5 Jan 94
Agency Agreements (Amendment No. ?) Byelaw(No. 1 of 1994, 5 January 1994).
10 Jan 94
Daily Telegraph: Lloyd's ‘withheld asbestosis facts'
CRUCIAL evidence aboutasbestosis related losses was withheld from Lloyd's of London's settlement process, claim loss-hit Names.
More than 17,000 members are pursuing allegations of negligence against their agents. Lloyd's sought to avoid costly litigation by making settlement offers to members, based on a legal panel's estimates of court awards.
But members facing claims for asbestosis allege Lloyd's withheld crucial evidence about their case from the panel.Chris Messer, Chairman of one members' action group, says the evidence is contained in minutes of a February 1982 meeting of auditors with Ken Randall, then Lloyd's audit manager.
Theauditors are understood to have called the meeting to express grave concern about asbestosis reserves for the 1979 accounting year and warned some syndicates held inadequate reserves. The auditors claimed if proper reserves were made the market would be effectively bankrupt.
As asyndicate may not close an account with inadequate reserves, they said badly hit syndicates should leave the 1979 account open.
All butone of the 404 syndicates accounts were closed and the market declared a £229m profit for the year. Members allege some accounts were closed improperly and 1980 members inherited liabilities for which reserves were inadequate.
A Lloyd's spokesman said: "We offered theminutes under terms of strict confidentiality, but the legal panel did not wish to see any submission not made available to all parties."
12 Jan 94
House of Commons - Insider dealing - Questions tabled
Mr. Paul Marland(Gloucestershire, West)
In order that there should be no confusion l remind the House that I am a name at Lloyd's. I want to speak about Lloyd's and explain why it should be brought under a beefed up version of the order that we are debating.
It is widely understood that insurance is a risk business and that, within reason, there are losses as well as profits. For names at Lloyd's it used to be reassuring that Lloyd's is a 300-year-old institution, run by men who did much to uphold the City of London's reputation for integrity and decently, as well as being bound by ‘he Lloyd's Act 1871. It states that one of the society's main objectives is
"the advancement and protection of the interests of the members of the Society."
Mr. David Jamieson(Plymouth, Devonport)
What a laugh.
I agree - what a laugh
In 1982, the House reviewed the 1871 Act, but self-regulation continued. As a result of SASSE litigation, members of Lloyd's ruling council ensured that they protected themselves against being sued for negligence - thereby relieving themselves of any duty of care to names at Lloyd's.
How did Lloyd's, free from ally obligations under the Financial Services Act 1986 and from any duty of care, exploit its investors by insider dealing? There are many ways in which it did so, but I will explain just three.
First, there were baby syndicates. That was a device whereby a few insider - usually underwriters, agency directors and their families - got together to form a small syndicate that skinned the cream off the business going into the main syndicate run by that agency. That favoured group sliced off the best business and, when necessary, reinsured itself into the main syndicate under its control. That ensured that when there were profits, the baby syndicate fared handsomely - and when there were losses, they were picked up by others. It was a win and no lose situation. I may add that I was never a member of a baby syndicate.
All that was done at the expense of Lloyd's external names. At the beginning of the 1980s, there were more than 90 baby syndicates. At Lloyd's one previous chairman was an expert on baby syndicates, as we learned from a television interview on 3 November 1992, in which he denied his involvement. That chairman was on four baby syndicates run by his agency. Three of them - I184, 207 and 998 - enjoyed huge profits, all at the expense of the members of the main syndicates. That is an utter disgrace.
Furthermore, Sir David Walker's recent inquiry into Lloyd's showed conclusively that many other insiders favour themselves on to the safest syndicates
Thesecond way in which insiders favour' themselves is by churning the market and fleecing external investors. The House will be aware that churning is illegal on the stock exchange, but not at Lloyd's under self-regulation. Lloyd's professionals make money out of commission, which is usually paid at the rate of 10 per cent. each time business changes hands. Business changing hands can be simply a matter of the broker moving from one box to the next. When some Lloyd's brokers wanted to increase their earnings, they simply passed the parcel within the business and helped themselves to the commission - which in some cases they shared with the underwriters.
When, however; the risk had been split up, rebundled and passed on 20 times, all the premium income had gone in commission In many cases, so vague were the details of what was in the bundle of risk that some underwriters ended up reinsuring themselves - [Laughter] I agree that is ludicrous. Proof of that activity emerged after the Piper Alpha disaster. Aclaim of $750 million gave rise to the movement of $15 billion within the insurance market. The money moved was 20 times the value of the claim. No money was left to pay out - no insurance premiums were left. The insiders at Lloyd's simply turned to the names and said, "Pay up"- and it should be remembered that names are liable down to their cufflinks.
Instead of stopping that churning, Lloyd's committee - the regulators - participated as can be seen from the results of the syndicates run by those legislating at Lloyd's.Two thirds of the London market of excess loss money - more than £600 million in 1989 - went to the syndicates managed by council members. The Merrett syndicates removed £256 million from the spiral in 1989; the Murray Lawrence syndicates removed £134 million; and the Sturge syndicates removed £120 million - as well as taking vast salaries from the markets.
All of that was done while Lloyd's names were forced to sell their houses. Some regulation that was - some duty of care.
Thethird way in which the Lloyd's insiders abused their professional knowledge is perhaps the most pernicious of all. In the mid-1980s, Lloyd's agents actively recruited, and were encouraged by the Lloyd's council to recruit, unwitting names, which the regulator allowed to be recruited, on to syndicates already known to be heavily tainted with pollution and asbestosis claims, so that the new recruits were there to be fleeced when they were needed
By the spring of 1982, more than 15,000 claims for asbestosis had been registered at Lloyd's.
Evidence of that practice and of the magnitude of claims has recently emerged in theminutes of an auditors meeting in February 1982 with Ken Randall, who was then Lloyd's audit manager. The auditors were understood to have called the meeting to express grave concern about asbestosis reserves for the 1979 accounting year and warned that some syndicates held inadequate reserves The auditors claimed that if proper reserves were made the market would effectively be bankrupt.
As a syndicate may not close an account with inadequate reserves, the auditors said that badly hit syndicates should leave tile1979 account open. What happened? I can see that you are curious, Mr. Deputy Speaker. All hut one of 404 syndicate accounts closed and the market declared a false £229 million profit for the year. It is alleged that some accounts were closed improperly and that the 1980 members inherited liabilities for which reserves were inadequate and that those liabilities were concealed from them by lack of disclosure.
Nevertheless, the1980 names were enrolled in droves with the promise to clean up at Lloyd's after the Lloyd's Act 1982 and many existing names were persuaded to increase their capacity.
At more or less the same time, theshow of wealth required to join Lloyd's was reduced to £37,500 - not the £250,000 of which we hear talk.
From Lloyd's point of view, thatexercise was a great success because from 1983 to 1988, Lloyd's capacity doubled to £14 billion - growth rate of 15 per cent. compared with an annual growth rate of 3 per cent. between 1967 and 1983.
An example of one of the new recruits was Mr. George Aldrich who joined in 1984. Mr. Aldrich is a retired chemist from Evesham who sought to augment his pension and protect his life saving from inflation. One of the things that Lloyd's agents used to say was that investment in Lloyd's was inflation proof. He was a man of modest means and now he is a man of virtually no means. He enjoyed a couple of years with small profits, but then demands for payment and cash calls began rolling in, which exceeded by 100 times what he had been told was the worst possible scenario. He has been well and truly fleeced, as were so many others.
Mr. Paul Flynn(Newport, West)
Will the hon. Gentleman give an assurance that no Members of the House were involved in the baby syndicates?
I cannot possibly give that assurance I do not know the identity of the people who were in the baby syndicates, I have taken the trouble to research one or two, but 1 do not know who all the members were-
Sir Richard Body(Holland with Boston):
No Members of tile House were members of the baby syndicates.
I am grateful for the intervention of my hon. Friend. It was a job for the insiders. I am glad that the hon. Member for Newport, West (Mr. Flynn) is following what I am saying so closely because it is a serious matter.
Imagine the horror of the names who had been fleeced when they learned that Mr.Robert Hiscox, the deputy chairman of Lloyd's, had said when referring to Lloyd's names:
"If God had not meant them to be sheared ht would not have made them sheep."
In order that there shall be no misunderstanding, I will repeat that. The deputy chairman of Lloyd's said of his investors:
"If God had not meant them to be sheared ht would not have made them sheep."
That is backed up by another member of theLloyd's regulatory body, whose identity I know, but I am not sure of the quote and therefore I shall not accredit it to him. He was beard to say, in effect, "If we find a mug, we use him." That is the way in which the Lloyd's regulatory authority refers to its investors. There is not much duty of care there
Dame Elaine Kellett-Bowman(Lancaster).
Would my hon. Friend care to repeat what he has said this evening outside the House?
I should be happy to repeat it but thequotation from Mr. Robert Hiscox is on the record. I am sorry that my hon. Friend thinks this is nor on the public record: it is all on record - it is in all the newspapers. I can produce chapter and verse for all that I have said, and I can back up what I am going to say to show just how disgraceful are the goings on at Lloyd's.
The Lloyd's hierarchy put it about that they do not make people bankrupt. In the recent past,Lloyd's has made 169 people bankrupt - except those whom it has forced into independent voluntary arrangements - and has levelled similar threats at a further 3,500.
What is somisleading about the statement, "We do not people bankrupt", is the fact that the banks do it for Lloyd's, through the bank guarantee offered to Lloyd's as security by those who struggle to qualify. Lloyd's then calls the guarantee; the bank then asks the Lloyd's investor how he will service the borrowings, and if he cannot do so the hank makes him bankrupt.
I suppose that, strictly speaking, it is true that Lloyd's does not make people bankrupt: but, toquote Lord Armstrong , that is being very economical with the truth. The horror continues when we realise that the regulators at Lloyd's have been fiddling the unregulated system, and that until very recently the chairman of Lloyd's and the Lloyd's regulator was one and the same person. Lloyd's investors are not shrinking violets: they have been to court and secured a judgment in their favour about duty of care. But can you believe it? Lloyd's appealed. It was in the Court of Appeal that the negligence of the Lloyd's regulator was clearly exposed. No less a person than Sir Thomas Bingham, Master of the Rolls - sitting with Lord Justice Hoffman and Lord Justice Henry on 13 December 1993 - made the following statement:
Sir Thomas then threw out the Lloyd's appeal against the duty of care.
It is greatly to the credit of my right hon. Friend the Member for Wokingham (Mr.Redwood) that, when he was a Minister at the Department of Trade and Industry he saw and understood what was going on at Lloyd's and appointed Sir David Walker - then chairman of the Securities and Investments Board investigate what was going on. The chairman of Lloyd's tried to convince the world that be had appointed Sir David Walker to investigate, but that simply was not true.
What did Sir David find? He found that Lloyd's had kept no records. He had to design his own computer system to find out what had been going on there, despite the Boydell undertaking given to the House in July 1981 that within two years Lloyd's would adopt true and fair accounting practices. Twelve years later, Sir David found that Lloyd's had done nothing. It had no measurement of risk against premium; the Lloyd's professionals were doing substantially better than the external investors. The LMX underwriters, he found, were considered a "soft touch", and the regulator had done nothing about it. On the contrary - the regulators were helping themselves to the funds as I have already mentioned.
Sir David found that there was little consideration of duty of care by Lloyd's insiders in regard to names interests. It will come as no surprise that a majority of names are either in litigation, or threatening litigation, against the Lloyd's professionals, and that theSerious Fraud Office is investigating the activities of Mr. Anthony Gooda and Mr. Derek Walker while they ran Gooda-Walker, now one of the most notorious agencies at Lloyd's.
