverage was restricted to events that were sudden and accidental. From 1985 to date, pollution coverage has been excluded. In a prophetic statement E W Sawyer, the principal drafter of the policy was able to announce in 1941 that

Minimum Requirements for Safety and Industrial Health in Contract Shipyards issued by the U.S. Navy Department and the U.S. Maritime Commission. These requirements issued in 1943, contain guidelines requiring the use of certain protective equipment so as to minimise exposure to asbestos fibres.

Exchange Control Act 1947 receives Royal Assent.

Lloyd's Special Reserve Fund introduced by a socialist Chancellor, Sir Stafford Cripps.

The Companies Act of 1948 receives Royal Assent.

U.S. Federal Government publications: "A Statistical Summary of Shipbuilding under the U.S. Maritime Commission during World War 11, Historical reports of war administration, United States Maritime Commission No. 2 (1949) ", published by G L Fisher.

The Assurance Companies Rules 1950, Statute Instrument 1950 No. 533 issued by the Department of Trade.

Lloyd's Act 1951 receives Royal Assent.

"The premiums which we charge ... must do three things - they must cover the losses ... pay our expenses, and they must yield a profit. The truth is that last year and this, the business is operating with a serious underwriting loss ... Rates must be adequate to cover losses and expenses and yield a profit. Reinsurance is essential to the underwriting of risks which are limited in number and which are characterised by heavy loss potentialities".

He went on to state that the combined results of inflation on personal injury cases and of technological change had led to ruinous losses. In 1951, the combined losses of New York admitted companies had been $91.3m on a premium base of $2-5bn.

2. Into this void stepped Lloyd's and the Price Forbes umbrella policy. Price Forbes was assisted by their close relationship with Marsh & McLennan, the leading US broker. It is estimated that more than 50% of the available market was captured by Price Forbes, aided by the efforts of Marsh & McLennan. Other Lloyd's brokers naturally developed their own imitative wordings in order to compete principally Sedgwick Collins and Willis Faber.

3. By 1959, the American market place had become saturated by the Lloyd's-introduced umbrella products. Just how aggressive Lloyd's was in going after this high risk business can be gauged by the specific line slip facility for EBASCO, covering the Gas Industry, which Price Forbes brokered. Research indicates that virtually every US utility was part of this programme at some point of time during the 1950's. It is noteworthy that INA's share of this industry had been 85% prior to its 1952 withdrawal.

4. The relative narrow producer base of Price Forbes, Sedgwick Collins and Willis Faber, who between them accounted for most North American liability accounts, placed the business across the Lloyd's and London Company markets, thereby leading to a concentration in London of US legal liability risks.

From at least 1942 until the mid 1960's, virtually all of Marsh & McLennan's Lloyd's business was placed by Price Forbes. Price Forbes also had other major US producer brokers in this time period, including Thomas E Sears of Boston.

5. Not all Lloyd's Underwriters were happy to participate in what can only be termed a frenzy of underwriting unrestricted American liability risks during the 1950's. The Sir Matthew Drysdale Syndicate, which became the Harvey Bowring Syndicate, was one of Lloyd's leading underwriters of American risks in this period. The Underwriter, Len Durham, was reluctant to underwrite liability risks on an occurrence basis, largely in fear of gradual pollution claims. It is of interest that this was the first box worked on by R J Kiln.

6. Not all syndicates writing American liability risks were Non-Marine syndicates. Marine syndicates would take lines on Non-Marine placings. Marine Bumbershoots, a type of super umbrella policy, were sold to insureds, whose links with the marine Market might be based on no more than a barge. Aviation underwriters would also write what was in reality a Non-Marine account. They would define as acceptable as an aviation risk if a corporate aircraft was included or some aircraft products liability was present. It was only in 1970 that aviation underwriters took action to curtail their coverage for environmental liability with the imposition of AV 46A and AV 46B standard clauses that restricted pollution coverage.

7. During the 1930's, 1940's, 1950's, and well into the 1960's, General Liability coverage was written usually with only a limit per person and occurrence and without any limit to the number of occurrences in any one year. Some American insureds retained their unlimited coverage up to the 1980's.

8. Aggregation of Risks by Policy Year. The implications of this failure to control the aggregation of risk can not be overstated. It is entirely possible for an insured to have 100 waste sites, and therefore occurrences, in one policy year; thereby multiplying what may ostensibly be a $5m cover into a $500m cover.

9. Concentration of Losses into a Single Policy Year. Typically an American insured will have between $10m and $50m of unrestricted coverage available in the 1969 coverage year. This was generally the last year of non restricted pollution coverage for most insureds. By virtue of the prior year insurance and non-cumulation of liability clause, the 1969 coverage year will be susceptible to infinity, Many of these insureds will have multiple sites which will in turn multiply Underwriters' ultimate liability.

It is of note that up until the Wilcox scandal, at some time in the mid 1950's, a syndicate was under no obligation to make entries and settlements through LPSO unless a policy had actually been issued through LPSO. In other words, it was possible for a syndicate, if it did not issue a Lloyd's policy, to simply enter its transactions into its books. This practice was prohibited following the Wilcox scandal and from that time Lloyd's obliged syndicates to effect all transactions through LPSO, which involved the making of all relevant entries on LPSO cards.

Lloyd's Market Circular informing Underwriting Agents that Inter-Open Year Reinsurances, which had been effected by certain underwriters between different Open Years of Account of their syndicates, must cease.

Mendes & Mount report to Leslie Dew Re: Products Liability Insurance of Tobacco companies

With regard to your tobacco company inquiry, I have discussed this subject at great length with Mr. Mendes and other partners of this firm and I might say at the outset, Leslie, that we are virtually unanimous in our feelings that the recent publicity given to the possibility of causal relationship between cigarette smoking and cancer has not served to lessen the risk of liability to which these companies are exposed. In saying this I think I should emphasise that we are not attempting to evaluate whether this may or may not be a good underwriting risk but are rather simply suggesting to you that it might not be wise to place too much favourable weight upon the publicity element in arriving at your own underwriting judgement on this risk.

We do not mean to minimise the fact that the public has become more aware of the possible link-up between cigarette smoking and cancer. Reports by various, research scientists, such as those attached to universities, setting forth their statistical studies have been highly publicised in our newspapers and, generally speaking, these reports have tended to support the theory that a causal relationship does exist. However, it must be remembered that at the same time publicity has also been given to reports by other research organisations which have questioned the possibility of such relationship. I have particularly in mind reports of organisations whose research has been sponsored by the tobacco companies.

From a technical standpoint, the tobacco companies in order to attempt to take advantage of recent newspaper publicity would in the event of litigation probably have to plead as a matter of defence that the plaintiffs were guilty of contributory negligence or had assumed the risk of cancer. It does seem to me that before the tobacco companies reached this point they would be faced with a decision of major business policy and this would involve the question of whether or not such defence should be pleaded. This would arise because in advancing these defences the tobacco companies would in effect be saying to the plaintiff that ever assuming he contracted cancer from cigarette smoking, nevertheless he does not have a valid claim against the companies because either he was negligent himself or he assumed the risk. I can't see that many tobacco companies would prefer to avoid theme defences and would instead decide to base their principal defence on the theory of a lack of substantive proof of a causal relationship.

Even assuming that the tobacco companies were prepared to advance such defences, I can see cases where the nature of the claim on behalf of the plaintiff would be such that contributory negligence or assumption of risk would not offer a complete defence even if it could be established. I have in mind particularly causes of action based upon the following: (a) breach of an express warranty; (b) breach of an implied warranty; (c) deceit or misrepresentation. The causes of action listed in (a) and (c) would not seem to be important from your viewpoint since as I understand it you would intend to include in any policy an exclusion of any liability based upon advertising. While I do not know the exact exclusionary wording, you have in mind, I imagine it would be broad enough to eliminate causes of action based upon these two items.

However, a cause of action based upon a breach of an implied warranty might fall in a different category. As you know, what is involved here is not any actual statement or warranty by the manufacturer of a product out rather a warranty implied in law. I think you undoubtedly have had experience with the implied warranty that a product is fit for the use for which it is sold. I realise that generally speaking in this country the purchaser of a product is permitted to sue in law for breach of a warranty only the retail dealer who sold the item in question. Normally, if the purchaser desires to sue the manufacturer, it is necessary for him to proceed on the basis of negligence. However, our courts are gradually modifying this general rule and it is my thought that the cigarette type of case may be one in which a plaintiff will be permitted to plead against the tobacco companies a cause of action based upon breach of an express or implied warranty. After all, we are here dealing with a product packaged by the manufacturer and one which the retailer simply sells in the package as delivered to him. When we consider this, plus the very nature of the product itself, I am inclined to think that a number of our courts might consider the case analogous to the cases involving packaged food products where warranty causes of action have been recognised.

1. I assume that any policy which is here written would provide coverage for either claims made during the policy year or perhaps cancers discovered during that year. If this is the case, any policy which is written runs the risk of picking up claims of people who have been smoking 15 or 20 years and from this viewpoint there is involved a potential backlog of a substantial number of claims.
2. Insofar as these cancer claims are concerned, the economic life of a major industry in this country is at stake. The tobacco companies can leave nothing undone in defending themselves against these claims; and while the cost of defence will be substantial, there is no doubt but that the quality of the defence efforts will be as good as could be hoped for under any circumstances.
3. Some consideration must also be given to the possibility that further research might identify a cancer inducing element in cigarettes. I could not possibly venture an opinion on this since I know so little about it but it does occur to me as warranting some serious thought.
4. We hear much talk today in our advertising media of the "filter" cigarettes. I would have the impression that this is probably the principal area in which the tobacco companies would today be faced with claims based on advertising. There is no question but that they are much more careful in their advertising generally than they were a number of years ago; and while they attempt to exercise a considerable amount of care with regard to the new filter tip, I would think that there might be some danger in this area. However, from an underwriting standpoint I have in mind that if it were eventually established that a cancer inducing element was present in cigarettes, it might at the same time be proved that the filters which are in use today do not afford an adequate protection against this element.

Before closing, I think I should mention to you on another subject completely that we have had very favourable reports from the various Lloyd's connections throughout this country. I am happy to say that we find a much more optimistic atmosphere than a year or two back. Generally speaking, it would appear that the amount of business flowing to Lloyd's from this country is on the increase and it is rather expected that this will continue throughout this year. I think we can attribute this in good part to the rather disastrous underwriting results of our domestic companies for the year 1956 and we are hopeful that we will find some reflection of this position in the legislative and political arenas and that some of the substantial forces which have been aimed at Lloyd's will now be directed into other channels.

The Insurance Companies Act of 1958 receives Royal Assent.

In 1958, the Northern California Chapter of the American Society of Chartered Property and Casualty Underwriters (CPCU) published a paper in the Annals entitled "Improving the Comprehensive Liability Policy", among its authors was Edmund L Bartholomew, Manager of the Lloyd's Department, Swett & Crawford. The panel recommended that coverage be on as broad a basis as possible to fully protect the insured against acts of a lawful nature and resultant liabilities that could jeopardise the financial solvency of the insured

Ferrara -v. Galluchio, 5 N.Y .2d 16, 176 N.Y.S. 2d 996 High Court of the State of New York recognised cancerphobia is a viable cause of action. Medical malpractice action for mental anguish against physician who caused x-ray burns for which plaintiff was told she had to have tissue examined every six months as cancer might develop. Court determined that it was common knowledge among laymen and laywomen that wounds which do not heal over long periods of time frequently become cancerous, and therefore, plaintiff's cancerphobia was justified.

Pollution. His objection to the use of the term "accident" was based upon what he called the dangerous interpretation of that was being given by the American courts. He further commented that Liability Policies were frequently endorsed deeming "accident" to be read as "occurrence" The word "accident" was interpreted according to Andrew Drysdale in a 1960 NMA memorandum, dated 30 August 1960, not as a sudden visible definite happening, but merely as an unexpected occurrence

The 1st Pollution Clause ultimately adopted in 1961, NMA 1333, was rarely utilised by underwriters due to its non acceptance by brokers and insureds. It was not until 1970 that Lloyd's took concerted action to limit coverage for pollution related losses following the American insurance industry, which in 1970, introduced cover restricted to sudden and accidental events.

As concern grew about the safety of the asbestos worker, the Asbestos Producers, commissioned Dr Irving Selikoff's to enquire into the matter. The subsequent Report entitled: "The Occurrence of Asbestosis among Insulation Workers in the United States" published by Selikoff; Churg & Hammond warns of the potential dangers of asbestos. Recognition of the injurious effect of asbestos became more widespread thereafter as Dr Irving Selikoff, of the Mount Sinai Hospital in New York , linked the development of asbestosis, mesothelioma and lung cancer in asbestos workers to the inhalation of asbestos particles.

The Restatement (Second) of Torts, (1965) enacted in the USA introducing the concept of "Strict Liability". Section 402A reads: "Special Liability of the Seller of Product for Physical Harm to User or Consumer.