Mr. Peter Hain(Neath)
The hon. Gentleman is describing a massive case ofnot merely insider dealing but corruption on a grand stale. As he has demonstrated very eloquently, insider names - underwriters and managing agents - have protected themselves and dumped all the losses on external names. The question that he and, surely, the Government Front Bench must answer is this: why did the Government not institute a proper inquiry into Lloyd's to ensure that this corruption, fraud, mismanagement and insider dealing was rooted out and the culprits prosecuted?
I hope that what is going on in the House tonight may stimulate the Government into action. The hon. Gentleman has put his finger right on the point.
I believe that it will surprise you, Mr. Deputy Speaker, when I tell you that so far mote than30 Lloyd's investors have killed themselves or died early as a direct result of their Lloyd's losses and Lloyd's attitude towards them
Sir Gerard Vaughan(Reading, East)
I, too, am a name at Lloyd's, although I have never taken part in or been involved in any baby syndicate. My hon. Friend is expressing a clear argument. Does he agree that the conclusion is that insider dealing and other financial manipulations are rife within Lloyd's and that the whole system of self-regulation in Lloyd's and other parts of the financial market has failed?It is totally unreasonable to expect the self-interested to be self-regulating. It is time that not only Lloyd's but the over parts of the market which do not come under the Financial Services Act 1986 were brought within the Act.
I appreciate that intervention. That is precisely the point that I am trying to make and I am glad to have my hon. Friend's support.
Sir Richard Body
Does my hon. Friend agree that the House was deceived by Lloyd's when we considered the Lloyd's Bill.? When some of us, on both sides of the House, queried whether Lloyd's should be regulated from outside, massive arguments and much persuasion were used to dissuade us from any regulation. We were deceived factually.
I agree with that. That is another helpful intervention.The proof of that is the fact that the Boydell undertaking which was given in 1981 was never implemented. Twelve years later, Sir David Walker went back to investigate Lloyd's and found that nothing had happened. It had said that within two years it would tidy up its act.
Does the hon. Gentleman agree with the proposition that while he and others who are Members of the House and members of Lloyd's agree with the view that he is expressing, they are in the minority and that the majority of those who are Members of the House and members of Lloyd's do not agree with him? Does he agree that when the House discusses the regulation of Lloyd's it would be better if all members of Lloyd's who are Members of the House took no part in the proceedings? There should not be the taint of self-interest when we are discussing regulatory matters.
That is a valid point and perhaps it should be discussed at a later date. There is no doubt that agreat deal of elbow clutching went on in the House during the early 1980s when the Bill went through. We were told, "Don't worry old boy, it will all be all right. Would you like to come and have lunch with the chairman?" Many of us were put through that treatment
I want to return to the 30 people who killed themselves or died early as a result of Lloyd's losses. Mr.Harold Weston, a 51-year-old solicitor, hanged himself from the banisters of his home in north west London. Several others have hanged themselves. Some have shot themselves and others have gassed themselves in their cars. I will spare the House the gruesome details, but my hon. Friend the Member for Lancaster Dame E Kellett-Bowman) will be reassured to know that they have all been written up and reported in the newspapers
There weretwo further suicides in Canada, which Peter Middleton, Lloyd's chief executive, admitted were as a direct result of their Lloyd's losses.
16 Jan 94
Sunday Times: Lloyd's plans float for syndicates
As Lloyd's braced itself for a month of yet more bad news, details are emerging of an ambitious management plan that could see insurance syndicates floated on the stock market.
The moves comes asLloyd's faces rejection of its financial settlement with litigating names and details of bumper underwriting losses from 1991.
Lloyd's proposed £900m settlementwith 17,000 loss-making names will be in jeopardy this week if members of the largest litigating groups - Gooda Walker and Feltrim - take their executives' advice and turn down the offer. Between them, they have enough voting power to secure its rejection.
Ina worse-case scenario, some names' representatives fear the offer's failure could lead to a levy on the membership, or even threaten the solvency of Lloyd's and require the Department of Trade and Industry to intervene. However, Peter Middleton, Lloyd's chief executive, denies either scenario is likely.
Further disappointment will arise next month with the emergence of 1991's trading performance.Lloyd's has already forecast the 1991 deficit will be more than £1 billion.
Despite the bad news, management is developing acontroversial plan to end the free-for-all trading of insurance business between insiders, a 300-year old tradition at Lloyd's. In its place, syndicates or groups of syndicates could be floated on the London Stock Exchange, with investors taking a view on their prospects depending on the business each one underwrites. Other plans include replacing the three-year accounting period with annual accounting, beefing up the market's regulatory body, licensing the Lloyd's name, and living off non-core services such as computer programming.
These ideas discussed by Lloyd's management at a brain-storming session last weekend, will be in an internal report to be finished in two months. Traditionalists will be outraged bythe plan which virtually removes any role for the members' agents, who have traditionally controlled access to Lloyd's. They will have the opportunity to oppose the proposals in a vote.
"Investors in Lloyd's will be given more control over their capital and have a value placed on their membership," said Middleton yesterday.
His colleague, Robert Hiscox, Lloyd's deputy chairman, added: "The first step was introducing corporate capital, now innovation is more acceptable at Lloyd's."
23 Jan 94
Sunday Telegraph: Names face court battles with Lloyd's
LLOYD'Sof London underwriters warned yesterday that loss-stricken Names rejecting Lloyd's £900 million offer would face a tough legal fight. After two key votes last week, the offer is virtually dead
Names, facingcumulative losses of £2. 8 billion, must now prepare to sue members' agents who put them onto the big losing syndicates. The Names hope legal action will enable them to tap the agents' errors and omissions cover, rumoured to be £1. 1 billion.
Butleading E & 0 underwriter Brian Smith said: "We will appeal against each judgement. Some Names may get something if they move early enough. Others will get nothing." Litigation costs are already estimated to exceed £100 million and will be deducted from any payments underwriters make.
"Ourreinsurers will pay £400 million but no more." said another E & 0 underwriter. Lloyd's chairman David Rowland has stressed there is no more money in Lime Street's kitty.
Syndicatemembers have until February 14 to reply to the Lloyd's offer, which would give them on average 30p in the pound or less for their past losses.
Buttwo meetings of syndicate action groups last week sealed the fate of the settlement. On Monday. Gooda Walker Names, who face losses of more than £1 billion, voted by 1,563 to 300 to reject their settlement. worth £220 million. On Friday, 770 Feltrim syndicate Names voted by 11 to one to refuse their £237 million Lloyd's offer.
The offer was made to each Name individually. But it wasmade conditional on winning a satisfactory level of acceptances.
Lloyd's has indicated this means70 per cent or more accepting, not by number of Names but by the value of their commitments. The Feltrim and Gooda Walker votes make it impossible for acceptances to reach anything like 70 per cent.
Thelegal process will start soon. Barrister Gordon Apsion, of the Lloyd's Overseas Names Group, is considering suing Lloyd's itself on February 18 for allegedly failing to disclose a key report in the early 1980s. This spelt out the insurance implications of asbestosis, one of the biggest causes of syndicate losses.
His and other Names groups areplanning to sue syndicate auditors, including Ernst & Young, Coopers & Lybrand and Neville Russell. Auditors' E & 0 cover is mostly placed in the company market. Names on Cuthbert Heath syndicates facing losses of more than 300 per cent will vote on legal action soon.
A further group of Names is meeting Lloyd's officials tomorrow toprotest at the enfranchisement of corporate investors.
Elsewhere, there ismounting fury that members agents have only in the last few days passed on a warning letter sent last October from stop-loss specialist Holman Wade. This said that its policies would not cover losses caused by paying a levy to set up Newco, the company that will handle pre-1985 "long-tail" claims.
23 Jan 94
Sunday Telegraph: My week by Mary Archer
25 Jan 94
Annual Meeting of theInstitute of London Underwriters: Statement by the Chairman, Mr P L Evans
Effects of Reduced Membership
As you will be aware,membership of the Institute was further reduced during 1993. Eighteen companies gave notice of their intention to withdraw. As you can see from the annual report, at January 1, 1994, the members totalled 74. Many of the companies not going forward were transacting only small volumes of business and the increasing expense burden clearly called into question their economic viability. Others were subsidiary companies within groups whose portfolios have been assumed by a larger main entity within the same group.
9 Mar 94
Municipal General Insurance Ltd placed in liquidation.
16 Mar 94
Meeting at the Department of Trade & Industry involving the Chairman of a Lloyd's Action Group, Richard Hobbs and Martin Brebner. The notes of the meeting state inter alia:-
The Central Guarantee Fund had been used in contravention of the terms of the Act;
That double accounting was going to be eliminated this year. Had double counting been eliminated for Names who were no longer underwriting, it may well have been possible for them to continue underwriting or not to have had losses at all or even to have had profits. Any attempt by Lloyd's to run this argument for continuing Names should result in an even stronger argument for a payment strike by discontinued Names;
The minimum percentages have been upped over the last three years while Richard Hobbs has been setting them with Lloyd's. He reckons by about £150m per year;
I mentioned that the minimum percentages had no scope for increase on the US$ "All other Business," which he agreed but he said some of the business was very adequately reserved. I went through the syndicate balance sheet with him and pointed out that there was only £7.5bn of investments and cash; all the remaining items were non-interest bearing (including about £2bn at indemnity value of "Time & Distance." He found the figures helpful but was disturbed that the tangible assets only amounted to £7.5bn. (How much of the remaining £9bn would be cancelled in a consolidation?) He said that someone else was totalling syndicate information and that he would put him in touch with me;
We discussed Newco at some length, he and his colleague will be the ones to authorise it.
22 Mar 94
Meeting Between two Lloyd's Names and Richard Hobbs, Under Secretary at the Department of Trade & Industry. The notes of the meeting state inter alia:-
The annual solvency test over-rides Section 40 of the 1871 Lloyd's Act which provides that each Name underwrites for himself and not one for another;
Hobbs said that it is clear that the market is under reserved in some respects. The present system of setting minimum percentage reserves has operated since 1983. The DTI has set MP's with Lloyd's and the Government Actuaries Department. In previous forms the DTI has been involved with setting reserves requirements for Lloyd's since 1950. In attempting to resolve the problem of under reserving, the DTI has allowed "stairstepping", i.e. The gradual increase in reserves over a period of years;
The DTI are in touch with US Attorneys representing some of the larger claimants on Lloyd's. What they want is every last cent out of Lloyd's up to the point that Lloyd's goes into run-off If the latter happens, SEC rules require them to make full provision in their balance sheets. There are thus interests in the US as well in keeping Lloyd's afloat:
There is nothing to say Lloyd's should pay the claims of failed Names to Corporate policy holders. Only two countries, UK and Eire, have Policyholder Protection Funds and those only apply to individuals. No-one else in the world, apart from Lloyd's, protects Corporate Policyholders;
It would however, need secondary legislation to allow Lloyd's to avoid payment on claims by policy holders where Names are insolvent. (This needs to be clarified. The need for secondary legislation is presumably to allow Lloyd's as a whole to remain within solvency requirements). Secondary legislation is technically possible, but an affected policyholder can "pray against" such an administrative order (? Seek judicial or parliamentary review);
Hobbs did mention as an aside that he is working on a revision to Policyholder Protection Act that will be brought forward later this year and that will close the loophole that partnerships are covered on their professional indemnity policies in the event of the insurer failing (vis the case of US partnerships holding Weavers policies).
27 Mar 94
Mail on Sunday: Britannia crew health test call
A call for all ex-crew of theRoyal yacht Britannia to have medical tests has been made by Portsmouth MP Peter Griffiths.
The Mail on Sunday told last week how aretired Britannia stoker died from an asbestos-related disease.