1. Strict Liability

In order to appreciate the case law development in the asbestosis arena, we must first consider the development of strict liability. It will be recalled that the case of MacPherson -v- Buick, was the first one to recognise a duty running from the manufacturer of a product to the ultimate user thereof, notwithstanding the absence of privity between the parties. Prior to that time an individual had no cause of action against the manufacturer where the injured party was not the immediate vendee. In the MacPherson case the N.Y. Court of Appeals, speaking through Judge Cardozo, held that when an object places life in peril because it is negligently made, a manufacturer is liable in negligence. MacPherson and its progeny quickly dispelled the concept that a manufacturer was insulated from liability in tort for violation of a duty to make a product reasonably fit and safe for use.

In MacPherson's day enforcement required a suit in negligence.

That contributory negligence continued as a viable defence was later recognised by the same court in the case of Velez -v- Craine & Lark Lumber Corp., where it was held that a plaintiff could be guilty of contributory negligence in failing to discover the defect, and also in failing to exercise reasonable care generally. These cases were decided prior to the adoption of Comparable Negligence in its pure form.

New York retained the "unreasonably dangerous" requirement when it adopted the "crashworthiness" doctrine in Bolm -v- Triumph Corp., in the following language:

(B) Clarence Borel -v- Fiberboard Paper Products Corp., et al

The use of asbestos reached a peak in Britain in the 1960's. In 1965, the worst year, some 180,000 tonnes of the stuff went into a wide variety of industrial applications, from insulation to roofing products. By 1980 the use of asbestos had dropped by more than half. In the 1990's, it is now used in only a few specialised products, such as gaskets in chemical works. But because of the length of time that elapses between exposure to asbestos dust and the development of the disease (often as much as 40 years), mortality rates are certain to go on rising for at least a generation.

Hurricane Betsy, resulted in the first overall loss for Lloyd's.

Janson Green was a subsidiary of Staplegreen Insurance Holdings Ltd, later to become the Hogg Robinson Group. Staplegreen also owned another underwriting agency, Gardner Mountain D'Ambrumenil & Rennie (Agencies) Ltd, later to become Gardner Mountain & Capel Cure Agencies Ltd. The directors of Staplegreen wished to keep Mr Cameron-Webb's services within their group, and they suggested he should underwrite for the Gardner Mountain syndicates 970 for the 1967 underwriting year, and that from the 1968 year he could underwrite for a syndicate managed by his own agency, provided he continued to underwrite for the Gardner Mountain syndicate 970. Mr Cameron-Webb agreed to this, and PCW was incorporated as his agency on 3 October 1968. From 1968, PCW acted as managing agent for Mr Cameron-Webb's new marine syndicate 810 and aviation syndicate 859, and for the Non-Marine Syndicate 918 for which Mr Anthony Oldworth was brought in as underwriter. PCW also acted as a members' agent.

The entire membership (17,800) of the Asbestos Workers Union. International Association of Heat and Frost Insulators and Asbestos Workers, AFL-CIO, CLC, in the United States and Canada was registered on 1 January 1967. Observation has been maintained since, with the assistance of the approximately 120 local unions. Whenever an insulation worker associated with the union dies, notification was given to the Environmental Sciences Laboratory, Department of Community Medicine, Mount Sinai School of Medicine of the city University of New York and the Department of Epidemiology and Statistics, American Cancer Society, New York

The Misrepresentation Act 1967 receives Royal Assent.

Following the recommendations of the Advisory Panel of the Senior Medical Inspector, a scheme for the periodic surveillance and long-term follow up of asbestos workers has been put into operation by the Department of Employment and Productivity in co-operation with Industry (Ministry of Labour) in 1967. This will be gradually extended to cover all groups potentially exposed, as they are identified. The records of this scheme will be linked with the environmental measurements recorded by the employers and the Industrial Hygiene Unit of the Department of Employment and Productivity.

HMSO publication entitled "Problems Arising from the use of Asbestos", published by UK Ministry of Labour.

Borel -v- Fibreboard Paper Products Corp., (Case No. 493 F.2d 1076 5th Cir. 1973) filed in Texas.

During November 1968, when, after learning other asbestos thermal insulation product suppliers were adding warning labels to their cartons, PCC caused a 5 inch x 3 inch notice to be printed in red on all cartons. The notice read as follows:

Also, beginning in 1968, PCC participated in the distribution of a National Insulation Manufacturers Association (NIMA) booklet, by mail and by hand, to distributors which described precautions to be observed when handling, applying, removing or ripping out asbestos thermal insulation products.

HMSO publication entitled "Annals of Occupational Hygiene 11,47", published by the British Occupational Hygiene Society Committee on Hygiene Standards.

A Register of mesotheliomas was started in the UK in 1962. Cases from the records of pathologists and the Cancer Registers have been accumulated with new reported cases. Over the years the incidence of confirmed cases has risen as follows:

When distributed geographically; the new cases nearly all come from places where past occupational exposure are known to have occurred. In 1968, the possibility that asbestos-associated disease might be an important problem in shipyard workers was suggested. P B Harries, in his 1968 publication "Asbestos hazards in naval dockyards", reported five cases of pleural mesothelioma among civilian employees of the Royal Navy Dockyard in Devonport. Although isolated cases of shipyard asbestos disease had previously been described, his information was disturbing in that none of the patients was an "asbestos worker". Rather, they were people in other trades (boilermakers, shipwrights, labourers, welders, etc.) who worked in shipyards together with asbestos workers but did not themselves often use asbestos. In the same year, Stumphius described similar findings at the Royal Schelde yard in the Netherlands. Again, the mesotheliomas were among workers other than those in the usual asbestos trades. By 1973, Harris had seen 55 cases of mesothelioma at Devonport, 2 in asbestos workers, 53 among men in other trades , and by 1979 the number had reached 115.

The Asbestos Regulations 1969, Statutory Instruments 1969, No. 690 enacted under the Factories Act. These extended coverage to many workers not covered by the older 1931 regulations, but they still reflected relative ignorance about the risks of mesothelioma, lung cancer and possibly other cancers. The UK was the first to introduce new and more exacting environmental standards for asbestos, following the recommendations of the British Occupational Hygiene Society in 1968, and also to develop codes of Practice, worked out by the Asbestos research Council in consultation with the Department of Employment and Productivity. Following the recommendations of the Advisory Panel of the Senior Medical Inspector, a scheme for the periodic surveillance and long-term follow up of asbestos workers was put into operation by the Department of Employment in co-operation with Industry (Ministry of Labour) in 1967. This was gradually extended to cover all groups potentially exposed, as they were identified. The records of this scheme were linked with the environmental measurements recorded by the employers and the Industrial Hygiene Unit of the Department of Employment and Productivity

The Committee of Lloyd's authorised the use of roll-over policies for the first time in 1969. One of the conditions imposed was that the auditors' agreement needed to be obtained to the arrangements. In 1968, Charlie Skey visited America and learnt first-hand about the future asbestos-related problems in store for the insurance industry. Upon his return, there was an informal meeting with the Non-Marine Association (NMA) and with the Committee of Lloyd's. It was decided that Lloyd's had to build up its reserves in any possible manner; hence, the offshore rollovers.

Hamilton Reinsurance Co., incorporated in Bermuda, as a subsidiary of Bermuda Fire & Marine Insurance Co Ltd (BF&M). This involved a joint venture between BF&M and Bellew, Parry & Raven, the purpose being to provide funding policies as a service to Lloyd's syndicates and Insurance Companies.. Accrued interest earned on syndicates' offshore rollovers was split many ways. The first rollover placed by Mr C H A Skey for the R A Edwards Non-Marine Syndicate 219 through Mr Raven was in 1969 with Hamilton Re in respect of the 1967, 1968 and 1969 years of account. Mr Skey continued to place rollovers with Hamilton Re until the 1985 year of account. For the 1969 to 1970 years of account, no interest was credited to the Syndicate. From 1971 until March 1974, one third of the interest of the interest earned by Hamilton Re on the excess of the roll-over fund over $1.5m was credited to the Syndicate. The figure of U.S. $1.5m has been referred to as "the threshold". From March 1974 until July 1982, 50% of the interest was credited to the Syndicate, subject to two variations in 1977 and 1981 which resulted in the Syndicate obtaining a somewhat higher credit of interest. From July 1982 until 1984, 75% of the interest was credited to the Syndicate. The Syndicate's entitlement to interest was dealt with in these ways:-

Montagu Trust formed, as a company within the same group as Lloyd's broker, Bland Welch, a Bermudan company, Montagu Insurance and Reinsurance Co Ltd ("MIRCO"). The purpose of forming MIRCO was to provide funding policies as a service to Lloyd's Syndicates and Insurance Companies. In providing this service , MIRCO was not running any risk of having to pay out more than the premiums received plus a share of interest earned on the premiums as invested by Mirco. Mirco was not at risk in the sense of any insurance risk, as would be a reinsurer under an ordinary reinsurance policy. Mirco incurred little expense of administration and was able to set its margin of profit at a low level.

The following table gives interest rates applicable to certain MIRCO "funding policies"

The average Eurodollar rates in the years 1976 to 1982 were:-

At the beginning of the 1970's, interest rates were substantially lower than in later years and, interest was rarely added to "rollover funds". The position had changed by 1975 and an entitlement of syndicate and Names to at least 50% of the accrued interest on "rollover funds" for syndicates and Names Personal Stop Loss was normal in the Market. In 1978 and 1979, this entitlement increased to 75% and from 1 January 1980 an entitlement to 80% was within the range of acceptable market terms.

The Cromer Report is submitted to the Committee of Lloyd's. The Working Party, chaired by Lord Cromer (a former Governor of the Bank of England), met on 45 occasions, received 160 written submissions and invited 50 individuals to appear in person before the Working Party. In view of the importance of the United States market, Lord Cromer had talks with a number of U.S. brokers and others in New York: and the Working Party in the course of the enquiry heard in London some evidence from the United States. The Working Party was greatly assisted by the help they received in these ways. Lord Cromer was an international advisor to Marsh McLennan Companies New York.

Lloyd's Log: Lloyd's in the 70's - R J Kiln speaking at the IIL

Mr. Kiln described the present time as a critical and intriguing one for Lloyd's and probably one of the most decisive in its history. Reviewing some of its major problems, he said that Lloyd's had suffered along with the rest of the world in having an unprofitable business in recent years; but during the last two to three years, an enormous amount of work had been done, particularly on the non-marine, marine and aviation accounts and the result of this work was beginning to be felt.

For the first time in memory, Lloyd's growth was dependent not on the inflow of business but on the capital and number of names available to underwrite it. On this question of capacity, Mr. Kiln said that Lloyd's had now been opened to foreign nationals and to women. Existing names had been allowed to use their accumulated reserves to write larger premium limits, and had been encouraged to put up extra reserves to increase their limits.

The Committee had also increased the amount of permitted outward reinsurance allowed to a syndicate. In recent years, the actual premium income limit had been increased primarily to take care of devaluation.

Describing himself as a "realistic optimist", Mr. Kiln predicted that by the mid-1970s the premium income of Lloyd's would not be less than £1,000 million net and by the end of the decade could be nearer £2,000 million.

As to results, he thought the 1968 and 1969 underwriting years for marine and non-marine and aviation would be profitable. He anticipated good profits, if not a boom, in the early 70's and a decline in profits around 1975. During the next five years, he expected that the average Lloyd's name would receive an underwriting profit of not less than £5,000 per annum with something like £1,000 of capital appreciation per annum.

He said investments and the use of money had been largely ignored by Lloyd's syndicates in the past. This was not a bad thing because they had concentrated on the underwriting and many insurance companies would be better to-day if they had given underwriting the same prestige as investments.

In the years ahead, thought Mr. Kiln, the image of Lloyd's as a rich man's club would have to go. Lloyd's should allow in a man whose assets totalled, say, £25,000 and had an income of £5,000 and to allow him to become a member for a deposit of around £5,000; and to permit him to write a smaller premium limit related to his assets. He could then take a larger share gradually as he became established. The young executive, the professional men were what Lloyd's wanted.

Furthermore, Lloyd's might allow existing syndicates to form limited liability syndicates to run pari passu with the existing unlimited syndicates and writing and subscribing to a Lloyd's limited policy. As a preliminary and additional move, Lloyd's should make the best use of available members by doing away with non-marine as a single class and replacing it with three separate classes -property, liability and personal accident - each with their own premium limit.

Stressing that the security of a Lloyd's policy bad never been challenged he said it was vital that whatever changes were made in the structure of Lloyd's the security of a Lloyd's policy remained paramount.

Up to now, the administration of Lloyd's had been done by an unpaid part-time Committee of 16 members, supported by a full-time staff. This was not to say that the job of a Chairman and Deputy-Chairmen was not pretty well full-time. This was perfectly practical when Lloyd's was a comparatively small place and the function of the Committee was to act mainly in an advisory capacity. During the last decade, however, it has had to take on an increasing amount of administrative work and the time was coming when it was no longer possible for this administration to be effectively controlled and directed without full-time professional people at top level. Therefore, he thought in the early 70s they would see either a professional chairman or deputy chairmen of Lloyd's or a professional executive chairman plus a number of full-time professionals on the Committee of Lloyd's itself. This, he thought, would achieve better people on the Committee, be an incentive to Lloyd's staff and achieve greater efficiency, although the Committee would always have to continue with its function of advice and help to the market.

Mr. Kiln did not see the Lloyd's system being supplanted because of its great advantage in having a concentrated market and the advantages of centralised administration which a company could only get by merging with others. He could foresee the market expanding - a new building was needed now, as well as new offices.

Mr. Kiln said that a large divergent market of individual firms under one roof produced versatility and capacity. There was probably more entrepreneur underwriting ability in Lloyd's than in the rest of the world put together. Insurance companies did not realise the enormous advantage that Lloyd's underwriters had of being close together in one building, and the large-scale interchange of ideas and information, which took place often over coffee or on the stairs.

Lloyd's however, badly needed more forward planning at Committee level, or a study group to make predictions for the requirements of five or even twenty years ahead. There had been in the past a tendency to stumble from crisis to crisis because no-one at Committee level had either the means or the continuity of service to see ahead for a sufficiently long period. The 70's ought to see the Committee re-organise itself on a professional basis to include a number of full-time members each given wide powers over specific and limited fields of the Lloyd's administration. At least one member should be responsible for future planning and nothing else.

"I see absolutely no reason why we should not set up in London a Lloyd's market consisting of both limited and unlimited names, drawing upon the capital of the world to finance insurance and reinsurance business of the world. Only our own lack of foresight can hold us back".

The 2nd Pollution Exclusion Clauses issued under the auspices of Lloyd's Underwriters' Non-Marine Association (LUNMA) which defined "Seepage and Pollution", under NMA clauses 1683, 1684, 1685 and 1686, and excluded coverage for pollution unless the pollution was "sudden, unintended and unexpected". The American Courts have said that Insurers often strung together terms with similar or redundant meanings when drafting phrases in insurance policies. The courts concluded that replacing the terms "accidental" with the terms "unintended and unexpected" did not conclusively demonstrate that "sudden" had a definite meaning other than "unintended and unexpected". Finding the phrase "sudden, unintended and unexpected" to be ambiguous, the court held that the phrase did not absolutely preclude coverage for gradual pollution. The court's interpretation of the Lloyd's Pollution Exclusion Clause is astonishing. In effect, the court has read the term "sudden" out of the pollution exclusion 70.

U.S. Congress: Environmental Protection Agency (EPA)

On President Nixon's recommendation, established the Environmental Protection Agency (EPA). The EPA was established to analyse the pollution problem, control all types of pollution, prepare proposals for handling, and to enforce various federal environmental statutes. The most important of these statutes are the 1976 Resource Conservations and Recovery Act (RCRA) and the 1980 Comprehensive Environmental Response Compensation and Liability Act (CERCLA), also known popularly as Superfund.

Lloyd's Log: The Cromer Report on Lloyd's

The Cromer Working Party has made recommendations which, when fully implemented, could lead to Lloyd's increasing its capacity by a further £100,000,000 of premium income. It further recommends that the means test for membership should be simplified and that unlimited liability should be retained.

The Working Party examined Lloyd's capital structure and found that Lloyd's reserves, i.e., deposits and premium trust fund deposits, were more than adequate when compared with those required of an insurance company, and from this followed recommendations designed to make better use of Lloyd's existing capital. Some of the main conclusions are as follows

The Lloyd's deposit and the Premiums Trust Fund deposit hitherto held in trust by the Committee of Lloyd's and Underwriting Agencies respectively, should be amalgamated and held on behalf of members by the Committee of Lloyd's. A simplification in the calculation of premium limits was recommended which would lead to a substantial increase in future capacity. These suggestions will be implemented by the Committee of Lloyd's.

To quote an example in respect of an unconnected name writing two accounts, the total deposit required at present amounts to £15,000 which entitles a member to write up to £72,000 premium income annually. Lord Cromer's proposals, which will come into effect from next year, will raise this limit to £100,000. Another radical proposal is that appreciation of deposits will be allowed to count towards increased premium limits.

The Working Party recommended that in future the means test should be simplified to a figure of £50,000 for unconnected names and £75,000 for foreign names, and that future members should be required to maintain their means at these figures. They also recommended that unlimited liability should be retained. The Committee of Lloyd's has accepted these recommendations.

In examining considerations affecting unlimited liability, the Working Party said, "No one has suggested that, under limited liability, a member should be left on his own and that default on a Lloyd's Policy would be regarded as a possibility, however remote. If this is so, there must be an unlimited liability somewhere and in practice that could only be placed on the shoulders of the members of Lloyd's as a whole. The more that the individual name is relieved of his unlimited liability, the more it must fall on his fellow names. Of course deposits can be increased and reserve funds built up, but if Lloyd's remain determined to ensure that all Lloyd's policies are honoured, then the limited liability of the name must mean that other names will have to come to his assistance before he has exhausted his private means. If default happened only in isolated cases, this might not be a serious burden on the general body of names-but, if the whole of a market becomes unprofitable or the less efficient syndicates lose money throughout the markets, it is not obvious that the remainder of the names would be willing to pay out what might be substantial sums.

Organisation of the Lloyd's Market The present demarcation between markets should be eased to enable more use to be made of spare capacity in one market for risks normally placed in another market. The Committee of Lloyd's agrees with the need to avoid rigidity and these proposals are to be discussed in detail with the Underwriting Associations.

The outside members of the Working Party said "we are greatly impressed by the way in which the Committee of Lloyd's and the staff of Lloyd's have grappled with the difficult conditions of recent years."

However, after discussing the advantages and disadvantages of a full time Chairman of Lloyd's or of outside Committee members, the Working Party recommended continuing the present-day system of a Committee drawn from members working in the market.

In total, the recommendations already accepted by the Committee should lead to a substantial increase in the capacity of the market without imperilling its integrity; to a greater flexibility of operation in some areas; and a modernisation of the relationship between names and Agencies.

Sir Alexander Johnston has subsequently, at the invitation of the Committee of Lloyd's, joined the Corporation as a Consultant and Adviser in particular on the working out of the Cromer Report recommendations.

The Working Party met 45 times, received 160 written submissions and heard evidence from 50 individuals. The Chairman of Lloyd's, Mr Henry S. Mance, has received the Report, which has been considered by the Committee. On some recommendations decisions have been taken: others are under scrutiny or need further investigation before final decisions are made.

The Report continues by pointing out that, while Lloyd's represents only one of the world's insurance markets, its influence in relation to particular types of insurance, notably marine, aviation and various forms of reinsurance, is great and sometimes of crucial importance.

In competition with the insurance companies, Lloyd's has had the advantage of a simple and adaptable organisation. Over the years this resulted in greater flexibility in underwriting, a willingness to pioneer new forms of insurance cover, and an ability to compete effectively because of lower costs.

This independence and versatility can be preserved, says the Report, and the advantages of co-operation within a market secured, if there is a clear understanding that, in certain matters, there must be uniformity of working such as in matters of claims procedure and documentation. This independence of mind, which is essential, must not spill over into matters where resistance to uniformity becomes mere obstinacy.

Posing the question, "What place should Lloyd's try to occupy in the insurance world?", the Report suggests an answer. Although a small select spread of risks may seem safe, in the long run Lloyd's will lose if the insured or their agents believe that Lloyd's has not the capacity or the will to underwrite large-scale risks or that the rates are too high. The capacity of the market and the profitability of the Members are inextricably bound up together. Steps should be taken to increase the capacity of Lloyd's and to attract business that may be by-passing Lloyd's.

Underwriting must become profitable again. Lloyd's relies on underwriting for profitability to a greater extent than the companies, which have large income-yielding investments. Success at Lloyd's depends on the skill of underwriters.

The Working Party estimates that the world insurance market is expanding at the rate of 10% per annum. To maintain its share of the market Lloyd's needs a steadily increasing amount of capital. The Working Party considered that Lloyd's reserves are adequate on the statutory standards applicable to companies. If fluctuations in profitability are to be met by greater reliance on reserves, then these reserves will need to be increased.

The Working Party considered there should be some easement of the conditions governing the use of the Special Reserve Fund, or there should be another form of Reserve Fund accumulated and used under easier conditions. The Working Party also considered that there is an obvious need for a fund to deal with catastrophes that arise at irregular and unforeseen intervals.

The Working Party proposed that the means test for membership should be simplified. It suggested that the various tests for unconnected non-commercial Names, commercial Names and the relatives of Lloyd's Names should be replaced by a simple test of one minimum for all. The figure should be £50,000 instead of the present figure of £75,000 for unconnected non-commercial Names. The Working Party did not favour special concessions for so-called commercial Names, or a separate test relating only to income. Lloyd's men could as at present be admitted without a show of means. Where a Lloyd's man is allowed to write larger amounts because of his means, the means would be at least £25,000. A foreign Name might be required to show means of £75,000 instead of the present £100,000. The means test should not be just a show of wealth at election, but should be a continuing requirement for Membership. These proposals have been accepted by the Committee of Lloyd's.

The Working Party considered that unlimited liability should remain a Lloyd's principle. As Lloyd's remains determined to ensure that all Lloyd's policies are honoured, then the limited liability of a Name would mean that other Names would have to come to his assistance before he had exhausted his private means. There must be an unlimited liability somewhere and in present circumstances the Working Party favoured the retention of the present arrangements.

The Working Party considered various proposals that Members should adopt the device of one-man companies, partnerships with limited liability, the incorporation of syndicates, a plan to contribute to a common fund which could be drawn on to avoid recourse to private means, or one whereby Members would be protected by stop loss reinsurance against the consequences of unlimited liability. But the Working Party found that there were practical or taxation objections to all of these.

The Working Party suggested that companies (subject to certain exceptions) should be eligible to become Members of syndicates, as a limited company can undertake unlimited liability and it can be liable to the last penny of its possessions, though not to the last penny of its shareholders' possessions. Initially, the Report suggested, this type of Membership should be limited to U.K. companies with a minimum paid-up capital of £1 million, and should exclude brokers, insurance companies and companies specially formed for the purpose of underwriting; no company element in any one syndicate should exceed 10%.

The Working Party received many complaints that the existing premium limits imposed a serious barrier to the growth of business at Lloyd's. Limits of some kind have to be retained in order to ensure a solvency margin. However, the Committee of Lloyd's has accepted a simplification in the calculation of premium limits based on a fuller use of Members' resources and leading to a substantial increase in future capacity which the Report proposed. This is linked with the combination of the Lloyd's deposit and the Premiums Trust Fund deposit. In the case of new Names the scheme would operate as follows: the first £5,000 of the new combined deposit would be ignored in fixing premium limits. Premium limits would be related to the rest of the combined deposit by a simple proportion. Unconnected Names-commercial and non-commercial-and Lloyd's men subject to means test could write up to ten times the amount of their premium income deposit. Lloyd's men not subject to means test could write up to five times the amount of their deposits. As in the past, there would be special rules for overseas Names.

While some of these proposals will need further examination, a substantial potential increase in capacity will result from the proposals on premium limits. But the Committee of Lloyd's has also agreed that there should be a change in the concession on outward reinsurance in the calculation of premium limits. At present there are varying percentages for differing forms of reinsurance. In future, up to 33 1/3% will be deductible in outward reinsurance or retrocession when calculating premium limits.

If all Names were to agree to take advantage of the concessions recommended by the Working Party and were to instruct their Agents accordingly, this would eventually result in Lloyd's underwriters being able to increase their capacity by a further £100,000,000 of premium income.

The Working Party argued that, in view of the high reputation which Lloyd's enjoys, particularly in the United States, and the amount of insurance business it brings to this country, there is a strong case for a liberal attitude being adopted in the application of the tax code to Lloyd's and its Members. The Working Party hoped that the Government will have regard to the importance of Lloyd's as a national asset in considering tax proposals relating to Lloyd's. The unusual character of the organisation of business at Lloyd's is itself a ground for special treatment.

The Working Party have made a number of detailed recommendations on tax matters, which will have to be discussed with the Inland Revenue. One of these proposals was that the syndicate should be the taxable unit for income tax on syndicate funds and if the Revenue agreed, this might be developed in ways that would facilitate the building up of reserves.

The Working Party made a number of recommendations on the organisation of Lloyd's markets. They considered that there was too sharp a delineation between the marine, non-marine and aviation and motor markets. This could mean that one market was rejecting business because of lack of capacity, when another market had spare capacity. They proposed that if a broker had covered 80% of a risk in the market to which it belonged, he should be free to cover the remaining 20% in another market. They also proposed that, to meet the problem of package deals, the non-marine market, and possibly the aviation market, should be allowed to write a small amount of "incidental marine", corresponding to the incidental non-marine which can be written in the marine market. The Committee of Lloyd's agrees with the need to avoid rigidity, and these proposals are to be discussed in detail with the Underwriting Associations.