28 Mar 94.
A M Best & Co:
The insurance rating concern, stated there's more bad news on the horizon for property and casualty insurers, stemming from underwriting of years' past. The rating concern said the insurers, over the next 25 years, will face environmental and asbestos claims with a value, in today's dollars ofU.S. $132bn. But those insurers have so far reserved or paid just U.S. $15bn in claims. As a result, "you're going to have substantial earnings drain and capital depreciation" for the 50 or so insurers who wrote most of the insurance at companies facing the liabilities, said John Snyder, an A M Best Senior vice-president. Mr Snyder said possible Superfund reform might lessen the costs and streamlining cleanup processes.
29 Mar 94
Wall Street Journal: Insurers' losses on catastrophes reach $7 billion
NEW YORK -Insurance losses from winter storms, the Los Angeles earthquake and other catastrophes are expected to exceed $7 billion for the first quarter of 1994, one of the worst periods ever for the nation's property and casualty insurers.
Thelatest catastrophe claim estimates overshadow a report issued yesterday showing that the insurers posted net income $18.5 billion last year, more than three times the $5.8 billion net income in the catastrophe-ridden year of 1992, according to the Insurance Services Office Inc. and the National Association of Independent Insurers.
The$7 billion estimate does not include a string of tornadoes that hit four Southern states over the weekend.
Sean Mooney, senior vice president of theInsurance Information Institute, said, "From an insurance point of view, this will be the worst winter on record."
In contrast, in thefull year 1993, losses from catastrophes totalled just $5.7 billion. In 1992, the nation's worst year for catastrophes, insurers posted $23 billion in catastrophe losses, and the second-worst year, 1989, left them with $7.6 billion in disaster red ink.
"It's a little bit of calm between storms," Mr. Mooney said of the1993 figures, which are estimated to represent 96% of the country's property and casualty insurance business. "We're obviously very concerned about 1994."
While the tornadoes quickly met the$5 million, 1,000-claim threshold in insured property losses to be declared a catastrophe, damage estimates are not expected for several days, according to the American Insurance Services Group, a trade group and official scorekeeper for disaster claims.
For1993, the two insurance-trade groups found that the industry's underwriting loss dropped to $18.7 billion from $36 billion, a decline mainly explained by fewer catastrophes. Among 1993's worst disasters was a blizzard that edged up the East Coast, while 1992 gave the industry two major hurricanes, including the $16.5 billion Andrew.
In addition to higher claim losses, analysts say that theinsurance companies could earn less income on their investments this year if the bond market continues to perform poorly.
Thetrade groups said that property and casualty insurers had pre-tax operating profit of $13.2 billion in 1993, exclusive of realised capital gains, a sharp improvement over 1992's loss of $2.5 billion. The underwriting loss was 8% of earned premiums of $234.9 billion, down from the 15.9% of earned premiums of £226 billion for 1992.
In thefourth quarter of 1993, the industry's consolidated net income was $5.9 billion, against a net loss of $1.2 billion a year earlier. But the $8 billion of net investment income in the fourth quarter of 1993 was down 4.3% from $8.9 billion a year earlier.
Meanwhile, A.M. Best Co., the insurance rating concern, said there's more bad news on the horizon for property and casualty insurers, stemming from underwriting of years past. Yesterday, the rating concern said the insurers, over the next 25 years, will face environmental and asbestos claims with a value, in today's dollars of $132 billion.
But thoseinsurers have so far reserved or paid just $15 billion in claims. As a result, "you're going to have substantial earnings drain and capital depreciation" for the 50 or so insurers who wrote most of the insurance at companies facing the liabilities, said John Snyder, an A.M. Best senior vice president. Mr. Snyder said possible Superfund reform might lessen the cost to insurers by curtailing litigation costs and streamlining cleanup processes.
10 Apr 94
Sunday Express: Rottweiler turns on Lloyd's
0 May 94
Daily Telegraph: Letter to the Editor - Lady Archer of Weston-Super-Mare - Lloyd's must carry on
Amid the media furore currently surrounding Lloyd's, one fact seems to have escaped attention:all the problems aired relate to the past. That Lloyd's is not only radically reforming itself, but also successfully trading on is neglected by those who seem to want it to fail. Thus do observers incline to Adam Raphael's "meltdown" scenario rather than to his "march on" alternative (articles, April 26 and 27
However every informed person within the Society - whether among working or external members, Corporation staff or those concerned with Lloyd's governance - strongly believes thatLloyd's will survive, and they are now making tremendous efforts to achieve that end
The "meltdown" proposition is that American long-tail claims will overwhelm any future profits at Lloyd's. Certainly ifLloyd's allowed managing agents to continue to handle old-year claims as 550 separate problems, severe difficulties would persist, but NewCo and the new Special Claims Unit put in place to handle old-year business will be able to settle these much more effectively.
Long before NewCo itself could encounter any problems, it is likely that the entire American Insurance industry would have melted down, a prospect that no United States Administration would countenance.
Old years apart, the timbers of the Lloyd's business plan have been laid. There is anew approach to regulation to professional standards, to simplifying structures, to cutting costs and strengthening members' rights. Critics of the Society should acknowledge this progress to avoid the charge of obsolescence
Regrettably, there are those who have been gravely damaged by their encounter with the market. Many are now seeking redress from the courts an uncertain alternative to the settlement offer rejectedearlier this year. Those who do not wish to continue the confrontation, but rather to obtain finality with respect to their underwriting affairs, are approaching my hardship committee, which is now concluding many private arrangements.
It is in the interests of all Lloyd's members whether trading or ceased, and of the London and world insurance markets more generally, that Lloyd's continues as a healthy and profitable entity. Without it all these would be impoverished.
3 May 94
The Chairman of Lloyd's, David Rowland, forwards the documents entitled "Value at Lloyd's" and the "Business plan Progress Report" to Members.
13 May 94
The Auditors notes to the 1980, 1981 and 1982 open accounts of the Posgate Non-Marine Syndicate 126 state "Under the Syndicate Accounting Rules we are not required to report whether or not in our opinion the Annual Report gives an true and Fair view of the result of a run-off year.
18 May 94
New York Herald: Grace restores reserves for asbestos claims
W.R. Grace & Co. said it is setting aside $200 million in earnings to cover potential asbestos-claims pay-outs stemming from a recent federal court ruling.
The action restores to its original size a fund first set aside eight months ago by the Boca Raton-based company. In September,Grace had reacted to an unfavourable court ruling by setting up a $300 million reserve. But when the U.S. Court of Appeals in New York said in January it would reconsider its decision, Grace put $200 million back in its profit kitty.
The federal appeals court upheld its earlier decision that Grace's liability begins with the date of asbestos installation, not when the damage from asbestos was discovered. The company said it will appeal.
"We continue to believe that this decision is contrary to the weight of authority nationally, and we plan to seek further judicial review," said Brian J. Smith, Grace's chief financial officer.
Grace shares fell 50 cents to $40.37 1/2 in New York Stock Exchange trading Tuesday.
In its latest filing with the Securities and Exchange Commission, Grace estimated its maximum liability in asbestos cases at $1.17 billion. Grace made asbestos fireproofing material and acoustical plaster from 1963 to 1973, but has faced a mounting number of health-claims lawsuits from asbestosis victims ever since.
Grace has had to file suit against insurance companies unwilling to live up to its coverage. At Grace's annual meeting last week, chief executive J.P. Bolduc said the company is settling as many cases as it can out of court.
18 May 94
New York Herald:
W.R. Grace & Co. said Tuesday it is setting aside $200 million in earnings to cover potential asbestos-claims pay-outs stemming from a recent federal court ruling.
Theaction restores to its original size a fund first set aside eight months ago by the Boca Raton-based company. In September, Grace had reacted to an unfavourable court ruling by setting up a $300 million reserve. But when the U.S. Court of Appeals in New York said in January it would reconsider its decision, Grace put $200 million back in its profit kitty.
The federal appeals court upheld its earlier decision thatGrace's liability begins with the date of asbestos installation, not when the damage from asbestos was discovered. The company said it will appeal.
"We continue to believe that this decision is contrary to the weight of authority nationally, and we plan to seek further judicial review," said Brian J. Smith, Grace' 5 chief financial officer.
Grace shares fell 50 cents to $40.37+ in New York Stock Exchange trading Tuesday.
In its latest filing with theSecurities and Exchange Commission, Grace estimated its maximum liability in asbestos cases at $1.17 billion. Grace made asbestos fireproofing material and acoustical plaster from 1963 to 1973, but has faced a mounting number of health-claims lawsuits from asbestosis victims ever since.
Grace has had to file suit againstinsurance companies unwilling to live up to its coverage. At Grace's annual meeting last week, chief executive J.P. Bolduc said the company is settling as many cases as it can out of court.
20 May 94
Daily Telegraph: Gooda agent ‘told to suppress losses'
ON theninth day of the case of the Gooda Walker Names against their Lloyd's of London agents yesterday, Anthony Willard, a former Gooda Walker underwriter said that fellow directors pressured him to suppress information about losses on his syndicate, 299.
MrWillard, a witness for the agents, was being cross examined by Geoffrey Vos QC, for the Names, in Court 36 on the Strand. He said: "I was taking considerable stick from some fellow directors, who suggested that instead of telling the truth I should be keeping quiet. I fought alone trying to get the truth out about Syndicate 299's loss."
Mr Willard told the court thatDerek Walker, a fellow underwriter and managing director of the firm that ran the Gooda Walker syndicates, had interfered in the running of Syndicate 299.
Mr Willard said Mr Walker had wanted him toseek out cheaper quotes for his reinsurance programme, but he did not want to.
Mr Vos asked: "Why didn't you say no to Mr Walker?"
Mr Willard replied: "I was in a prettypoor state about everything. I was trying desperately to save money somehow. I was under pressure."
Mr Willard said Mr Walker had tried to persuade him that "one way of getting some premium income into 299 would be for it to write a reinsurance for 164, a non-marine syndicate." Mr Willard said the policy would be worth £1m and the premium would be £1m. He explained, "effectively I would have the use of the £1 m until such time as I had to pay it back."
Mr Willard said he told Mr Walker that he would have to report the transaction to his auditors and added: "Mr Walker said, "surely Tony you do not tell your auditors everything do you?" Mr Willard said he refused to take part in the transaction and within two days was informed the firm was seeking a replacement for him.
Mr Willard saidAnthony Gooda, w ho ran the members agency, asked him to write to Names on the syndicate, "an optimistic upbeat letter saying how much better things would be." He wrote it, but Mr Gooda told him "it was not optimistic enough."
24 May 94
Annual General Meeting of Members of Lloyd's:
The Chairman of Lloyd's, David Rowland, gave a speech entitled " Realise the Extraordinary Potential". Asbestos cover up denied by Chairman. Refusal by John Mallinson, Solicitor General, to hand over Asbestos Working Party and Audit Panel Committee meeting minutes. "They are private and confidential" he states.
0 Jun 94
No One Lime Street: Accurate accounting
10 Jun 94
Daily Telegraph: Ruling loses Heath A. $50m
17 Jun 94
The Grosvenor House Hotel: Seminar on Schemes of Arrangement, Commutations and Run-Offs.
30 Jun 94
Evening Standard: Court setback for Lloyd's Names
Thecourt of Appeal today found against a group of Lloyd's Names in a move that could have major implications for actions worth hundreds of millions of pounds being brought against underwriters of the insurance society.
The cases, between theOuthwaite agency and the 1992 Outhwaite Names Association, centred on whether litigation can be brought on actions that happened many years ago, even if those actions were subsequently concealed by their perpetrators.
English law maintains thatproceedings have to start within six years of acts of negligence occurring.
Many proceedings now being brought by Lloyd's Names refer to acts of alleged negligence that happened well over six years ago.