The Working Party described the organisation of Lloyd's syndicates and the relationship of underwriting agencies with their Names on the one hand, the underwriters on the other, and the Committee of Lloyd's as a third party, as ‘‘unique''... presumably unique even for Lloyd's. In the old days the underwriter was himself the agent for his Names, but the growing burden and problems of administration, taxation and the complexities of communication, led gradually to the establishment of the present Agency system, under which most Underwriting Agencies are run by companies, and some in association with brokerage houses. The Working Party examined the duties of the Agent, his relations with his Names, his remuneration, and the extent of the control of agencies by brokers, and made a number of recommendations. A Sub-Committee, under the chairmanship of Mr. Paul Dixey (a member of the Committee of Lloyd's and a former Deputy Chairman) is already examining the whole problem. One result is likely to be an addition to Lloyd's bye-laws to bring the Agency system more specifically within the Committee of Lloyd's jurisdiction.

On another aspect of organisation, the Working Party came out strongly in favour of ultimate responsibility resting, as at present, with a Committee drawn from Members working in the market. They rejected proposals for a full-time chairman or deputy-chairman drawn from outside. He would lack experience of the market and day-to-day contacts. Answering suggestions that outsiders should be appointed to the Committee, the Working Party commented that outside expertise can be had by consulting the right people who need not necessarily be members of the Committee.

The Midland Re acted as a fronting company and retroceded 95% of the Brooks & Dooley Syndicates' reinsurances to the Fidentia, both in the process of being incorporated.

The Midland Reinsurance Co formed in Bermuda on behalf of Bellew, Parry & Raven. This involved Conyers, Dill & Pearman, Bermudan Attorneys. The Midland Re wrote re-insurance or co-insurance of the BPR managed syndicates and was in turn reinsured by Lloyd's syndicates.

The Fidentia Marine Insurance Co formed in Bermuda on behalf of Brooks & Dooley. This involved Conyers, Dill & Pearman, Bermudan Attorneys. When Mr Brooks first placed Fidentia's management in the hands of BF&M Management Ltd, the accounts of BF&M showed net assets of £721,000 (BD$1,724,202), excluding the life fund. The net retained premiums for the year amounted to £916,000 (BD$2,190,238) of which £4,388,000 related to the Overseas Reinsurance Department. Losses from overseas reinsurance amounted to £232,000 (BD$553,515) in 1970 and were approximately £200,000 in 1969. These losses were material to the company as a whole, preventing the payment of the final dividend and possibly influencing the decision to restate property at valuation rather than depreciated cost, thereby adding £164,000 to reserves. Total losses for the year were £180,000 (BD$431,178) The Department of Trade and reinsurers would not view the life fund as part of the company for strength and solvency purposes since this is purely for the benefit of life. The BF&M Chairman's statement to the 1970 accounts comments on the adverse underwriting position of the international reinsurance account which apparently commenced in the latter part of 1964. The additional provisions made in 1970 were based on an independent appraisal of outstanding and unreported claims by a London firm of Chartered Accountants. The statement also indicates that the company is using a new agency, C R Driver & Co, to write business on their behalf. The Lloyd's appointed Committee of Enquiry into the Fidentia concluded that BF&M did not directly control their reinsurance underwriting , but used London agents writing on their behalf. (C R Driver & Co, Henry Weavers & Co. etc. are all involved in London United Investments).

A notice was pinned to the board in the underwriting room stating starkly: "As from Jan 1, 1971, in accordance with the directions of the Committee of Lloyd's, Mr Ian Richard Posgate will cease to act as an Underwriting agent at Lloyd's and will cease to be a shareholder in or a Director of any company or a partner in any firm acting as an Underwriting Agents at Lloyd's.

I R Posgate is "posted" by Lloyd's following Baker Sutton's investigation into Syndicate 128/129. The series of events which resulted in Posgate joining the Howden Group began in May 1980. Concern was expressed to the Chairman of Lloyd's (then Sir Henry Mance) that Posgate that had been overwriting his premium income limits (writing a premium income larger than permitted by Lloyd's) in the preceding three years and that, for a variety of reasons, the premium figures had not been correctly reported in the annual returns. As a result of initial discussions with the Committee of Lloyd's, Baker Sutton & Co. (who later merged with Ernst & Whinney), were instructed to investigate the syndicate's books and to make a full report. Baker Sutton's investigations revealed a number of irregularities which included not only overwriting and incorrect reporting of premium income (largely as a result of inadequate book-keeping), but also undisclosed reinsurances with a connected company in Bermuda which was controlled by Posgate, in effect as trustee for the Names participating in his syndicate. The company was in fact nothing more than a vehicle for holding funds which were an early version of rollover funds.

Karjala -v- Johns-Manville Products Corp. (Case No. 523 F.2d 155 8th Cir. 1975), filed in the U.S. Court.

Lloyd's Circular:

The Chairman of Lloyd's sent out a circular letter to all active underwriters, underwriting agents and Lloyd's panel auditors stating that:- "No reinsurance may be effected with Companies of which the majority of the Voting Shares is owned by the Syndicate Placing the reinsurance."

Bellew, Parry & Raven Ltd also arranged rollovers with Hamilton Re for Mr D J Walker's Syndicate 295 from 1971 in respect of years of account from 1969. These continued for several years, with interest being credited at a materially lower rate than on Mr Skey's rollovers (the fund was smaller than Mr Skey's). (Presumably, the U.S. $1-5m threshold applied before a percentage of interest was credited to the Syndicate).

A World in Action programme entitled "The Dust at Acre Mill" broadcast by Granada Television. This concerned Hebden Bridge in Yorkshire and led to a furore in the press and helped to bring about public awareness to the asbestos problem. Another television broadcast in the early 1970's concerned the Ferodo factory, near Buxton in Derbyshire, where asbestos was used to make brake linings.

Occupational asbestos exposures were first regulated in the United States by the U.S. National Institute for Occupational Safety and Health Administration (NIOSHA) in 1971.

In 1971, the Department of Health and Social Security's Standing Medical Advisory Committee, chaired by Sir Richard Doll, prepared a report on the health risks from asbestos. This report recommended that the use of different types of asbestos in this country, the extent to which the public is exposed to asbestos dust and the hazard associated with this exposure should be reviewed in five years time from the introduction of the 1969 Asbestos Regulations under the Factories Act.

A Paper entitled "Late effects of Indirect Occupational Exposure to Asbestos in U.S. Shipyards in World War 11: Population at Risk" presented by I L Selikoff, H Heimann and E C Hammond at the International Symposium on Safety and Health in Shipbuilding and Ship Repairing held in Helsinki on 30 August 1971.

The National Research Council, in a report prepared for the Environmental Agency (EPA), asked for tight controls to keep asbestos dust out of the atmosphere. The report said since it was unknown how much asbestos dust could be inhaled without health damage, it would be "highly imprudent to permit additional contamination of the public environment." Inhalation of the dust by asbestos workers had been linked to lung disease and cancer. The Council cited among sources of atmospheric asbestos pollution spray fire-proofing of buildings and dust from demolition of buildings with asbestos used for insulation and wallboard.

The Environmental Protection Agency (EPA) proposed new curbs on industrial atmospheric emission of asbestos, mercury and beryllium. No specific standard was set for the emission of asbestos into the air, but the rules would require the use of filters to clean gases during mining and manufacturing of asbestos products such as floor tiles, brake linings, paper and textiles. Spraying of buildings with asbestos for fireproofing and insulation would be banned, except for indoor spraying, where air treatment would then be required.

The U.S. Department of Labor's Occupational Safety and Health Administration (NIOSHA) ordered a reduction in the maximum asbestos exposure levels for manufacturing and construction workers from 13 to 5 fibres per millilitre. The maximum standard was set of an average of 5 fibres per cubic centimetre (c.c.) of air over an eight-hour period. This was the Department's first use of its emergency powers under the Occupational Safety and Health Act. The reduction came five days after publication in the New England journal of Medicine of a report that 38% of a group of pipe coverers exposed to "safe" levels of asbestos over long periods showed evidence of lung scarring.

A Paper entitled "Significance and Description of Exposure in the Fabrication, Installation and Removal of Asbestos Material in United States Navy Shipyards, in Safety and Health in Shipbuilding and Ship Repairing", published by G M Lawson, S H Barboo and E J Sulivan in the Occupational Safety and Health Series (International Labor Office, Geneva 1972).

The U.S. Department of Labor's Occupational Safety and Health Administration (NIOSHA) set new standards for asbestos exposure levels in plants but delayed their implementation for four years. The standard of an average of 5 fibres per cubic centimetre (c.c.) of air over an eight-hour period set in December 1971 would remain. But beginning 7 July 1972, no concentration of 10 fibres per c.c. would be permitted at any one time. Starting 1 July 1976, the average standard would be reduced to 2 fibres per c.c.

The new regulations set by The U.S. Department of Labor's Occupational Safety and Health Administration (NIOSHA) were criticised by Dr Irving Selikoff of Mount Sinai Hospital in New York, who predicted that thousands of workers would continue to die of asbestos-related diseases including bronchial cancer, under the new standards of safety.

Midland Company, Hamilton Company, and Western Brokers (I.o.M.) Ltd formed in the Isle of Man on behalf of Bellew Parry & Raven. B P & R Management (Isle of Man) Ltd formed as a management company to manage Midland , Hamilton and Western. 80% of its shares were held by Bellew, Parry & Raven (Overseas) Ltd. No accrued interest was credited to the syndicate rollovers placed in the Isle of Man on behalf of the Stratton Syndicates 782, 718 and the Couture Yachtsman Syndicates 689 and 691.

Chester Insurance incorporated in Bermuda. Disclosed in the 1980's as being part of the BPR group of companies.

The Environmental Protection Agency (EPA) issued new rules limiting industrial omissions of asbestos, mercury and beryllium. The rules would bar visible omissions of asbestos in asbestos mills and in plants using the substance, including textile and construction materials factories, unless air cleaning devices were used, and would bar the use of asbestos mine tailings for road surfacing. The EPA estimated that the asbestos regulations would add $45m annually, or 8%, to building demolition costs.

At some date in 1973, when Hamilton Co was not yet in business, rollovers for syndicate 718 and 782 for the 1972 and 1973 and for subsequent years of account were placed with the Midland Re in Bermuda, with the intention that it would be fronting for Hamilton Co, once that company was operational. On 1 May 1973, Mr Parry wrote a long letter to Barclays Trust (I.o.M.) explaining how Hamilton Co would work with a view to Barclays Trust (I.o.M.) placing shares with I.o.M. subscribers. Mr Parry began by referring to an enclosed copy of the Hamilton Re Nominee Agreement, stating that it would be preferable for this to be used in an unchanged form for the I.o.M. company. He then described the proposed method of operation referring to Hamilton Company as "Hamilton Re" and to Bellew, Parry & Raven Ltd (the Lloyd's broker) as "B. P. & R". He explained that the capital of Hamilton Company would not be on risk since its liabilities would equal the premium received or any excess would be covered by reinsurance. The next two paragraphs of the letter read as follows:- "Hamilton (Company's) Income: The net profit before local expenses will be 25% of the interest income earned on the premiums held by Hamilton (Company). It may be that to secure some of the contracts Hamilton (Company) will be obliged to refund some of the interest to certain clients should their fund reach substantial proportions. For instance one of our clients receives a proportion of the interest on premium which is in excess of U.S. $1-5m". "(Bellew, Parry & Raven Ltd.) Income: As the face value of the policies issued by Hamilton (Company) are only for the amount of premium which they have received, the brokerage will only be a nominal 1/2% as opposed to 10% which is normal brokerage. (Bellew, Parry & Raven Ltd.) are therefore remunerated by Hamilton (Company) for introducing the business at a rate equal to 75% of the interest income". After these two paragraphs, Mr Parry referred to the premium income received by Hamilton Re in the previous four years, and then gave an estimate of the profitability of Hamilton Company. In respect of Hamilton Company's "25% retained interest income", he estimated profits for the first 3 years of $24,000, $39,000 and $57,000, a total of $120,000 (which would give Bellew, Parry & Raven Ltd for its 75% share a total for the first three years of $360,000. He, therefore, anticipated a return of 20% on Hamilton's Company's capital employed in year one and 40% in year three, excluding investment income on the capital of £50,000. On 27 June 1974, another nominee agreement was entered into between Hamilton Company, Western Brokers I.o.M. Ltd, Bellew, Parry & Raven Ltd and Barclay Trust I.o.M.

The Environmental Protection Agency banned the use of spraying asbestos.

The asbestos industry has made important contributions through the Asbestos Research Council in the UK and the Quebec Asbestos Mining Association in Canada. The Royal Navy has taken a leading part in reviewing the use of asbestos and supporting an important study of dockyard workers. The Asbestos Research Council has given an important lead by preparing Codes of Practice for all uses of asbestos.

A Parkington, Assistant Manager Lloyd's Audit Department, forwards a letter entitled "Reinsurance" to all Active Underwriters, Underwriting Agents and Panel Auditors which states:- " In letters to the market, Underwriters and Underwriting Agents have been advised of certain forms of reinsurance which do not meet with the approval of the Committee of Lloyd's. Full information appears in Section F.4 of the Manual for Underwriting Agents.

The Revised Section F.4 of Manual For Underwriting Agents

4. Reinsurance.

1. "As a general principle, the Committee of Lloyd's leaves to the discretion of Underwriters and Underwriting Agents the arrangement of their reinsurance, so long as they conform with the basic concept of honourable trading. The concept of honourable trading implies, among other things, that there exists a genuine risk of loss, and that this risk is the subject of the reinsurance contract.

i ) By circular letter of the 12 September 1955, Underwriting Agents were informed that Inter-Open Year Reinsurances, which had been effected by certain Underwriters between different Open Years of Account of their syndicates, must cease.

ii ) By circular letter of the 16 December 1958, attention was drawn to certain Excess of Loss Contracts whereby the Names concerned had been afforded protection on terms which provide that:-

1. the amounts (if any) by which the premium paid by each reassured syndicate in respect of each year during which the Contract is in force, exceeds losses arising during the year shall, on the renewal of the Contract, be carried forward to form part of the maximum indemnity recoverable under the Contract for the succeeding year and
2. b) if the Contract is not renewed at the expiry of the agreed period then in subsequent years the reassured syndicate shall be afforded Excess of Loss protection up to the amount of the balance of premiums (less certain deductions remaining in the hands of the reassurer.
3. In view of the taxation difficulties which such Contracts were likely to cause, Agents were requested not to effect, on behalf of their Names, Excess of Loss Contracts on the terms indicated above.

European EU. 1st Non-Life Council Directive.

Borel -v- Fibreboard Paper products Corp., Case No. 493 F2 1076, 5th Circuit 1973, cert. denied, 419 U.S. 869, 15 October 1974. Court of Appeals for the Fifth Circuit applied the doctrine of strict liability in asbestos disease cases and subjected producers to joint and several liability. Plaintiffs, in order to state a viable claim, need only show their exposure to defendants asbestos or asbestos containing product and an asbestos-related disease. Judgement given for Borel. One of the leading cases in this field, filed in Texas during 1968, which traces in detail the history of asbestos claims. The court holds that an asbestos manufacturer has a duty to warn industrial insulation workers of the dangers associated with the use of asbestos. There was either a failure to warn the workers or inadequate warning, says the Court. The Court finds asbestos to be unreasonably dangerous and imposes joint and several liability on all involved manufacturers for whom a particular worker worked. The Court also indicates that collateral estoppel is applicable. The judgement contained the statement that 1 in 10 Americans (21m) had been in contact with an asbestos-related product either at work or at home.

H R Rokeby-Johnson, a Committee Member and the Sturge leading Non-Marine Underwriter, stated during a Lloyd's golf match at Walton Heath "Asbestos is going to change the wealth of Nations. Lloyd's will probably be bankrupted in the final chapter unless something happens to intervene i.e. Government or legal duress on the Americans - but it will happen and we cannot stop it". Rokeby-Johnson estimated a figure of U.S. $66bn by the early 1990's and over U.S. $120bn by the year 2000. The cost of the "time bomb" syndrome will be more than $210bn, affecting over 21m Americans. The "time bombs" are old, middle aged and young people. The asbestosis claims being paid now in the 1970's are for the old people who have died. The middle aged people are dying now, and that's why the dribble, but the younger people are the far more, they're going to be dying in the 1990's, the awards will be going out per person and that's when the claims will pile in. It's the "time bomb" syndrome that worries me". (H R Rokeby-Johnson Knew, but market did not).

The New Yorker magazine published an article by Paul Brodeur detailing the workers' hazards dangers faced by asbestos workers. In the article Mr Brodeur reviews the history of health standards pertaining to industrial exposure to toxic materials such as asbestos. It was not until 1970, when Congress passed the Occupational Safety and Health Act, that any significant legislative action was taken to protect our Nation's workers from work-place hazards. And it was not until 6 June 1972 that, over strong industrial protest, a safety standard was created for asbestos fibres. To say the least, in view of the fact that investigations have revealed that cancer accounts for approximately 75% of the excess deaths among asbestos-industrial workers and that even slight exposure has been proven to cause asbestosis, mesothelioma, and other malignant tumours, the 1972 ruling was long overdue.

Borel -v- Fibreboard Paper Corp. Judgement confirmed on appeal.

Asbestos Exclusion Clause promulgated for Employers' Liability Policies issued from 1974 onwards. This resulted in asbestosis claims, previously covered under Employers' Liability , becoming a Strict Liability in Tort issue under products liability cover, which had no asbestos exclusion clause.

U.S. District Court Judge, Miles W Lord, in Minneapolis ordered Reserve Mining Company to halt discharges of industrial waste from its Silver Bay iron ore processing plant into Lake Superior and the air. After a trial lasting almost nine months, Lord ruled that asbestos and other fibres in the wastes posed substantial cancer hazards to five communities in Minnesota and Wisconsin using Lake Superior as a drinking water source. The immediate effect of the order was the closing of both the plant, which processed taconite, a low-grade iron ore, and the company's taconite mine inland from the lake. But a three-judge appeals panel, acting on an appeal by the company, issued a temporary stay of Lord's Order of 22 April 1974 and allowed the plant to resume operations pending a hearing. In his ruling, Lord noted evidence that prolonged exposure to minute fibres found in the discharge had been associated with asbestosis, a lung disease ,and cancer of the lungs, gastrointestinal tract and larynx. Lord said the exact scope of the hazards was impossible to gauge immediately, since asbestos-related diseases did not develop until 15 - 20 years after initial exposure. According to reports during the trial, Reserve Mining had been dumping 67,000 tons of taconite wastes into the lake daily for 17 years. Lord rejected company objections that closing the plant would cause severe economic hardship in the area, ruling that people in Duluth, Minneapolis (with over 100,000 residents, the largest community affected by the pollutants) should not be "continuously and indefinitely exposed to a known human carcinogen in order that the people in Silver Bay can keep working." (The plant processed about 15% of the iron ore produced in the United States and, with the mine, had a work force of 3,000.) Lord also noted that he had repeatedly encouraged the company to devise an alternative method of disposing of the wastes on land. The company had failed to do so, Lord said, and had engaged in delaying tactics while continuing the taconite dumping. Contending that Reserve's parent companies, Armco Steel Corporation and Republic Steel Corporation were among the wealthiest in the nation., Lord rejected as "absurd" a company proposal for Federal and State assistance in paying for an on-land disposal system. The "intransigence" exemplified by the proposal and the company's request for a ruling that no health hazards existed, forced him to order an immediate halt to the discharges, Lord said. The suit against Reserve Mining had been brought by the Federal Government, the States of Minnesota, Wisconsin and Michigan, and a coalition of environmentalist groups.

The Legal Publishing Department of Lloyd's of London Press have increased their activities. The department was already well known as "Lloyd's Law reports". In May 1974, a new publication, Lloyd's Maritime and Commercial Law Quarterly, was launched. In this quarterly topic legal points and new developments are reviewed in a manner intended to appeal both to businessmen and lawyers. The publication incorporates articles, a case-note service which sets out under classified headings details of important decisions by the superior courts of common law and civil law countries, and the texts of relevant international conventions and details of UK and foreign legislation. This department has staff working in the law courts and libraries, and are always pleased to hear from those engaged in the market on ways in which the legal service can help.

Bermuda Fire & Marine Co formed North Atlantic, inc. in Bermuda, as a subsidiary company. This company acted as a "front" and provided funding policies as a service to Lloyd's Syndicates and Insurance Companies.

Borel -v- Fibreboard Paper products Corp., Case No. 493 F2 1076, 5th Circuit 1973, cert. denied, 419 U.S. 869, 15 October 1974.. Court of Appeals for the Fifth Circuit applied the doctrine of strict liability in asbestos disease cases and subjected producers to joint and several liability. Plaintiffs, in order to state a viable claim, need only show their exposure to defendants asbestos or asbestos containing product and an asbestos-related Disease. Judgement given for Borel.

Extract from an address by Sir Henry Mance, Chairman of Lloyd's 1969-72, at a recent meeting of the City Forum on the subject entitled "Lloyd's in the 1980's".

The subject "Lloyd's in the 80's" will certainly involve looking deeply into the crystal ball, since I cannot remember any time in my career when the future of insurance has held more uncertainties. Questions are being raised about the financial security on which our industry is based, about our capacity to handle future insurance demands, about our structure in relation to government and about our public image in relation to the kind of policies we issue.

In looking to the future of any enterprise, there are clearly two sets of factors to watch when making judgement of likely developments; those factors external to the enterprise and those involved internally in the structure of the enterprise. I propose to deal separately with each of these, although the reaction of one to the other is always vital to prosperity.

So far as Lloyd's is concerned, there seems to me to be only two external factors which could bring about major changes in our business. These are firstly, the activities of government and secondly, the prosperity - or otherwise - of the broker system of doing business since Lloyd's is wholly dependent on brokers for its input.

The interest of government in insurance seems to me to stem from two main concerns. Firstly, the protection of the public - this is the issue of security; and secondly, whether insurance should be in the public sector - this is the issue of nationalisation.

For security, governments are now asking the industry for two things, namely sufficient information to show that adequate funds will always be available to meet claims whenever and wherever they arise, and some form of backstop guarantee to rescue policyholders in the last resort should the funds prove inadequate.

The Lloyd's system meets both these requirements, with its internal audit, its members' capital at unlimited risk and its ultimate mutuality for the benefit of policyholders through the Central Guarantee Fund. So far these protections have been sufficient to convince all governments of the complete security behind a Lloyd's policy.

But there are at least two areas related to security where we at Lloyd's are being increasingly asked questions; these are in the realms of statistics and in dealing with the transferability of payments across frontiers.

Nevertheless, I can foresee a growing and understandable demand for statistics in two particular respects - for information on reinsurance, both inward and outward, and for information on the geographic source of business. Both these trends reflect the growing international nature of insurance and the need to ensure that reinsurance will stand up and domestic markets are not being overwhelmed by overseas competition. Fortunately data processing is well suited for providing many of these demands and I can foresee no great difficulty in meeting any reasonable demands, given time to build up the record.

The reason for government concern on transferability is, of course, the present uncertainties and strains relating to the convertibility of foreign currencies. It is hard to realise that for over two hundred years all Lloyd's policies were issued in £ sterling and to suggest that funds should be deposited abroad would have been heresy. We shall certainly not revert to that position in the 80's but I am sufficiently an optimist to hope that by then a new international monetary system will have been evolved. If this were so I believe the present pressures for insurance funds to be deposited in small parcels throughout the world would become unnecessary.

On the other main concern of government - the threat of nationalisation - I will say this. To many governments, insurance has all the appearance of being a very luscious plum ready for the picking, although this is perhaps not quite so true just at this moment. Nevertheless the funds generated, with their enormous investment potential, are certainly attractive to many governments throughout the world.

It is not only our own government which can affect the future of Lloyd's. The increasing tendency to set up State owned insurance companies in the developing world has already led to a considerable change in our overseas business. This trend is understandable and much international reinsurance business results therefrom, of which Lloyd's often gets a fair share. I believe this tendency will continue, at least for the next decade. I would hope, however, that in the long run increasing decentralisation will lead to such national companies becoming more and more independent of political influence and even to the development of a competitive system under the government umbrella. This is almost the case in Yugoslavia now. This I believe to be a real possibility when the importance of providing a service to the domestic economy begins to override the needs of government to control insurance funds and protect exchange rates.

The service which brokers provide is essential to industry and commerce and I also believe it will become increasingly important for the individual. But in all cases it must be a real service and not just a post box operation - or worse still, a disguised selling agency for a limited number of products. The responsible broker has always made service and professional advice his first priority and this is certainly true of the Lloyd's broker. As backing to this approach, many insurers would welcome an acceptance of some professional code for all who wish to call themselves insurance brokers and I suggest that we may well see some statutory backing to this view before the end of this decade.

1. The growing complexity of our modern industrial technology. This has made it increasingly important for specialist advice and knowledge to be applied in formulating the best insurance coverage. Furthermore, the growth of the international company calls for such advice based on knowledge of what is going on in many other countries. A broker with a world-wide portfolio is well placed to provide such advice.
2. The continued growth in the size of industrial units and the values at risk. This results in an increased need to spread insurance coverage world-wide by co-insurance and reinsurance. To achieve this coverage, reciprocity has often to be given and arrangements such as these can only be achieved by the use of brokers. The growth of captive insurance companies is another example. In many cases the complex insurance arrangements to which accompany such ventures can only be handled by brokers and I can see an increasing tendency in this direction.
3. This whole situation will call increasingly for advice on loss prevention and risk management, which can very often best be given through a service developed by the broker.