But the Names saythese acts were concealed and they did not become clear until losses started flooding through in the past five years. As soon as they did, action groups formed and litigation proceedings began.
But today, Kevin Ryan, acting for the Outhwaite agency through solicitors Denton Hall, said: "The Appeal Court ruled that if a cause of action has arisen and there is a subsequent fraudulent concealment, that does not stop limitation time running from the time when the cause of action arose unless the fraudulent concealment happened at about the same time."
The ruling, in which two judges found for the Outhwaite agency and one against, could mean thatactions in which Lloyd's agents did not immediately conceal underwriting commitments may be proved invalid.
The Outhwaite Names have been given leave to appeal to the House of Lords.
Lloyd's action groups saidOuthwaite case was a one-off because most Names fought their pitch years ago. It is therefore hard for the 1992 group of Names to claim that concealment occurred.
Solicitors involved in the case say it centrespurely on the point of law, not on whether concealment did or did not take place.
28 Aug 94
Washington Post: Attention – Individuals exposed to asbestos or asbestos-containing products (Their spouses, household members or legal representatives) and individuals or entities which may be sued by those exposed to asbestos-containing products
WHAT IS THE AHEARN CLASS ACTION SETTLEMENT ABOUT?
The class action settlement ("Global Settlement Agreement') deals with asbestos-related personal injury claims that might be brought against Fibreboard Corporation ("Fibreboard"), formerly known as PABCO Corporation.
If you are a member of either of two classes - the Global Health Claimant Class or the Global Third-Party Claimant Class - you are covered by the terms of the settlement.
WHO IS INCLUDED IN THE AHEARN CLASS ACTION?
1) The Global Health Claimant Class consists of all persons, including their spouses, household members or legal representatives, who were exposed, directly or indirectly, to asbestos or asbestos-containing products for which Fibreboard may bear legal liability, and who had not filed a lawsuit against, or settled a claim with, Fibreboard before August 27, 1993. The Global Health Claimant Class also includes all persons (or their legal representatives) who filed an asbestos-related personal injury lawsuit against Fibreboard, but dismissed that case without prejudice prior to August 27, 1993 and retain the right to sue Fibreboard upon development of an asbestos-related disease. To be a member of the class, you do not need to be presently suffering any symptoms of injury, and your asbestos exposure need not be occupationally-related.
2.) The Global Third-Party Claimant Class includes all persons or entities who now have, or in the future may have, any claim for contribution or indemnity or other third-party claim's alleging thatFibreboard or certain of its related entities, or Continental Casualty Company., CNA Casualty Company of California, Columbia Casualty Company or Pacific Indemnity Company (collectively. the "Insurers") is or may be liable for all or part of an asbestos-related personal injury claim of a Global Health Claimant Class member.
WHAT DOES THE GLOBAL SETTLEMENT AGREEMENT DO?
Among other things, the Global Settlement:
a.) Resolves a dispute between Fibreboard and the Insurers, now pending in the courts of the State of California with respect to the extent of coverage provided by insurance policies issued by the Insurers to Fibreboard:
b.) Resolves all future Global Health Claimant Class asbestos-related personal injury claims against Fibreboard and its Insurers,
c.) Establishes a $1.535 billion fund to be devoted to the claims of members of the Global Health Claimant Class: and
d.) Removes the risk to asbestos claimants of Fibreboard losing the California insurance coverage litigation and being unable to compensate such claimants.
If it is approved and becomes effective, the Global Settlement Agreement provides I-or the following:
WHO REPRESENTS ‘THE AHEARN CLASSES?
The Court has appointed the following Class Counsel to represent the Global Health Claimant Class as a group:
The Court has appointed the following Class Counsel to represent the Global Third-Party Claimant Class as a group:
If you are a member of either of these classes, your interests as a class member will be represented in this class action, at no cost to you, by the Class Counsel. You may contact them at any time with any questions you may have regarding the class action settlement. If you wish to be represented in this class action by your own attorney, you may do so at your own expense and your attorney may enter an appearance in the class action lawsuit by mailing a Notice of Appearance to the Clerk of the Court at the address listed below.
Class Counsel does not automatically represent you with regard to filing a claim for compensation. You may file a claim for compensation yourself or you may retain any attorney of your choice, including one of the attorneys serving as Class Counsel, to represent you individually.
IF YOU ARE A MEMBER OF THE AHEARN CLASSES DESCRIBED ABOVE, YOU ARE ALSO A MEMBER OF ONE OF TWO DEFENDANT CLASSES SUED IN CONTINENTAL CASUALTY CO. V. RUDD.
On June 29, 1994, the Insurers filed Continental Casualty Co. v. Rudd, CA. No. 6.94cv458 (E.D. Tex.), (the Rudd Defendant Class Action") against two defendant classes, the Trilateral Health Claimant Class and the Trilateral Third-Party Claimant Class. In that lawsuit, the Insurers seek approval of the Trilateral Settlement Agreement, entered into between them and Fibreboard, to settle all liabilities and obligations of the Insurers under certain insurance policies they issued to Fibreboard.
In that action, the insurers also seek:
If such relief is granted, the effect will be, among other things, to bar any member of the Trilateral Classes from asserting any claims
26 Oct 94
Lloyd's Solicitors Dept: Re Byelaws
In response to an enquiry concerning underwriters acting for more than one syndicate, Lloyd's Solicitors Dept. states:-
The principal byelaw covering the matters you refer is the Multiple Syndicates Byelaw (No. 5 of 1989) which was made on 10 May 1989. This byelaw revoked the Multiple Syndicates Byelaw (No. 7 of 1985) and replaced the "Code of Practice for Underwriting Agents and Active Underwriters - Multiple Syndicates" issued on 9 December 1985.
0 Nov 94
Lloyd's List: US concern over Superfund Delays
Substantial concern has arisen over the cost and slow rate of clean-ups at hazardous waste sites, the US General Accounting Office (GAO) has concluded after a 16 month investigation of the Superfund programme.
GAO, the investigative arm of the US Congress, called for US Environmental Protection Agency (EPA) action to correct problems at the 14 year-old Superfund scheme.
The findings by GAO came too late for use in the Capital Hill debate on substantial revision to Superfund, as the measure died in September when neither chamber was able to bring the issue to the floor for debate and a vote. A renewed effort to legislate at least some revision is expected to be mounted next year.
Meanwhile, GAO found that Superfund clean-up work as at30 September 1993 had been completed for only 52 hazardous waste sites. However, significant progress had been made in moving about half of the 1,320 Superfund sites beyond the initial study phase into the design and construction phases of clean-up.
Yet GAO said that150, or 18% of the sites in the Superfund programme for at least eight years had not progressed beyond the initial study phase, and even that phase had not begun at nine sites placed on the National Priorities List (NPL) before 1987.
Errors were found in EPA data on the status of cleanups at the nine sites, resulting in under-reporting by EPA of the status of clean-up work at these locales.
GAO said: "On the basis of our limited review we do not know how widespread this problem may be, but Congress needs accurate information to adequately oversee the programme and to decide what future investment is needed."
GAO detected "a disturbing trend" of longer average clean-up times for ongoing projects than for already-completed projects. It warned that despite EPA's efforts to expedite clean-ups, the times may become even longer due to those continuing projects' greater complexity and different characteristics.
Among the findings, GAO noted that in thefinancial years 1987 - 1993 some 60% of the $10bn obligated to the Superfund scheme went to the contractors performing site clean-ups. The largest portion of clean-up spending was for remedial or long term activities including site studies, remedial designs, and construction of the cleanup remedy.
EPA since 1986 had shifted away from studying hazardous waste conditions at sites, to constructing remedies that would protect human health and the environment.
EPA had concentrated a large portion of the Superfund remedial-action budget on cleaning up a very small number of sites. Infinancial years 1987 - 1993, for example EPA obligated $1-1bn, or more than 40% of the $2-6bn obligated to construct cleanup remedies at 13 sites - or about 7% of the more than 200 sites that were funded during this period.
0 Nov 94
Lloyd's List: US Liabilities cast a long Shadow
Currently there are about1,300 sites on the Environmental Protection Agency (EPA) priority list, and the EPA expect the total to reach 2.100 by the year 2,000. Overall more than 36,000 hazardous waste sites have been identified by the EPA, which estimates the average cost to clean up a site is $31.5m.
ByJanuary 1994 clean-up had finished at 218 sites. By the end of 1992 potentially responsible parties (PRP's) had paid about $7bn in total - cumulative appropriations under Superfund were $9bn by the end of 1991. There are over 26,000 identified PRP's.
One of the biggest pollution cases was Shell Oil's suit against its insurers after they denied coverage - following the US Government's action against Shell demanding $1-8bn for clean up of the Rocky Mountain Arsenal site at Denver. Insurers won the case and have won an appeal for most issues.
Based on a study of 53 large US insurer groups the industry paid $2,184bn in 1990-92and increased reserves for pollution by $3,645bn. By the end of 1992, reserves were equal to almost seven years payments at the then current level. If the US insurance industry continued to increase its annual reserve additions by 6% each year for 25 years, it could meet the expected cost.
4 Nov 94
Times: Fraud through concealing information
Adams -v- The Queen
A person could be guilty of fraud when hedishonestly concealed information from another which he was under a duty to disclose to that other or which that other was entitled to require him to disclose.
TheJudicial Committee of the Privy Council [Lord Templeman, Lord Jauncey of Tullichettle, Lord Browne-Wilkinson, Lord Woolf, and Lord Lloyd of Berwick] so stated on October 31 in dismissing an appeal by the appellant, Grant Adams, from the dismissal by the Court of Appeal of New Zealand of his appeal; against his conviction of conspiracy to defraud.
Lord Jauncey said that the appellant had beencharged with conspiring with his co-accused to defraud any one or more of Equiticorp Holdings Ltd, its subsidiary companies and others by agreeing to use dishonestly a system of disguising the source and utilisation of moneys from legitimate enquiry by the use of offshore companies and bank accounts and a New Zealand legal firm.
Since acompany was entitled to recover from directors secret profits made by them at the company's expense, any dishonest agreement by directors to impede a company in the exercise of its right of recovery would constitute a conspiracy to defraud.
In the case of the five transactions in question the appellant had been party to the use of the overseas structure for the purpose of dishonest concealment of information which, as a director, he was under a duty to disclose to the company, and so he had properly been convicted of conspiracy to defraud.
8 Nov 94
The Times: Reinsurance is insurance business
In reNRG Victory Reinsurance Ltd before Mr Justice Lindsay [Judgment July 27]
Reinsurance business was "insurance business" within the meaning of the Insurance Companies Act 1982 and long term reinsurance business was accordingly "long term business" within that Act. Arrangements for the reinsurance of reinsurance were likewise not only "insurance business" but also "long term business" within the Act.
Mr Justice Lindsay so held in a reserved judgment in the Chancery Division when giving reasons for having sanctioned on 19 July, on the petition ofNRG Victory Reinsurance Ltd, presented to the court on 24 May 1994, under section 49 of the 1982 Act, a scheme for the transfer to Employers Reassurance Ltd of its long term business carried on in the United Kingdom.
Section 49 of the 1982 Act provides "(1) Where it is proposed to carry out a scheme under which the whole or part of the long term business carried on in the United Kingdom by an insurance company to which this part of the Act applies ("the transferor company") is to be transferred to another body whether incorporated or not ("the transferee company") the transferor company or transferee company may apply to the court by petition, for an order sanctioning the scheme".
Mr Robert Hildyard. QC. for the company.
MR JUSTICE LINDSAY said that the company, which wrote no direct insurance business but was a "pure reinsurer" carrying on both long term and general reinsurance business, had petitioned the court for the sanction of a scheme which would transfer its long term business carried on in the United. Kingdom to another company.