I thus take an optimistic view about the continuance of the broker system of placing business which is so essential for the Lloyd's market. However, there is still the question whether insurance brokers will continue to use that particular market as they have done in the past and here the picture Perhaps not so happy. For one expanding international reinsurance account placed by a Lloyd's broker the percentage at Lloyd's has dropped from 50% to 15% over the last ten years.

To deal with this sort of question I must now move on to the internal factors in Lloyd's which may well change during the next decade. But first let me answer one question which may puzzle you. I have not mentioned as a third external long term factor the possible loss of business to Lloyd's through growing capacity in world insurance markets. Such things as the entry of the American Life Companies into general business and the active development of insurance markets in Japan and on the Continent might suggest that Lloyd's was going to find it increasingly difficult to obtain a share of world insurance. I have not developed this theme since I do not believe in the long run that the growth in capacity world-wide is likely to outstrip the growth in demand for insurance. There is, I believe, much historical evidence to support this view but I will only mention a recent American memorandum which stated that by the end of the century world population will have doubled to 7 billion. I can only say that the economic, ecological and social problems imposed by such estimates are bound to involve a growth in the demand for insurance far beyond anything we have hitherto experienced.

There have always been times when insurance capacity exceeds demand and we are certainly going through such a time just now, although I do not mind forecasting that even by the end of next year we shall be realising how temporary this phase has been. Unfortunately memories always seem to be short in these matters and on past experience - which seems to be based on a 10 year cycle - we shall see at least one period of loss underwriting in the ‘80s.

I now turn to those internal factors at Lloyd's which may change between now and the ‘80s, but first of all what do we mean by Lloyd's? My experience is that there are many who still regard Lloyd's very much in terms of that definition which I have so often heard quoted, namely "It is a riddle wrapped in a mystery inside an enigma". You may not know that this is in fact a quotation from a speech by Sir Winston Churchill in 1939 when he was asked to forecast the actions of Russia in the event of war. Perhaps it is indeed more appropriate to a forecast of what will happen to Lloyd's in the ‘80s than as a definition of Lloyd's itself. I don't believe this sort of mystic answer gets you very far these days and I want to suggest that the best way of understanding the meaning of the word "Lloyd's" is to see clearly the three distinct elements which make up the society of Lloyd's, for that is what we are. Each of these elements is distinct, yet they are all closely inter-related.

The first is the market itself, operating in the Underwriting Room at Lloyd's, where the business is actually done between underwriters and brokers. This is, in a real sense, a workshop. Its competitive efficiency has always depended on the skill of the individuals operating therein both in the generation of pure underwriting profit and in innovating new types of insurance coverage. The emphasis here has always been on underwriting and not on the investment of insurance funds.

So far as this market is concerned, there will certainly be some changes in structure. The present divisions between the main classes of business which have grown up historically as a means of allowing special skills to be developed are, in my new, unlikely to continue m their present form for very long. I still believe that there will be specialists in each class and that there will be market associations of these specialists to handle particular problems relating to their class of business. I do not believe, however, that the present strict division between the marine, non-marine and aviation markets by syndicates will outlive the end of this decade.

On business generally, I believe that there will be a move towards more reinsurance and less direct business. At present the division is probably not far from 50/50 over the whole market and I can see that moving to a greater predominance of reinsurance. Hitherto the Lloyd's market has been very largely a net retained line market with outward insurance being used only moderately, mainly for protection purposes. I think there will be a change here. The demands for reciprocity in the reinsurance field will call for a greater outward reinsurance capability from Lloyd's underwriters if they are to retain and build their inward portfolio. It will be a delicate matter to see that this tendency does not lead to abuse, since there is no greater restraint on an underwriter than to know that he must retain for his own syndicate the greater part of the line which he writes. On the other side, the ability to write lines will undoubtedly attract some brokers back into the Lloyd's market and provide a counterweight to the loss of business to which I referred.

I must refer to one dilemma relating to business written in Lloyd's market. As I see it there is going to be an increasing demand for business which comes into the category of third party liability or casualty. This stems from the increasing need for protection against damage claims lodged by clients, consumers or fellow citizens. Obvious examples are evident in motor business, professional indemnity and products liability. However much one may regret this tendency to shift any loss on to third parties, it is probably inevitable in any modern society where net profit margins are limited by the tax structure and where recourse to the legal system is open to all. This type of business often calls for new thinking and Lloyd's is accustomed to providing that. The trouble is, however, that Lloyd's is not really geared to writing very long-tail business, and this of course, is one of the reasons why syndicates do not participate in any truly long term life business.

There is, however, one factor which may well change this trend. If the no fault principle were adopted extensively in cases of third party liability, this could reduce substantially the growth of casualty business while at the same time encouraging personal accident coverage. I believe that by the ‘80s we may have seen a substantial move in that direction, and it is intriguing to think of its implications in such cases as the Thalidomide settlement.

The second element at Lloyd's is the back up, or the administration system which supports the market. This can best be described as the Corporation of Lloyd's directed by the Committee of Lloyd's. It is now a very substantial organisation with some two thousand people employed and the market depends a great deal on the services it provides. There are three main functions carried on here. Firstly, the maintenance of security through the audit. I have already mentioned this and will say no more than that I believe that the system is entirely adequate provided it is carried out as intended by underwriters, agents and auditors. There are dangers in becoming too statistically minded and equal dangers in relying too much on subjective judgement when calculating audit reserves and I believe our present blend of the two is just about right.

Secondly, the provision of various services to the market. These include such matters as a room to work in, a world-wide information network, policy signing, central accounting and claims settlement, and many other activities. Here indeed lies the economy of shared central services and the fact that the Lloyd's market is a low cost operation derives from this. Whether these services will maintain their standard between now and the ‘80s will depend largely on whether the standard of those men and women on the Corporation staff who serve the Committee and the market remains as high as it is now. I have no reason to think it will not and am therefore confident that the Lloyd's market will remain well served at low cost compared with its competitors.

There is, however, one danger and that lies in the balance of power between the administrators and the market men. The bigger the central service, and it is bound to grow in importance if maximum economies are to be obtained, the greater the risk that underwriters will lose control. The object must always be to centralise as much as possible without limiting underwriters' individual decision-making. The secret of this lies I believe, in seeing that the Committee of Lloyd's is always made up of active market men and to avoid a permanent Chairman. I can only hope that this may remain the practice through not only the 80's but as long as Lloyd's continues.

Lastly representation. This covers not only public relations but equally vital, negotiation with Government. I can only say that both areas call for specialist and particular skills. Public speeches by the Chairman of Lloyd's are listened to and read by wide audiences and can do much for reputation. Negotiation at all levels on legislation, including tax, is equally important. We are here faced by one dilemma and that is of maintaining continuity at the highest representational level with a changing committee and chairman and deputies. Delegation to a first-class senior administrative permanent staff provides one answer and even in my time great changes have taken place in the degree of such delegation. The appointment of permanent consultant advisers, both for financial and foreign affairs, is another step. The system of having two deputy chairmen enables experience to be built up in the committee before anyone takes on the chairmanship. I see no great change in this system.

The third main element at Lloyd's is that of the membership organised into syndicates through the agency system; men and women, both British and foreign, who provide the necessary capital without which the business could not be transacted. They now number over seven and a half thousand of whom something under one third actually work in the market. The ability of the Lloyd's market to expand depends on those numbers increasing year by year, although historically the willingness of those already in the business to increase their commitment has also helped. If we accept the view taken by the Cromer Report on Lloyd's in 1970 we should aim for an annual 6% growth rate in membership if we are to continue to handle our present share of world business. This would mean some 12,000 members by 1980 - quite a formidable target. The dilemma we face here is that Lloyd's is a capitalist enterprise and it depends mainly on the accumulation of private wealth, while society seems to be moving against such accumulations in its thinking. The prospective wealth tax is one indication of this. Whether or not we can continue to recruit, as members of Lloyd's, men and women with such wealth to support an unlimited liability concept will depend a great deal on how society continues to regard the use of wealth. In the case of Lloyd's we have a unique system whereby people can put at risk their own private fortunes and in so doing render a service to their fellow citizens. The reward they obtain from so doing must obviously be commensurate with the risk they run. If society is to say that such risks must not be run nor such rewards received as part of a bargain to protect individuals against losses, then it will incidentally be saying that the Lloyd's system must end. I find it difficult to forecast how attitudes will develop on this during the next decade. I do not believe that Lloyd's will move towards any form of corporate membership. Not only would this involve immense problems with our overseas business but would also make us far more vulnerable in the nationalisation stakes.

There are, however, two hopeful indications for Lloyd's. The first is that there does seem to be a general acceptance that our economy is best ordered on a mixed basis with government intervention and private enterprise running parallel in many spheres. The difficulties of such a system when government plays more than a minimum part are now being experienced in much of British industry, particularly in the cash flow and profit margin areas. But Lloyd's is a unique form of private enterprise which has few cash flow problems and where expense ratios, apart from claims, are low. It could be that the tax structures will be so devised as to enable the accumulation of wealth necessary to support the membership of Lloyd's to remain untouched, which has hitherto been the practice. The Special Reserve Fund, with its specific tax arrangements designed to encourage the building up of reserves, was introduced by a socialist chancellor, Sir Stafford Cripps.

The second hopeful feature is the possibility of recruiting membership from overseas and here I do see considerable opportunities. There will undoubtedly be, world-wide, a redistribution of wealth in the years ahead and whereas at the moment our main source of overseas underwriting members is the United States of America, it seems possible that we might soon add Arabs as a major source. Perhaps later, men and women from Africa and finally, even Chinese. This would give a new ABC for the future.

Internally we could at Lloyd's destroy ourselves only by ceasing to be a competitive market. This could be because our skills or courage as underwriters deserted us, or because we became top-heavy with expenses through inefficient administration, or because our sources of new capital dried up and our existing membership faded away.

I believe that none of these things will happen. Indeed, the reverse, since I believe our reputation as a continuing, secure and skilful market will bring Lloyd's as much business as it can or ought to handle. In saying this I believe our low cost reputation will remain and that our competitors will always suffer more than we will from inflation.

Finally, I cannot believe that any government which is committed to a mixed economy would consider the Lloyd's system one which ought or indeed could be included in the government sector. My own only fear here is that taxation changes designed for other purposes might undermine our capital base.

When distributed geographically, the new cases nearly all come from places where past occupational exposure are known to have occurred. 236 new cases of mesothelioma, caused by exposure to asbestos dust, were reported to the Department of Health during 1974.

The Head of Lloyd's Information & Publicity Dept., Douglas Greenall, writes to newly elected Members in 1974:- "Following your election to Underwriting Membership, I would like to draw your attention to the enclosed copy of "Lloyd's Log", our monthly journal. The object of "Lloyd's Log" is to keep its readers informed both of the latest developments in the Lloyd's Market and of the lighter side of life there. It also contains articles of a more general nature - often contributed by those associated with Lloyd's. In addition to matters of a particular insurance interest, the magazine together with its supplement "Lloyd's Community News" reports on events and personalities in the Market".

The Bank of England received an application on behalf of BPR stating:- "We apply for permission .... to purchase .... a 14% interest in the Bermuda Reinsurance Company Ltd, an existing Bermuda resident company which is about to trade in reinsurance business ..." "The remaining shareholders are Bermudan resident individuals and companies."

Sedgwick Forbes International Ltd has changed its name to Sedgwick Forbes North America Ltd.

The U.S. Court of Appeals in St. Louis ordered Reserve Mining Corporation to take immediate steps to reduce air pollution at its plant in Silver Bay, Minnesota and to plan to end water pollution within a "reasonable" time. The Court of Appeals, noting that the plant was a major employer in the area, criticised the order to close the plant "in the absence of proof of a reasonable risk of imminent or actual harm." But it said the plant's discharges "give rise to a potential threat to the public health" and were a threat "of sufficient gravity to be legally cognisable" It found the air problem "more significant" than the water discharge because of the asbestos contaminant in the discharges. When inhaled, asbestos was linked with increased cancer incidence. As for the water contamination, the court said the taconite disposal operation must be moved to an on-land site that must be approved by the State of Minnesota. It did not set the precise limit for "reasonable" time but it said if the site could not be set up, the plant at Silver Bay would have to be closed. The court noted that the health factor imparted "a degree of urgency in this case that would otherwise be absent from an environmental suit and in which ecological pollution alone were proved."