Three jurisdictional matters of general importance had arisen on which his Lordship had had to be satisfied before sanctioning the scheme under section 49, namely:
1. Was reinsurance business "insurance business" within the Act?
At the heart of the ordinary meaning of the word "insurance", which was not precluded by the partial definition thereof in section 95 of the Act, was the notion of securing against pecuniary loss in consideration of a payment proportioned to the risk contemplated and, accordingly, the ordinary meaning of the word included reinsurance
The references in the Act, in sections 3(2), 9(3), 32(1)(b), 32(3), 37(2)(d) and 63(1), to, "reinsurance" either only made sense if "insurance" included reinsurance or, at least, were not inconsistent with "insurance" having that meaning. The Act therefore pointed irresistibly in the same direction as the ordinary meaning of the word.
Looking chiefly to those considerations, his Lordship concluded that reinsurance business was for the purpose of the Act, included in "insurance business".
2. Was long term reinsurance business "long term business" within the Act?
If insurance business included reinsurance business then reinsurance business had to be capable of being examined to see whether it fell into "long term business" within the classes specified in Schedule 1 to the Act or "general business" of the classes specified in Part 1 of Schedule 2 to the Act; see section 1(1) thereof.
As, however, there was no reference in either schedule to "reinsurance", it had to follow that the terms of the schedules were sufficient in themselves to effect any necessary division.
As, moreover, no other machinery for such division had been provided and as the machinery provided had to suffice, the inevitable conclusion, in his Lordship's view, was that the Act contemplated that reinsurance of insurance which was insurance within the classes of business in Schedule 1 was long term reinsurance and "long term business". Long term reinsurance was therefore "long term business" within the Act.
3. Was reinsurance of reinsurance not only "insurance business" but long term business within the Act?
Retrocession, arrangements made for the reinsurance of reinsurance, being within the meaning of "reinsurance", was also within the meaning of "insurance".
The ordinary meaning of the words was sufficient to indicate that retrocession was "insurance" and his Lordship therefore concluded that it was and, as with reinsurance was divisible into classes by reference to the classes of initial direct insurance to which it related.
Being satisfied on those jurisdictional matters, his Lordship had then sanctioned the scheme before him.
Solicitors Clifford Chance.
9 Nov 94
The Financial Times: USG wins court ruling on asbestos claims.
USG, the US manufacturer of building materialswhich is fighting a large number of asbestos-related claims has won a legal victory which could have implications for the liability of insurers in asbestos cases, writes Richard Waters in New York.
The decision in theIllinois Appeals Court, upheld USG's contention that it should be able to claim against insurance policies on a property from the date that asbestos was first installed not just from the date it was discovered.
This so-called"continuous trigger" test means the company can claim under insurance policies issued between the late 1940's and 1984.
If applied to all outstanding property damage claims against the company over asbestos,the decision could make available up to $600m of insurance cover, USG said.
Eleven insurersare affected directly by the verdict, including Lloyd's of London. A lawyer for Lloyd's said the decision would be appealed to the Illinois Supreme Court.
While numerous asbestos-related property damage cases in the US are working their way through the courts, personal injury claims arising from asbestos were all covered by a global settlement reached earlier this year.
10 Nov 94
Lloyd's Solicitors Dept: Re Byelaws
Letter states: - I am not aware of any byelaws or regulations made under Lloyd's Acts specifically dealing with underwriters acting for two syndicates concurrently between the years 1980 and 1985.
11 Nov 94
The Times: Lloyd's halts Lloyd's debt collection
LLOYD'S of London was barred from pursuing thousands of names through the courts, torecover debts estimated at up to £3.1 billion, by a Court of Appeal ruling yesterday.
Lloyd's said the sum was £1 billion, not the higher figure claimed by names' action groups. Several names said the inability to collect debts cast doubt on the solvency of Lloyd's. Richard Slowe, at SJ Berwin, a firm of solicitors acting for names, said: "Someone should tell the Department of Trade and Industry that this judgment has a potential to affect the whole basis of the market."
Appealing against an earlier judgment, John Clementson, a name, successfully argued that Lloyd's could be inbreach of EC competition rules. The issue of whether a breach has taken place is set to go to full trial. Until a ruling is made, Lloyd's is unable forcibly to collect debts. Granting the appeal, Sir Thomas Bingham, the Master of the Rolls, said he was overturning the original ruling "with diffidence, reluctance and regret". Handing down the judgment, he said: "We know that this affects a very large sum of money and a very large number of names."
Lloyd's is currentlytrying to recover about £1.1 billion of debts from an estimated 10,000 names. A further £2.4 billion of losses have not yet been demanded.
Mr Clementson's action was supported by theWrits Response Group, which has almost 3,000 members and which hailed the Appeal Court's ruling as the most significant legal victory won by names. Mr Slowe, the group's solicitor, said: "This ruling halts Lloyd's in its tracks. There is no way that it or its rottweiler can progress claims against names."
In the summer, Lloyd's employed the services of Dibb Lupton Broomhead, a firm of solicitors specialising in debt collection.Michael Deeny, the chairman of the Gooda Walker Action Group, said: "Lloyd's debt collectors can now goon holiday for the next 18 months." Alan Porter, the chairman of the Devonshire Names Action Group, said the result ‘would "effectively stop Lloyd's debt collectors from attacking names' assets held outside Lloyd's for the next two years or more".
The Appeal Court judges agreed with Mr Clementson's. argument that the Lloyd's central fund was capable of being a competition-distorting agreement. In other words, it was possible that Lloyd's might have gained business, at the expense of other insurers, because policyholders were protected against the collapse of any syndicate by the central fund.
The court also said that inducements to reinsure risks within the market might also be anti-competitive. Names argue that this process was to blame for thenotorious LMX spiral, a web of reinsurance contracts between a handful of Lloyd's syndicates.
Theruling was reached with varying degrees of reticence by the three judges. Lord Justice Steyn said his initial view was that Mr Clementson's argument should fail. "I have, however, been persuaded ... by the judgment of Sir Thomas Bingham that it is not a position that I can maintain. I still consider that Mr Clementson's Community law defences will ultimately fail.
The third judge,Lord Justice Hoffman, drew attention to the fact that Lloyd's had not applied for exemption from EC rules, after repeatedly saying it would.
As soon as yesterday's judgment was announced,Lloyd's started the process of applying to the EC for an exemption. If this is granted, the Lloyd's central fund will be deemed not to be anti-competitive, but only from the time of the application.
Lloyd's also intends to petition against the refusal of leave to appeal to the Lord.
11 Nov 94
The Times: Appeal Court ruling enables Names to take battle to Lloyd's
THOUSANDS of Lloyd's of London Names could sue Lloyd's and avoid paying their insurance losses, Names' lawyers claimed yesterday, after an Appeal Court ruled that Lloyd's was subject to European competition laws.
Richard Slowe, a partner at S J Berwin, solicitors for the Writs Response Group of 3,000 Names who are resisting Lloyd's attempts to force them to pay their insurance market losses, claimed yesterday: "Names can now go on the offensive. The Lloyd's steamroller has stopped." He said Lloyd's must call off the debt collectors, who are currently pursuing more than 10,000 Names. Lloyd's could face a solvency crisis and thousands of Names could for the first time be in a position to sue Lloyd's for damages. Yesterday's ruling overturned a judgment last December by Mr Justice Saville, but thecourt upheld his view that the contract between Lloyd's and Names implied no duty of care.
A spokesman for Lloyd's said it would seek leave to appeal to the House of Lords, and claimed: "This judgment is on preliminary issues. It is like a door that's still open, but no-one has the evidence to walk through it."
The case revolves around Lloyd's central fund, which meets policyholders' insurance claims when Names fail to pay. At the latest count, the£806m central fund was standing in for £1.2 billion of Names' losses, and two months ago Lloyd's stepped up its attempts to recover the money.
The Writs Response Group claims -the central fund arrangements are anti-competitive under European law, and that Lloyd's therefore may not recover money paid out on their account.
Mr Slowe said his advice to Names who receive Lloyd's writs was: "Join the Writs Response Group. Nothing further will happen until this case is decided." He claimed Lloyd's would face serious solvency problems as a result of non-payment and said: "It is clearly in a very difficult position. It's got its rules wrong."
Mr Slowe claimed Names who lost money on the notorious spiral, where Lloyd's syndicates laid off loss with each other, might now be able to sue Lloyd's, despite its indemnity from suit under the Lloyd's Act. When Lloyd's assessed syndicates' solvency, it gave more credit to reinsurances placed inside than outside Lloyd's, he said, claiming: "Spiral losses all arose because Lloyd's arrangements were anti-competitive."
Michael Deeny, leader of the Gooda Walker Names, claimed yesterday: "At best, Lloyd's will never be able to collect any debts. At worst, their debt collectors will have to twiddle their thumbs for 18 months."
A Lloyd's spokesman conceded the outcome of its proceedings against Names would depend on the resolution of the Writs Response Group case, but added: "It won't take as long as they suggest." He said there wasno solvency problem, because "recoveries from Names are contingent assets which will be taken into account for solvency purposes". Suggestions that Names might sue Lloyd's was "speculation".
U.S. House of Representations: The Sub-Committee on Oversight and Investigations of the Committee on Energy and Commerce
Report published:"Wishful Thinking - A World View of Insurance Solvency Regulation"
29 Nov 94
Health & Safety Commission: Health & Safety Statistics – Statistical Supplement to the 1993\94 Annual Report
Table 33:Death certificates mentioning specified asbestos-related disease 1968-1991 p *+
* The time period covered remains the same as in last year's publication. This is due to theOffice of Population Censuses and Surveys, the sole supplier of death certificates in England and Wales, redeveloping , their computer system. This service will resume later this year.
+A data quality exercise has been completed on the mesothelioma register and figures differ slightly from those published last year.
Table 34: Death certificates mentioning mesothelioma by age and sex 1968-1991 p *+
*+ see footnote to Table 33
Table 35:Mesothelioma crude death rates (per million) by region 1983-1991 p *+
*+ see footnote to Table 33
0 Jan 95
Director: Unfair is foul
24 Jan 95
Annual Meeting of the Institute of London Underwriters: Statement by the Chairman, Mr L N Campbell
The annual report contains a report on General Average and the revision of the York-Antwerp Rules. A very considerable amount of work was put in by the Institute to ensure that the position of insurers was protected.
Following the decision ofOrion Insurance Company/London & Overseas top go into provisional liquidation, we were able to announce that agreement had been concluded between the ILU and Nationale Nederlanden regarding claims arising after those companies were acquired by Nationale Nederlanden in March 1969 and August 1970.
The negotiation of this agreement through the ILU's legal advisers has significantly contributed towards the delay in the strategy working party producing final conclusions on membership issues.
25 Jan 95
TheHouse of Commons Treasury and Civil Service Committee press notice
5 Feb 95
Sunday Telegraph: Names deal likely in April
14 Feb 95
Evening Standard:Warning to ministers over Lloyd's
Governmentministers have been warned by the Conservative chairman of the Treasury select committee that they will face a grilling on the Lloyd's insurance market if Department of Trade officials fail to give satisfactory answers at a hearing tomorrow.
Sir Thomas Arnold says he willraise a series of concerns about DTI handling of Lloyd's solvency. This would include issues surrounding the vital Non-Marine All Other Business account highlighted by Business Day last week.
"There areall sorts of things that we need answers to. We will want to know for instance what the real system for testing solvency was. If we do not get the answers we need we will have to call ministers," says Sir Thomas.
His concern is shared by other committee members such asBrian Sedgemore who questions whether Lloyd's might have run into insolvency last year.
The MP for Hackney South and Shoreditch says: "Isuspect the department has been following its own agenda, which is to keep the Lloyds market afloat so that it can continue to attract foreign investment."
"I suspect it (theDTI) has been more concerned about making sure it did not frighten off future investors than checking to ensure the market was solvent using normal accounting and actuarial procedures."
DTIofficials, who share responsibility for the regulation of Lloyd's with the market itself, come before the committee after Lloyd's chairman David Rowland made his second appearance yesterday.
Rowlandhas dismissed suggestions by some Lloyd's Names that the markets which faces losses of more than £8 billion, has been effectively bankrupt for some time.
One of thekey areas of debate between Lloyd's and disaffected investors has been the level of minimum reserve figures, especially those for the NMAO class of business, which accounts for some £4.6 billion of the market's losses.
Chris Stockwell, chairman of the Lloyd's Names Working Party, says that theNMAO reserves have been too low and has warned of potential legal action against the DTI. But Lloyd's officials have insisted that two tests were used annually to decide Lloyd's overall solvency levels and that the more exacting of the two was always applied.
"Forall accounts (including the NMAO one) containing asbestos, pollution and health hazard liabilities, the Test Two figures have been used for many years," says a Lloyd's spokesman.
16 Feb 95
Daily Telegraph: Lloyd's rules
TheDepartment of Trade and Industry favoured continuing self-regulation at the troubled Lloyd's of London market because Lloyd's was a can of worms" and the DTI did not want to be stuck with it, Labour MP Diane Abbott said yesterday at a Treasury select committee looking at City regulation.
17 Feb 95
Times: Lloyd's names need offer they cannot refuse
Lime Street's impeccable image is under heavy fire, says Alfred Doll-Steinberg Thetide has turned. Lloyd's of London no longer has the support it could rely on. By the beginning of this year it was clear that the tide of unfavourable publicity generated by aggrieved Lloyd's names was influencing the opinions of three groups crucial to Lloyd's welfare: the judiciary, the providers of corporate capital and more importantly, Lloyd's policyholders.
Previously, legal skirmishes that ended in decisive victory for Lloyd's. Early in1992 for example, before the ripples from the struggle between Lloyd's and its names had caught the attention of a wider public, the courts ruled that the council of Lloyd's owed no duty of care to its names – a decision incomprehensible to most of them. Also that year names from the Gooda Walker Action Group were refused a judicial review of Lloyd's. The application was rejected on technical grounds, but the judges made it quite clear their disapproval of such an ungentlemanly attempt to avoid paying debts to an institution as unimpeachable as Lloyd's.
But1994 saw a series of important court decisions favourable to litigating names. The Gooda Walker judgment in the High Court in October attracted the most media coverage. But even greater damage to Lloyd's image was done by the Court of Appeal's decision in November to refer to the European Court a case between Lloyd's and John Clementson, who refuses to pay his losses. If Mr. Clementson wins this case, Lloyd's will be unable to enforce demands that names pay their losses. And until the case has been decided it is hindered from collecting the debts.
The Clementson decision was followed by the news onDecember 12 that an American company had withdrawn from investing £50 million in Lloyd's, and on January 7 that Lloyd's three-year run of improving business conditions had ended. The end of the run was not just symptomatic of an industry-wide downturn, as was made clear by the news on January 8 that Exxon had switched most of its 1995 insurance renewals away from Lloyd's. This was said to be one of the biggest rejections for Lloyd's in recent memory, but it was only the tip of the iceberg.
Lloyd's reaction to the Gooda Wa1ker result was toannounce that it would change its rules so that Lloyd's could have first call on the money due so the litigating names. But after the Clementson decision Lloyd's mood changed. The plan to amend the rules was dropped "for the time being to facilitate a new attempt to settle all disputes with the names". A year earlier, when Lloyd's made its £900 million settlement offer, which was rejected by the names, it had stated bluntly that "there are no circumstances in which the offer will be increased". Peter Middleton, Lloyd's chief Executive, has embarked on negotiations with the chairmen of each of the Lloyd's action groups.
There are currently43 action groups, up from about 35 before the plan for the new offer was announced: names are acutely conscious that previously non-litigating names were offered less than litigating ones.
The result is now evident. The disputes are proliferating and none is near a conclusion. Theaward in the Gooda Walker case is estimated by the action group at 80 per cent of the names' losses, but the agents have no means to pay, except for their errors and omissions insurance, and their insurers claim that their cover is inadequate.
Meanwhile new action groups are rising hydra-like; the salary earning committee members are in no hurry to settle; andLloyd's itself, having been proved to be the only possible source of the funds necessary to achieve a settlement, has been drawn in anyway - but at the maximum cost to its image and to its future ability to generate those funds.
Thenext Lloyd's offer really ought to be the last; the consequences of failure to agree could prove too costly for both sides.
21 Feb 95
Daily Telegraph: MP attacks Lloyd's brokers
The Lloyd's of London insurance market's broking community, whichcritics claim made fortunes on the backs of loss-hit Names, yesterday defended its record before the Treasury select committee.
Quentin Davies MP, a member of the committee which is looking into City regulation, said: "You can spin any line to the underwriters after a good lunch and there ‘s a lot of evidence to suggest that brokers have been spinning any number of good Lines to underwriters after good lunches."
DieterLosse, chairman of the Lloyd's Insurance Brokers' Committee, which represents 220 Lloyd's brokers, replied: "Brokers have acted faithfully on the instructions of their clients."
Conservative MPSir Thomas Arnold asked Mr. Losse when he became aware of the spiral, where Lloyd's underwriters laid off risks with each other, Lloyd's brokers earned commissions and Lloyd's Names suffered terrible losses.
Mr. Losse said: "I don't think anybody fully understood what a debacle it would be when the catastrophes started to happen. I don't think anybody had the overview." Mr. Davies said: "But the brokers in aggregate knew perfectly well."
Mr. Losse's colleagueKen Carter, who is chief executive of the Lloyd Thompson broking group, replied that brokers acted independently and claimed that "there was no single umbrella."
Mr. Davies asked: "Should there be a regulator who makes it his business to monitor the flaws of the market?" Mr. Losse replied: "It is up to the underwriting agents to control their underwriters."
23 Feb 95
Daily Telegraph: Tobacco firms may lose billions
A Judge in Mississippi yesterday rejectedthe traditional "free will" defence of tobacco companies, potentially opening the floodgates to billions of dollars in damages for the costs of dealing with smoking-related illnesses in cases mounted by four states.
The decision gives the go-ahead to a law suit mounted by the state of Mississippiclaiming compensation for taxpayers' money spent on the health care costs of smokers too poor to carry their own medical insurance.
Lawyers for the tobacco industry had sought to dismiss the case on the grounds that smokers knew the risks and chose to smoke. That defence has won against numerous individual cases brought by smokers or their relatives.
But the judge ruled that since the state case, a "class action", was being brought on behalf of taxpayers who footed the medical bills, the defence of smokers "free will" was irrelevant.
The ruling came on the day thatFlorida filed a £886 million suit against R J Reynolds and Philip Morris in a replica of the Mississippi case. The Florida case demands compensation for the Medicaid welfare-medicine costs of treating poor smokers from 1989 to 1995. The Florida case has additional potency because the state passed a law last year to prepare the ground for just such a civil case.
Itremoves the blame-the-smoker defence, allows the use of statistical evidence linking smoking to health problems, and allows courts to impose judgments against the tobacco companies based on market share rather than percentage of fault. As Governor Lawton Chiles announced the filing of the law suit, the two named tobacco companies filed a case in the state Supreme Court seeking to have the new law tilting the playing field against them declared unconstitutional.
Two other states have also filed class-actions suits against tobacco companiesfor the cost of welfare health care, West Virginia and Minnesota. If all are successful the companies would be facing damages of at least £2.5 billion from just those four states.
TheMississippi ruling was hailed as a breakthrough.
"Taxpayers never decided to smoke and therefore never assumed any risk," said Mr. Graham Fielder, of the Tobacco Products Liability Project, which has backed suits against the companies.
25 Feb 95
The Economist: A deadly toll
ASBESTOS is one of the most insidious of modern killers. A paper to be published in theLancet on March 4th forecasts that deaths from mesothelioma, an acute cancer of the lining of the lung, which over the past 20 years have increased fivefold to 1,000 a year, will triple again in the next quarter century.
The current death toll from all asbestos disease including mesothelioma is about 3,000 a year. But that figure is expected by theHealth & Safety Executive, a government agency, to rise to between 5,000 and 10,000 a year, which means there could be another 150,000 to 250,000 asbestos-related deaths in store.
Theuse 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. 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 development of the disease (often as much as 40 years), mortality rates are certain to go on rising for at least a generation.
In the Lancet paper, Julian Peto, professor of epidemiology at London University's Institute of Cancer Research, highlights the rapidly mounting toll of the most deadly form of asbestos-related illness. The only known cause of mesothelioma is exposure to asbestos dust. The disease is usually fatal within two years of diagnosis. Using current mortality statistics, Mr. Peto predicts that the increased use of asbestos in the 1960's is bound to be followed by an increase in the number of mesothelioma deaths in the years ahead. Thepeople most at risk are those who worked in the building industry and who were exposed even briefly to asbestos dust a generation ago.
Tragically, nothing can be done. There is no cure for either mesothelioma or asbestosis, a thickening of the fibre of the lungs. The victims usually feel no ill effects until they sudden]y find themselves short of breath. The worst affected waste away and eventually die in an agonising, choking spasm.
What is shocking is thatmost of these deaths need not have happened. As far back as 1930, the medical inspector of factories, E R Mereweather pointed out that "inhalation of asbestos dust over a period of years result in the development of a serious type of fibrosis in the lungs." New safety regulations were introduced 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 and 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 and Newall sought to suppress a studyit had commissioned from Sir Richard Doll showing that asbestos workers were ten times more likely than other workers to contract lung cancer. It claimed that "the conclusions reached were not supported by medical evidence". Sir Richard was so outraged that he published the study himself.
British sufferers from asbestos-related diseases face a struggle securing legal compensation.Awards for even the worst-affected mesothelioma cases rarely exceed £75,000 ($120,000). Legal experts are ever more inclined to say that it is not worth bringing an action.
0 Mar 95
Reactions: Aviation and Marine losses on the increase in 1994
Unprecedented aviationand marine losses were recorded by insurers in 1994, according to the Institute of London Underwriters, whose members represent half the London market companies.
World-wide aviation underwritingwere hit with a record £2-2bn in claims last year. Twenty-two western-built and 14 eastern-built commercial jetliners were destroyed last year, broadly in line with the average over the past decade. But higher hull values and increased liability costs wiped out any improvement made in rates and terms in the last three years.
Thevolatile business of satellite insurance suffered severely too, with world-wide losses of $770m.
In the marine market, although thenumber of ships lost declined to 103, compared with 140 in 1993, the tonnage lost rose significantly to 1.23m. In the ILU's annual report, published last month, chairman Len Campbell described 1994 as a calamitous year for the reputation of world shipping: more than 1,100 people died in the Estoria, Cebu City and Alqamar losses, while twice the number were evacuated at sea or disembarked in port in lesser accidents.
Marine insurersstarted 1995 badly and will be hit by cargo losses from the January earthquake that devastated Kobe.
Campbell is optimistic that insurers can continue to recover from the soft pricing and huge losses of the late-Eighties, however. Although theranks of the London market has thinned and over capacity is not a problem, the ILU market must hold its nerve in the face of re-emerging dormant capacity.
ILU membershiphas decreased from 74 companies in 1994 to 65 this year as more companies consolidated marine departments within existing business or pull out altogether. The most notable failure last year was Orion, which is now in administration. The shrinking membership of the ILU has prompted speculation that the ILU might be forced to give up its building at 49 Leadenhall Street. Campbell told members they "should not fear changing buildings or merging interests with other associations."