Surplus Reinsurance Management Ltd formed in Bermuda on behalf of Bellew, Parry & Raven. Conyers, Dill & Pearman , Bermudan Attorneys involved. It was proposed that a management company controlled within the BPR group be set up in Bermuda to manage the Bermuda Re. It was also proposed that the interest earned on syndicate rollover funds should be divided three ways, 60% to the syndicate, 20% to the Bermuda Re and 20% to the new management company. These matters were set out in a letter, dated 17 January 1975, from Mr Parry to Mr James Pearman, the Bermudan lawyer and a member of Lloyd's. Mr Parry was recognising that the market terms for rollovers involved payment to syndicates of 60% of interest. Mr E E Nelson confirmed the above in a letter, dated 20 January 1975, to Mr Parry. 35% of Surplus' shares were held by Bellew, Parry & Raven (Agencies) Ltd, an incentive company, until about 1980, when they were acquired by Horatio Ltd, a Bermudan company, which was owned by Mr Nelson's family trust. Horatio owned 100% of Breen Ltd, a Cayman company, and through Breen 14% of Bermuda Re from about 1980. 65% of Surplus' shares were held by Ocean Re, a Cayman Island company, owned by family trusts of the BPR principles. Thus the family trusts of the BPR Principals and Mr Nelson were able to benefit from personal stop losses and rollovers placed with Bermuda Re, both through their minority shareholdings in Bermuda Re and through their complete ownership of Surplus. In fact Surplus did not manage Bermuda Re and performed no services whatever in return for receiving 20% of the interest. Bermuda Re was managed by Island Reinsurers Services Ltd, a local company in Bermuda associated with Mr Gordon, who was also a director of Bermuda Re. Mr Parry and Mr Raven were directors of Bermuda Re. Bermuda Re's expenses of management in all the relevant years were minimal, Surplus was highly profitable

By 1975 Asbestos Action, an independent and voluntary organisation, had been formed under the Chairmanship of Mr Max Madden MP, by a group of individuals and representatives because of their concern at the inadequate public safeguards and public information about the risks to health from the use of asbestos in its many applications.

U.S. Federal Government publications: "Mineral Facts And Problems", published by the U.S. Department of Interior. The United States Bureau of Mines has estimated that this country's demand for asbestos in the year 2000 will range between 1-1.8 million tons.

The Policyholders Protection Act 1975 receives Royal Assent

Concerns about Asbestosis started to grow in the mid to late 1970's, initially when claims advised by Sedgwicks in relation to a company called Bell Asbestos started to hit the London market. By the late 1970's, some 4,000 - 5,000 losses had been reported at primary level and the market was starting to become more concerned, although it was only those particularly involved with asbestosis related claims who would have had any detailed knowledge of the matter.

Asbestosis now monitored as one of the "Big 5" latent disease risks. The "Big 5" latent liability risks being:- Agent Orange, Dalkon Shield, DES (Diethylstilbestrol),, Love Canal, and Pollution. In a November/December 1980 meeting of the Asbestos Working Party, Mr J R Heath (Weavers, Walbrook, PCW, Minet's) was in general agreement with Mr R A G Jackson (Merrett) and said that it appeared the number of new cases was more than doubling in each successive year from 1976 onwards.

BPR launch their Bermuda Re Personal Stop Loss Scheme

Ocean Reinsurance Co formed in the Cayman Islands on behalf of Bellew, Parry & Raven. It was managed by Bitco, the same Cayman management company that managed the Imperial, the Janson Green offshore captive company. Mariner Intermediaries Ltd, a reinsurance broker formed in the Cayman Islands in 1976 on behalf of BPR. 97% of the shares were held by Marlow, a Cayman investment vehicle, in turn owned by Harewood, a Bermudan investment company, 100% owned by the BPR Principals' family trusts.

An Unlimited run-off reinsurance placed for Wishart, Underwriter of Syndicate 165/151, to incept 1 January 1975 covering 1968 and prior years. Outhwaite 317/661 wrote 90%.

The BPR Stratton Non-Marine Syndicate 782 effected offshore reinsurances to protect the 1973 account of U.S. and Canadian fire business in August 1975 with the Midland Re, at which time they were known to be unprofitable. At the same time syndicate 782 wrote back stop Loss protection for Midland Re which was also known to be loss making at time of writing.

The Singleton Inquiry concluded that the effect of the contracts was to transfer part of the syndicate's 1973 Account losses to the 1975 and 1976 Accounts. Such a transfer is contrary to the internal regulations of Lloyd's contained in Section F of the Agents Underwriting Manual.

By reason of the Stop Loss protection provided to it, Midland Re made an underwriting profit before brokerage of £8,000 on the transactions. However, it had to fund the losses of £106,000 for a short period of time and it was estimated that the interest cost to Midland Re was approximately £1,000.

An Unlimited run-off reinsurance placed for Hutton, Underwriter of Syndicate 720/555, to incept 1 January 1975 covering 1970 and prior years. Outhwaite 317/661 wrote 100%.

Rouen, France: Conference on asbestos disease

Lansco, Inc. -v- Department of Environmental Protection, 138 N.J. Super. 275, 350 A.2d 520, Ch. Div., 4 December 1975. Affirmed, 145 N.J. Super. 433, 368 A.2d 363, Appeal Division, 30 November 1976. Cert. denied, 73 N.J. 57, 372 A.2d 322, 18 January 1977. New Jersey trial court and Appellate Division held lessee is strictly liable for oil spill under New Jersey Water Quality Improvement Act of 1971, coverage extended to such statutory liability, spill was neither expected nor intended (and therefore not "sudden" and "accidental") and thus not excluded, and the pollution exclusion did not bar coverage for spill since it only applies to "active polluters."

The Chairman of Lloyd's Insurance Brokers' Association has been invited to join the Committee on Invisible Exports; this is the first direct representation of Lloyd's brokers on that Committee. LIBA Chairman, Mr Ivor Binney, has said that he welcomes the invitation very much for it reflects the great contribution made by Lloyd's brokers to the overseas earnings of the United Kingdom. C T Bowring (Insurance) Holdings Ltd recently announced the following appointments: Mr I R Binney to be Chief Executive of C T Bowring (Insurance) Holdings Ltd, and will join the boards of C T Bowring (UK) Ltd and C T Bowring (Overseas) Ltd

The Chairman of Lloyd's Insurance Brokers' Association (LIBA) has been invited to join the Committee on Invisible Exports; this is the first direct representation of Lloyd's brokers on that committee. LIBA Chairman, Mr Ivor Binney of Bowrings, has said that he welcomes the invitation very much for it reflects the great contribution made by Lloyd's brokers to the overseas earnings of the United Kingdom.

The EEC Non-Life Establishment Directive should have been implemented by the 1st February 1976 in the nine member States, but this time limit was not met in all the cases. There are uncertainties under the Treaty of Rome as to the extent to which insurers are already free to provide insurance services across frontiers. Efforts continue to be made at the highest national and international levels to ascertain the extent to which Lloyd's Underwriters need to "establish" in the other eight States.

By 1975, there was also public concern about the possible exposure of members of the public to dust from asbestos waste on landfill sites and from consumer products. For these reasons, Ministers decided that a wide-ranging review of the health risks from asbestos by an Advisory Committee was called for, to report to Ministers and the newly created Health and Safety Commission (HSC). On 30 March 1976, the then Secretary of State for Employment, Mr Michael Foot, announced that with the agreement of Ministers the HSC were to set up a committee with the following terms of reference: "To review the risks of health arising from exposure to asbestos or products containing asbestos including:

to make recommendations as to whether any further protection is required. The Committee's report would be for the consideration of the Health and Safety Commission and Ministers and would be published".

The Environmental Protection Agency (EPA) said that asbestos fibres had been detected in drinking water supplies for Boston, Philadelphia, Atlanta, San Francisco and Seattle.. The samplings were "inconclusive", the EPA cautioned, because later samplings held no asbestos content. The asbestos was found as part of a two-year study of water supplies for 10 cities. No asbestos was found in samples taken from the water supplies of the test's group's other five cities - Chicago, Dallas, Denver, Kansas City and New York.

U.S. District Judge, Edward J Devitt, in St. Paul fined Reserve Mining Corporation and its parent firms, Armco Steel Corporation and Republic Steel Corporation, , more than $1m for polluting Lake Superior. Devitt ordered that $837,500 be paid to the State of Minnesota because of violation of water discharge permits pertaining to the dumping of taconite wastes into Lake Superior. Another $200,000 was to be paid to the State and environmental organisations that brought suit against Reserve Mining. This fine was assessed to cover legal costs and as a punishment for "misconduct" in failure to furnish requested data. Another $22,920 was ordered by the court to be paid to the city of Duluth for "furnishing interim clean water facilities and supplies" to residents in the area involved.

The Secretary of State for Employment, Mr Albert Booth as successor to Mr Foot, announced to the House of Commons the membership of the Advisory Committee on Asbestos. When announcing the membership, Mr Albert Booth said: "I have also asked the Chairman that if the Committee considers that there are any recommendations which it feels ought to be made in advance of its final report, interim reports should be submitted to the Health and Safety Commission on these aspects of its work so that the public may be kept informed of its progress". This in part reflected that of the Health and Safety Commission and was chaired by the Chairman of the Commission, Mr W Simpson. The organisations nominating the fifteen members were:

An Unlimited run-off reinsurance placed for Lane, Underwriter of Syndicate 479, to incept 1 January 1976 covering 1961 and prior years. Outhwaite 317/661 wrote 100%.

Black Lung Benefits Act (Public Law Order No. 91-173, 83 Stat 792, 30) passed by Congress.

First meeting of the Advisory Committee on Asbestos

It was decided to set up four working groups to assist the Committee on more detailed work in various spheres. These groups were:

Corporation of Lloyd's Annual Report and Accounts at 31 December 1975

During the past year the City of London has attracted increasing attention from Parliament and the media, by no means all of it favourable. By their reluctance to reply to comment and criticism, the major institutions may by default appear to be acknowledging the justice of some, if not all, of these criticisms.

For this reason the decision by the Bank of England to take the lead in creating a City Communications Centre under the guidance of the City Liaison Committee is to be welcomed and has the full support of the Committee of Lloyd's. The Chairman of Lloyd's is a member of the Liaison Committee and it is hoped that by a co-ordinated approach, wider publicity may be given to the rule and relevance of the City to this country's economy.

Lloyd's alone contributed £148m in 1974 to Britain's invisible income with an additional £76m from Lloyd's Brokers approximately 60% of all earnings from insurance business overseas and almost 8% of the country's net overseas invisible earnings in the private sector.

At home members of the Lloyd's community and indeed others from outside have freely given their time to the operation of over 20 management committees and working parties set up by the Committee of Lloyd's. All these include members of the Committee of Lloyd's, and their activities range from virtually weekly meetings with European officials involved in EEC negotiations, to advice and discussion on major UK financial legislation. In addition members of the many committees of the Market Associations concern themselves at length with the efficient policing of their own particular activities.

In 1975 1,005 new Members were elected. This figure, which was an all time record, compares with 435 new Members in 1971, 994 in 1972, 634 in 1973 and 293 in 1974.

The following comparative table shows the number of Members, Annual Subscribers and Associates:

The number of Underwriting Members elected between 1st May 1975 and 1st May 1976 was made up as follows:

As at 1st May 1976 the total Underwriting Membership of Lloyd's was made up as follows:

The 1974/5 Report referred to the introduction of a new class of Membership based on a Means Test of £37,500. Some 25% of the new Members who started underwriting in 1976 came forward in this new category.

In contrast to the marine and aviation markets, there is a great increase in the flow of business to the non-marine market which requires increased capacity. The increase in premiums to the motor market poses a similar problem. It is important that there should be sufficient capacity to enable this increase to be accepted, and to deal with the effects of inflation upon premiums, and the devaluation of sterling. The indications are that there will be another large intake of new Members for 1977, but in order to explore other possible ways of increasing capacity, a Working Party, under the Chairmanship of Mr L. R. Dew, is examining the whole question.

Among the matters which the Committee keeps under regular review is its requirements for firms of Lloyd's Brokers. Currently a Working Party under the Chairmanship of Mr Paul Dixey, with the co-operation of Lloyd's Insurance Brokers' Association, is re-examining the security and solvency arrangements of these firms.

European affairs have continued to absorb a considerable amount of time and effort and there has been a widespread sense of disappointment in the Lloyd's Market at the restrictionist attitudes which have persisted in some important Common Market countries.

The EEC Non-Life Establishment Directive should have been implemented by the 1st February 1976 in the nine member States, but this time limit was not met in all cases. There are uncertainties under the Treaty of Rome as to the extent to which insurers are already free to provide insurance services across frontiers. Efforts continue to be made at the highest national and international levels to ascertain the extent to which Lloyd's Underwriters need to "establish" in the other eight States.

Earlier this year a delegation from Lloyd's went to Madrid to discuss with the Spanish government the question of suitable provision being made for Lloyd's in their insurance law, which is being redrafted. Should the outcome be successful Underwriters will be able to accept direct business. Written representations were also made to Greece.

In the United Kingdom, the principal piece of new insurance legislation has been the Policyholders Protection Act 1975. The Market welcomed the recognition by Parliament that there was no need for this measure to apply to Lloyd's Underwriters.

On the 1st March the Policy Signing Office recorded its sixtieth anniversary. The Office originally started as Lloyd's Signing Bureau in 1916, coming under the control of the Committee of Lloyd's eight years later.

During 1975 the number of policies signed was 299,309 - 28. 7% being Marine and 71. 3% Non-Marine. A total of 312,995 endorsements were processed in respect of additional and return premiums and 506,731 items were handled covering claims, recoveries and syndicate reinsurances. The number of entries advised to Underwriters was 11,610,088 - an increase over both 1973 and 1974.

Major activities currently dominate the project work of the Group - Relocation and System Redesign. The relocation to Chatham involves detailed and complicated design problems in relation to siting and construction of the new computer suite. The Group is also assisting other departments in resolving the many problems which the forthcoming move presents.

The System Redesign project calls for a complete redesign of the computerised Central Accounting System, and to achieve this a separate department has been set up. Implementation will be phased-in over the next five years, with savings beginning to accrue in 1978. One of the new features to be introduced will be the use within Lloyd's Policy Signing Office of visual display units for the direct entry of data into the computer system.

The Writing Room area on the gallery has been converted to underwriting space, and is now functioning as part of the Room. A section of the Library, in the Old Building, has been refurnished and is now in use as a Writing Room.

In March 1975 the Government freeze on business rents was removed and since that date, wherever possible, the current market rental has been charged to tenants on revisions, renewals or the granting of new leases.

The Information Department has continued, under the guidance of the Information Committee, to assist the media in their enquiries so that reporting on Lloyd's affairs is as accurate as possible.

Pressure on the Department has been sustained to an unusual degree with such issues as the Suez Canal, the settlement of the DC10 claims and the run of serious marine losses last winter.

Arising from the publicity given to these events there were a number of broadcasts on radio and television, the most noteworthy being items for the "Money Programme" and "Nation-wide" on BBC Television.

During the year a new film was produced by the Central Office of Information entitled "Edward Presley - Man of Assurance". This 15 minute film, which is available on loan to members of the Market, shows how Lloyd's works as seen through the eyes of Edward Presley, now Head Waiter.

"Lloyd's Log", now enhanced by a colour cover, continues to expand its circulation and, in particular, is proving popular with newly elected Members of Lloyd's. In the 1976 House Journal Competition organised by the British Association of Industrial Editors, the magazine gained an Award of Excellence. The ‘‘Community News'', which gives news of people and activities within the Lloyd's Market, is included with every copy of the Log and helps to link the various parts of the community now being dispersed through relocation.

Although 1975 was a year of industrial recession increases in the circulation and sales revenues of most Lloyd's publications were achieved. Subscriptions from outside Lloyd's increased from £749,000 in 1974 to £1,046,000 in 1975. Advertisement revenues increased by 62+ to a total figure of £831,000. The biggest issue of "Lloyd's List" produced in recent years appeared on 21st July to mark the 50,000^th edition, and in December the first four-colour advertisement to appear in the paper was published in a supplement dealing with insurance broking. A successful new publication was the 1976 Lloyd's Desk Diary.

In June 1975 the Chairman of Lloyd's, Mr H H T Hudson, represented Lloyd's at the re-opening of the Suez Canal. He was accompanied by a party from all sections of the Market and was able to resolve misunderstandings which had arisen between some of the Arab States and Lloyd's.

In October 1975 the Chairman and Lady Cathleen Hudson, and Mr Foden-Pattinson, Member of the Committee of Lloyd's, and Mrs Foden-Pattinson, visited Montreal and Toronto. They were accompanied by Mr C G Wastell, Secretary General, and Mrs Wastell, Mrs P J Wyatt, Personal Assistant to the Chairman, and Mr C L Kirby, Chief Press Officer.

In May of this year the Chairman with Lady Cathleen toured the USA, visiting Seattle, San Francisco, Los Angeles and Atlanta. On this occasion he was accompanied by Mr Leslie Dew, Member of the Committee of Lloyd's, and Mrs Dew, Mrs P J Wyatt and Mr C L Kirby.

In both Canada and the United States the Chairman spoke to meetings of businessmen and insurance leaders, and met ministers and politicians. Press briefings were held and the Chairman took part in several radio and television programmes.

Lloyd's Medal for Services to Lloyd's was instituted in 1913 and the medals are struck in gold and in silver. The first gold medal was presented in 1919 and, so far, only 12 have been awarded. Ten of the recipients have been Chairmen.

The eight silver medals which have been presented have gone, with one exception, to Lloyd's Signal-masters. The most recent award was made in 1969, to the last Signal-master employed by the Corporation.

Last December the Committee decided that it would be an appropriate time to resume the presentation of the silver medal, but that the criteria for bestowal should be revised. In future it will be presented to people who have done much for Lloyd's outside their normal sphere.

It is with regret that your Committee has to record the death of four past Members of the Committee of Lloyd's.

Mr Towers, who died on the 30^th June 1975, was elected an Underwriting Member in 1922 and served on the Committee of Lloyd's in 1954.

The accounts for 1975 show a substantial increase in both income and expenditure. The operating deficit is £194,470 compared with £239,650 in 1974 but after crediting increased income from entrance fees, the net revenue for the year is £1,299,100 as against only £314,539 in 1974.

To finance these developments, the borrowing powers of the Corporation were increased at the General Meeting on the 25^th June 1975. Detailed arrangements have now been made for borrowing from the National Westminster Bank Ltd.

A computer system has been developed to assist with the speeding up of the repayment to Members of double tax relief in respect of United States income tax. Negotiations are proceeding with the Irish tax authorities regarding the taxation of Members resident in Ireland.

Resource Conservation and Recovery Act (RCRA) (Public Law Order No. of the USA) passed by the U.S. Congress. This was the first co-ordinated statute which addressed contamination resulting from liquid wastes and sludges as well as solid wastes. The EPA said that there were 30,000 - 50,000 hazardous waste dump sites in the US, of which about 2,000 were "imminent public health hazards". Congress had estimated that the U.S. was generating 3 to 4 bn tons of waste annually. Concern was being directed at the amount of toxic waste being generated, the lack of regulated control as to its subsequent disposal, and the inevitable pollution syndrome.

The U.S. Department of Labor's Occupational Safety and Health Administration (NIOSHA) set new standards for asbestos exposure levels in plants but delayed their implementation for four years. The standard of an average of 5 fibres per cubic centimetre (c.c.) of air over an eight-hour period was set on 7 December 1971 Beginning 7 July 1972, no concentration of 10 fibres per c.c. would be permitted at any one time. Starting 1 July 1976, the average standard was reduced to 2 fibres per c.c. By 1976, it was clear to Dr Irving Selikoff that of asbestos workers, 19% were dying of lung cancer, 9% of gastrointestinal cancer, 8% of mesothelioma and, 9% due to asbestosis and other lung diseases, i.e. 1 in 3 asbestos workers were dying of cancer.

A paper entitled "Technological Feasibility and Inflationary Impact of Standards for the Control of Asbestos Dust at the Workplace" prepared by the Consad Research Corporation. Final report for Contract Number J-9-F-6-0037, for the U.S. National Institute for Occupational Safety and Health Administration (NIOSHA).

An Unlimited run-off reinsurance placed for J S G Bruce, Underwriter of the JSB Motor Syndicate 155, managed by Brice Gregan & Co, to cover 1975 and prior years. Outhwaite 317/661 wrote 10%.

Lloyd's Press Conference: Global returns: Record Profit of £109. 6m for 1973 Year of Account

At a press conference at Lloyd's on August 26, record Global profits for the 1973 account were announced by Mr Havelock Hudson, Chairman of Lloyd's. Extracts from comments made by Mr Hudson at the conference and by chairmen of the various market associations, are reproduced here

Statement by Mr Havelock Hudson, Chairman of Lloyd's

It is pleasing to be able to report that the underwriting year 1973, closed at December 31 1975 produced record profits for the third successive year: also that this is the first time that Lloyd's profits have exceeded £100m. Furthermore, this is the sixth consecutive year of overall profit for Lloyd's.

The 1973 account profit amounted to £109,669,000, compared with the 1972 profit of nearly £92m. The 1973 profit was earned on a net premium income of £1,190m, which is an increase of £233+m over the 1972 premium income.

These are figures which reflect great credit on underwriters, underwriting agents and brokers and I take this opportunity of congratulating them all on a remarkable performance. The percentage profit, in relation to premium income, is only marginally lower in 1973 than in 1972, the figure being 9. 21% compared with 9. 61%. This is not a result that was anticipated and last year I gave it as my opinion that 1973 would be a "mediocre year". I am delighted to have been proved wrong, but it would be as well to draw your attention to significant factors.

For Lloyd's underwriters, the actual underwriting account - that is to say, the premium earned and the claims paid against that premium - is of prime importance. Interest and other credits, although they may be significant, are of secondary importance. You will see that the individual market accounts show in every case a deterioration in the settlement. The marine settlement is 3. 67% worse in 1973 than 1972, the non-marine is worse by 1. 8%, the aviation by 6.73% and the motor by 0. 97%. During the period 1974/1975 there was a significant movement in the FT index, the "all share" index in 1975 going from 66. 89 to 158. 08, and the Government 20 share index moving from 38. 93 to 47. 30. This resulted in a considerable increase in income from interest and capital appreciation of investments. At the same time expenses and depreciation of Investments showed a substantial reduction. It is these factors that have helped to save the 1973 account from the designation "mediocre".

These factors, too, may have a considerable bearing on the 1974 account. In this connection, the second year of the 1974 account shows an increase of premium income, compared with the second year of the 1973 account, of £282. 8m, but the underwriting results are not good. At the end of the second year of account the 1974 marine settlement is 5% worse than the 1973 account at the end of the second year; the non-marine account shows a similar deterioration.

It is too early to forecast the 1975 account results: suffice it to say that the actual underwriting settlement at the end of year 1 shows improvement over the 1974 account at the same time in the case of all the market accounts, except for a marginal deterioration in motor.

Although the name of Lloyd's of London is fairly widely-known, it is often associated with the insurance of actresses' legs and with the ringing of the Lutine Bell. It is quite agreeable to us that these activities should be widely known and applauded, but it is not at all agreeable that the tremendous significance of Lloyd's activities in connection with the UK balance of payments is not widely known and applauded. We are in fact the crack troops in the economic battle.

Statement by Mr Charles Gibb, Chairman of Lloyd's Underwriters' Association

A rough estimate of premium income from the North Sea oil fields is in the region of $200m. Of that about 40% comes to Lloyd's. On the other hand the cost of replacement of 100 metres of damaged pipeline from the Frigg Field to the mainland will be over £3m.

Statement by Mr Basil Edmunds, chairman, Lloyd's Underwriters' Non-Marine Association

Drought claims are in themselves likely to be small-scale. But the non-marine market could see a marked increase in fire claims arising from the drought. And in the private sector, we could be asked to face a number of subsidence claims.

Statement by Mr M T Hewitt, Chairman of Lloyd's Aviation Underwriters' Association

While profit margins have been reducing, the Lloyd's aviation market can be cautiously optimistic that their position in the world market is being maintained and in some areas strengthened. This is not due to the fact that we are the cheapest market available-there are many cases recently of business coming to Lloyd's and London at higher terms than other markets have quoted. Many clients and their brokers are attaching greater importance to security, stability and flexibility than basic price. A recent letter, written by a senior officer of the largest free world airline, referred to the Lloyd's market as being the ultimate in combining great ability with irreproachable integrity. That is part of what we are selling.

An interim statement by the Advisory Committee on Asbestos: Labelling of Asbestos Products

Lloyd's Log: City nears £1bn in invisible earnings

The City's invisible earnings are close on the £1,000 million mark for the first time, the Central Statistical Office revealed last month. Total net City earnings went up from £864m in 1974 to £978m in 1975 - and the greater part of the increase is from Insurance earnings which rose from £384m to £452m.

The steepest increase is from Lloyd's and the brokers. While Insurance company earnings rose from £148m to £158m, those of Lloyd's soared from £160m to £190m, including an increase from £136m to £164m on overseas underwriting business.

Another dramatic increase is shown by the insurance brokers, whose contribution rose by a third, from £76m to £104m. Banking earnings, by contrast, show a relatively modest increase from £122m to £135m.

Stressing the importance of the invisibles to the nation's earnings, Mr Hudson made the point that while our visible exports were often in the red, invisibles were almost always in the black.

"I don't think that people realise the tremendous efforts that brokers, in particular, put in bringing this amount of business to the country."

It will be noted with particular interest in the London market that the latest figures, relating as they do to a more recent trading period than Lloyd's global returns announced recently, show that the market is continuing to hold and even improve its record level of invisible earnings in the face of increasing problems.

The Invisible earnings figures are revealed in the Central Statistical Office's latest "Pink Book" on the UK balance of payments 1965-1975.

Outgoings for ships on charter to UK operators declined from £1,115m to £974m - the first fall since 1972 when the figure was £757m, compared with £863m. Freight and passenger payments to overseas operators also fell from £920m in 1974 to £865m last year, so that coupled with disbursements abroad on UK-owned ships, total shipping debits were £2,636m, against £2,780m last year and £760m in 1966. Earnings of the UK-owned and chartered-in fleet, together with disbursements by overseas operators in the UK