Chief executive Tony Funnell scotched any rumours that the ILU was planning to co-habit with members of theLondon Insurance & Reinsurance Market Associations at the London Underwriting Centre, however, pointing out that the lease on Number 49 ran until 2006.
4 Mar 95
The British Medical Journal, Lancet, publishes an article forecasting that deaths from mesothelioma, an acute cancer of the lining of the lung, which over the past 20 years have increased fivefold to 1,000 a year, will triple again in the next quarter century. Thecurrent death toll from all asbestos disease including mesothelioma is about 3,000 a year. But this figure is expected by the Health & Safety Executive, a government agency, to rise to between 5,000 and 10,000 a year, which means there could be another 150,000 to 250,000 asbestos-related deaths in store.
5 Mar 95
Mail on Sunday: Benyon fees anger Names
TomBenyon, the former Conservative MP, has been accused of overcharging Lloyd's Names whom he represented in their fight for compensation from the insurance market's underwriters
Benyon, the former MP for Abingdon, avoided bankruptcy two years ago only by striking a deal with creditors to whom he owed £2 million. He formed the Warrilow Action Group in 1988 to represent 610 investors who lost more than £90 million in Warrilow syndicates at Lloyd's. Three years ago, the group settled with the underwriters for a payment of almost £4 million.
The Names are angry that theWarrilow Steering Committee headed by Benyon, has run up costs of almost £200,000 for fees, charges and expenses paid to committee members. In addition, more than £100,000 has been held back in contingency fees.
TheWarrilow Fighting Fund accounts show that two members or the committee - accountant Robin Chaventre and insurance agent Alan Box - each received more than £40,000 in professional fees for negotiating the settlement.. Treasurer Harry Verney was paid almost £42,000 for administrative charges and expenses.
ButBenyon received the largest amount. His office expenses were £59,429, despite working from his house in Adstock, near Buckingham. In addition, he charged £8,619 for expenses, including a trip to the IJB to drum up support for the fighting fund.
The former MP also faces problems from afurther Lloyd's case after refusing to deliver up the files of the largest Lloyd's action group, the Writs Response Group. The action followed the sacking of Benyon's company, Public Affairs Associates, as secretary of the group.
Benyonclaimed he was owed £27,000 and had a justifiable lien on the files. WRG therefore paid the money into court and asked for the matter to go to trial, which the judge agreed last November.
Benyonleft it to the last moment to deliver his defence, but WRG's law firm, Reed Minty, claims there was no supporting documentation and plans to apply for a summary judgment against Benyon.
5 Mar 95
Mail on Sunday: Hung by the old school tie?
ANunprecedented legal action due to start tomorrow will challenge the actions of one of the City's most powerful groupings.
TheCourt of Aldermen, about two dozen establishment figures including brokers, bankers, company directors and lawyers - more than half of them boasting knighthoods - is being called on to justify its decision effectively to "blackball" a newcomer without giving reason.
The case, brought by businessmanMalcolm Matson, is giving rise to allegations that the City is governed by secret cabals and to suggestions that the Freemasons may influence decisions.
Itfocuses the spotlight firmly on the procedures which lead to the choice of the Lord Mayor of London, a position of enormous importance in promoting the City. With the Nolan Committee now probing conduct in public life, there are those who believe that the Court or Aldermen risks being hung by the old school tie - one of its most dominant features.
‘Thiscourt case is another nail in the coffin of the City of London,' says Ken Livingstone, the Labour MP who once led the former Greater London Council. He describes the vehicle of the Aldermen as ‘outrageous'. David Evans, Conservative MP for Hatfield, says that the Aldermen's actions are ‘totally wrong'.
Thecrux d the court action is the way in which the Court of Aldermen has vetoed the appointment of a new Alderman, despite his overwhelming victory in an election for the post last November.
There are deepsuspicions that Malcolm Matson has been excluded because he is, by his own definition, ‘an outsider'. Successful business ventures have made him a millionaire, but he remains a grammar school boy, whereas every one of the 24 existing Aldermen went to public school. Four of them, including Sir David Rowe-Ham and the current Lord Mayor, solicitor Christopher Walford, went to the same school, Charterhouse.
Sir David, a former Lord Mayor who heads the Privileges Committee which decides on who shall join the ranks of Aldermen and eventually become Lord Mayor, insists this is ‘just coincidence'. He says ‘There is no way that this is an Old Carthusians Club'.
MalcolmMatson made his fortune in cable television, then launched the City communications network COLT - City of London Telecommunications. He was elected to the City's Bread Street ward with 78% of the poll, only to have his victory overturned by the Aldermen.
Hebelieves that their decision to veto his appointment to their ranks is hugely damaging to his reputation, and his action is based on a demand that he should be given the reason why he has been deemed unsuitable for the job.
It will beparticularly embarrassing for current Lord Mayor Christopher Walford, a partner in law firm Allen & Overy. His firm provides the bulk of the voters in Bread Street ward, and it was they who elected Matson. Now, in his role as the foremost Alderman, Walford must defend the overturning of his partners' democratic vote.
Surveyor Anthony Bullhas also found the Aldermen determinedly blocking his path towards becoming Lord Mayor. He was first elected an Alderman in 1984, but suffered the same rejection as Malcolm Matson. His supporters objected and Bull was persuaded to stand for re-election. When he won a second time, the Court of Aldermen accepted the decision, but now they are fighting him again.
ButSir David Rowe-Ham defended the workings of the Court of Aldermen. ‘It's a very democratic body', he insists.
Rowe-Hamwas judged to have been a successful Lord Mayor, vigorously promoting the cause of the City and business during his 1986 year or office. He is a member of the Freemasons, as are many of the Aldermen. There is even a Guildhall Lodge, which adds weight to gossip that membership can help to advance careers within the Corporation.
5 Mar 95
Sunday Times: Shunned alderman takes on the City
MALCOLM MATSON felt he had the perfect credentials to join the exclusive coterie of men who rule the City of London according to conventions laid down in medieval times. A wealthy businessman he was a respected figure and knew the right people.
Yet it appeared his face did not fit as a prospective lord mayor, and his blackballing by the 25-member court of aldermen has left him infuriated. This week, he launches a High Court action for judicial review that could lead to the reform of the 800-year-old customs of the aldermen who wine and dine in the Mansion House and preside at ceremonial functions.
Matson will seek to overturn the rules that enabled the aldermen to reject him for office though he had been elected with 78% of the vote in his local ward. Without having to give its reasons, the aldermen decided that he was not "fit and proper" for the post of alderman.
It is an arcane verdict that has baffled his supporters. There is nothing in Malcolm's past or personality that could possibly disqualify him,'' one colleague said yesterday. "It seems that his face did not fit - perhaps he did not attend the right public school or belong to the right clubs."
The case has the hallmarks of a clash of cultures. The son of a local authority engineer. Matson, 51, is a product of a grammar school education at Strode's in Egham, Surrey. By contrast, at least 21 of the 25 aldermen attended top public schools including Eton, Harrow, Charterhouse, Radley, Haileybury, Rugby and Stowe. They are drawn from some of the most prestigious City names, including Rothschilds and Linklaters & Paines. Wrapped around the connections is a web of livery companies, ancient trade organisations that are now mainly dining clubs.
Matson is a self-made businessman, founding Europe's first all-fibre optic public telecommunications network which serves the City. He is a member of the court of assistants, Worshipful Company of Coopers; a liveryman of the Worshipful Company of Glass Sellers, on the committee of Bishopsgate Ward Club, and a member of the City Livery Club.
Yet when he arrived in morning dress to take his place in the aldermen's circular meeting chamber on December 6 after his election last November they rejected him . Rigged in their red and sable robes, they grilled him for half an hour sent him out and then informed him of their decision.
The aldermen have used their veto onlyfive times in 21 years. The most controversial was their decision twice to veto the overwhelming election of Edwina Coven, a fashion consultant and the first woman to be elected, in 1973. She went on to a distinguished career in the City Corporation and was made lieutenant of the City by Margaret Thatcher.
Last night Coven said the power of veto was undemocratic: "If you are chosen by properly held elections then the court of aldermen should have no right to refuse you.''
The common Council, of which Coven became leader, does the bulk of the corporation's work. Members are elected annually. The aldermen can attend council meetings and vote, but are outnumbered by the council members.
TheCity was the only local authority allowed to keep its aldermen when they were abolished elsewhere in 1972. Aldermen wine and dine regularly at the Mansion House, home of the lord mayor of London, and at Guildhall, the official headquarters. They rub shoulders with prime ministers and ministers, not only from Britain, but from abroad.
Each alderman gets a turn as lord mayor, for which he is given the use of two Rolls-Royces, travel expenses and the right to live in the Mansion House . There are230 lunches, dinners and banquets each year at the Mansion House, which has extensive wine cellars and 37 staff.
The row comes at a sensitive time for the corporation, which, with a budget of £155m, is responsible for policing the City, the roads and its handful of schools. The Labour party
has outlined its intention to reform the way it is run.
This week's case will centre on accountability: can the aldermen make such a ruling without detailing their reasons? While Matson acknowledged that his rejection had been a blow, he is maintaining a diplomatic silence: "I am challenging the decision through the proper channels and I don't want to comment before the court hearing."
The aldermen are standing their ground. Tony Halmos, spokesman for the corporation said: "We feel we have a strong case and we hope and expect to win."
26 Mar 95
Observer: Lloyd's to reopen asbestosis probe
Lloyd's to reopen asbestosis probe
Regulatory authorities a t Lloyd's of London have agreed to reopen an investigation into allegations that insiders traded on their knowledge of the threat posed by asbestosis - one of the prime causes of the insurance market's long-running crisis.
The Observer has been told that Sir Alan Hardcastle, chairman of Lloyd's regulatory board, hasresponded to fierce parliamentary criticism and accepted the need to examine all available evidence.
Hardcastle told the Commons Treasury and Civil Service Select Committee last month that he wasnot going ‘to duplicate' an investigation by Lloyd's Council' five years ago that cleared the market of all allegations. But a dossier of evidence presented by Memery Crystal, a solicitor acting for a loss-making Name, is said to have persuaded Hardcastle that he will need to review the evidence available to the Council in 1989-90.
Evidence published on Friday by the Select Committeeshows that Hardcastle faced intense pressure to review the evidence that market insiders deliberately concealed the scale of impending claims in the early 1980s.
It is alleged thatinsiders decided to draw new Names into the market, exposing them to the brunt of asbestos claims. That claim has consistently been disputed by Lloyd's. The Observer reported earlier this month that the Select Committee is expected to urge the Government to impose external regulation on Lloyd's following unsatisfactory exchanges with Hardcastle at two hearings last month on the asbestosis question. Some MPs hope that he now plans to prove them wrong - by reopening the asbestosis ‘can of worms'.
TheSelect Committee was concerned that Hardcastle had not felt the need to examine the minutes of a working party that had examined the asbestosis threat in 1982. It is alleged, amongst other things, that the Asbestosis Working Party decided at a meeting on 11 January 1982 to issue advice to the market about the level of reserves that would be required for asbestosis claims – and that no such letter was ever sent.
3 Apr 95
Letter to theBank of England
Thank you for your letter of23 March about the role of the Nominated Members and my part in their appointment.
Myrole in the selection of Nominated Members of Lloyd's Council, as specified in the Lloyd's Act of 1982, is to confirm appointments. This followed the recommendations in the Fisher Report of 1980 that there should be members from outside Lloyd's nominated by the Council whose appointments would be confirmed by the Governor of the Bank of England in order to make it clear that the nominees are independent and of a stature to make a distinctive contribution to the work of the Council. Their remit is to provide an independent voice on the Council and to bring the benefit of their experience to bear on the Council's work, and as such their responsibilities are to report to the Council. There are no procedures for the nominated members to report back to me as the Bank has no ongoing responsibility or role in the operation of Lloyd's..
I dotake a close interest in developments at Lloyd's and have been following the Treasury and Civil Service Select Committee's investigations into financial services regulations.
12 Apr 95
IndependentLloyd's evidence queried
A senior civil servant from theDepartment of trade and Industry has been accused of being "less than honest" with MPs' about the financial health of the Lloyd's of London insurance market.
Membersof the Treasury and Civil Service Select Committee are to be urged by their colleague, Brian Sedgemore, Labour MP for Hackney and Shoreditch to recall Jonathan Spencer, under-secretary in charge of the insurance division at the DTI.
Mr. Sedgemore claims that Mr.Spencer left MPs with the clear impression that Lloyd's had no problems with its statutory solvency position when he appeared before them last February.
However, it emerged earlier this week that Lloyd's believes that it could fail its annual solvency test next year. Themarket's authorities are working to put a rescue plan in place before the end of the summer. Mr. Sedgemore said: "If he did not mislead us he was certainly less than honest about solvency."
TheMPs have finished taking evidence as part of their investigation into regulation at Lloyd's. Mr. Sedgemore added "I believe there is a case for a one-off hearing. This is not a minor matter. He was given every opportunity to say that Lloyd's might fail. He adamantly failed to do so. The select committee has to operate on the principle of utmost good faith. He kept on insisting it was solvent."
Lloyd's, like all other insurance businesses, mustpass an annual test to show that it has sufficient assets to meet its liabilities. If it failed, the market would have to close.
Lloyd'srisks failing its 1996 test because 7,000 names have refused to pay more than £1bn of losses. The market's central fund, which is meant to meet the debts of defaulting names, does not have sufficient cash to meet claims.
Partof the rescue plan involves levying names and corporate capital investors who are trading on at Lloyd's.
15 Apr 95
Times: Name's Lloyd's income is not from trade or profession
16 Apr 95
Sunday Telegraph: Brokers seek solace in fees
17 Apr 95
Daily Telegraph: Lloyd's to make call for £600m
24 Apr 95
Times: Lloyd's Names could face £600m cash call
26 Apr 95
Daily Telegraph: Lloyd's chief to face MPs for third time
THETreasury Select Committee has called Lloyd's of London chairman David Rowland for questioning today to answer speculations that the insurance market is verging on collapse.
This will be MrRowland's third appearance before the committee, which subjected him to tough questioning in February.
Back then, when pressed to say what would happen ifLloyd's failed to pay claims, he answered testily. "Whatever our past mistakes we have got potential for the future. Every time we talk about this, another client goes to our competitors. I don't think the leading competitors, Allianz and the AIG, are subjected to what we're being subjected to here."
Last night, afterdays of speculation about the insurance market's future, Lloyd's tone was more conciliatory.
A spokesman said: "Weappreciate the committee's interest in enabling Lloyd's to have this opportunity of dispelling many of the misconceptions stemming from recent press coverage and to reassure the committee that we shall not be deflected from the task of securing our objectives for the development of Lloyd's business." The meeting would be held in private at the House of Commons this afternoon, the spokesman added.
Yesterday afternoon, Lloyd's chief executivePeter Middleton tried to reassure 300 of the names, whose assets traditionally support underwriting at Lloyd's, that it would pass its August solvency test this year and next. He complained: "We have a national characteristic of wanting to run things down and then bemoaning that it's gone." However, he also gave the first indication that the Department of Trade and Industry might force the insurance market to change the way it operates.
Speaking at a London conference of theAssociation of Lloyd's Members, he said analysts expected Lloyd's to declare an £800m profit next year and continued: "It may be that the DTI wants us to change this, that or the other but I find it inconceivable that a regulator will approach a body that has just posted an £800m profit and say we're going to close you down."
ALloyd's spokesman said he did not know specifically the changes to which Mr Middleton was referring.
0 May 95
ALM News: Lloyd's quarterly survey for March
3 May 95
Daily Telegraph: DTI letter to ease Lloyd's fears
THEgovernment has given Lloyd's of London a letter it can use to reassure policyholders that the insurance market is not verging on collapse. In an unprecedented joint effort by Lloyd's and the government, the letter was written on Department of Trade notepaper and contributed to brokers and underwriters by Lloyd's marketing department on Friday.
Itclaims reports that the DTI might force Lloyd's to close are "irresponsible and incorrect" and is accompanied by a message from Lloyd's chairman David Rowland telling market professionals: "Please feel free to make use of this letter and of my letter in discussions with your clients."
Labour MP Brian Sedgemore, a member of the Treasury Select Committee which is expected to publish a damning report on Lloyd's this month called the effort "a sign of panic", and said it raised questions about who was running Lloyd's.
TheDTI denied that it might be construed as a government guarantee. "It says the DTI expects Lloyd's to meet its solvency requirements. There is no way anyone could say that we've said Lloyd's is solvent," claimed a spokesman.
He said thedepartment had granted permission for Lloyd's professionals to show the letter to clients. He confirmed that this had not happened before, but refused to say whether ministers had authorised the decision. "I don't want to discuss the internal clearings of letters," he said. "All you need to know is it came from Richard Hobbs."
In theDTI's letter, Mr Hobbs, a grade 5 civil servant who reports to the department's head of insurance Jonathan Spencer, writes: "It may he helpful if I make one or two observations: The Government expects Lloyd's to meet its statutory solvency requirements in 1995. It is far to early to speculate about the position in 1996."
Hecontinues: "We consider that Lloyd's current priority is to implement the proposals of its business plan to overcome the problems that have beset the market in a recent years."
3 May 95
Times: From government to underwriter
THEletter sent to David Rowland by Richard Hobbs. revealed on these pages today, is as disturbing to taxpayers as it is comforting to members of Lloyd's of London. Mr Hobbs' missive drags the government another step nearer to a rescue, and will be seized upon gleefully by the restless army of American lawyers camped outside Lloyd's gates.
Mr Hobbs' employer, theDepartment of Trade & Industry, nay feel that the letter merely repeats earlier assurances, and denies that it could be construed in any way as a government guarantee of Lloyd's solvency.
Still, it does bring to mindearlier episodes, like the letter of comfort to British Leyland in its hour of need, and the incompetent authorisation of Barlow Clowes. The taxpayer got away with the former case, but was skinned by the latter. Lloyd's is not at all like Barlow Clowes. We hope.
3 May 95
In the Chairman's report dated 3 May 1995 Mr. C K Murray, Chairman of R .J. Kiln & Co Ltd wrote:
"Syndicate 510 is certainly one of the few if not the only syndicate that wrote a general Non-Marine account in the 1960's and that does not owe its survival to a reinsurance policy purchased from the Outhwaite Syndicate or from one of the very few markets that offered this cover.Our survival is due to the fact that we have always attempted to keep our acceptance of liability business in the United States to a low percentage of our overall account and because our total group capacity has grown from approximately £1m in 1963 to approximately £500m today."
From 1963 to approximately 1968 the Kiln Syndicate wrote a small book of direct US casualty insurance.Nearly all of this was written under market line slips and in particular the Price Forbes line slip. Nearly all of it was high level excess umbrella business and none of it was primary business. That book ceased in 1968 or 1969. The Kiln Syndicate was mostly a reinsurance syndicate, and had always written some reinsurance of US casualty business. In the 1970's that was predominantly either the casualty element of global or package reinsurances or the reinsurance of claims made and medical malpractice business. From the 1980's onwards, the element of global business disappeared, and from then on virtually all of the syndicate's US casualty business was on a claims made or a high level clash basis. There was a specific programme of outward insurance to protect the direct book, which consisted of an excess cession treaty protecting each year of account, covering each line written. It varied from between 75 and 80% of the syndicate's line, in excess of 25 or 20% of the line, with unlimited reinstatements as to the original business and that in turn enured to the benefit of an excess of loss protection, with a very low deductible, about $10,000 each and every loss, also with unlimited reinstatements. Thus the per loss retention of the syndicate was approximately $5,000 or $10,000 any one casualty loss. The syndicate's total casualty book was never more than about 10% of the book at its maximum. Mrs. Rowe said "we did not have the sort of book that would inevitably respond to every casualty problem that surfaced" and "we were known in the market as almost entirely a short tail syndicate".
3 May 95
Newsday: NY: Lloyd's of London risky for policyholders
4 May 95
Letter from theBank of England
I am sorry I have not written before now in response to your letter of 21 April but I have been abroad on business.
I have nothing to add to my letter of 19 April. I repeat that theBank has no responsibility for, or role in, the operation of Lloyd's or its supervision. My role in confirming the appointment of nominated members of Lloyd's Council is simply that.
I note that you have written to the Clerk of the Treasury and Civil Service Select Committee.
5 May 95
Financial Times: Dow Corning may seek protection from implant court claim
Dow Corning, the US company which is the biggest contributor to a $4-25bn (£2-6bn) world-wide settlement over silicone breast implants, warned yesterday it might seek protection under US bankruptcy law from growing compensation claims.
The warning came amid signs that thesettlement, agreed a year ago in a US federal court, was in danger of collapsing. Many women have already decided to pursue their claims separately through the US courts, and legal developments in the US over the past week have raised the likelihood that more will abandon the global plan.
Thousands of women allege they have been harmed by implants, claiming damage to their immune systems and other medical problems.
Dow Corning, which formerly made implants and sold silicone to other manufacturers, said it was "actively considering various alternatives, including protection under Chapter 11 of the US bankruptcy code", though it had not yet taken any decision to file.
The move would not prevent it paying out more than $2bn under the settlement to women who claim to have been harmed by implants, the company said.
However, Dow Corning would be protected from the7,000 separate legal actions brought by women who have decided not to accept the settlement. The warning comes two days after the $4-25bn settlement was opened for re-negotiation. Judge Sam Pointer, the US federal judge who has overseen the global agreement, indicated there would not be enough money to meet the initial payments that had been promised.
If the manufacturers do not offer to contribute more money, payments would have to be reduced and women would be given another opportunity to opt out of the deal, he added. Dow Corning is a venture between Dow Chemical and Corning, a US maker of glass and other products.
Bothparent companies said their risk from a potential Chapter 11 filing was limited to their investments in the company, which amounted to $874m at Dow and $342 at Corning.
Like other implant manufacturers, Dow Corning continues to deny there is any medical evidence linking implants to damage to the immune system.
5 May 95
Financial Times: Lex Column: Dow Corning
For Dow Corning to seek shelter in Chapter 11 would be a drastic development. For such a large company to be overwhelmed by liability claims seems absurd, especially when no scientific relationship has been proved between the breast implants and the plaintiffs' alleged diseases. Yet the financial arithmetic is compelling. Dow Corning has undertaken to pay $2-1bn ($1-3bn) into a settlement, but the judge overseeing the agreement says funds are inadequate to meet commitments. Plaintiffs seeking greater compensation could be encouraged to join women who are pursuing the company in other, separate actions. The cost of compensating them could break the company.
Insisted it would not hide behind Chapter 11. But the decision by the parents, Dow and Corning, to consider the move is a measure of their exasperation. In theory, Chapter 11 should stop out-of-court settlements and force plaintiffs to seek compensation from the settlement fund. Bankruptcy would reduce the parents' earnings, but should, in theory, draw a line under the affair.
The danger is that the plaintiffs turn their attention to the parent companies. Given its size, Dow makes a tempting target: lawyers have already won once against the group, although the decision was overturned on appeal. Other big groups in similar circumstances such as 3M, Bristol-Myers Squibb and Union Carbide are also at risk. At least they can take comfort that Dow Corning had 50 per cent of the silicone implant market.
9 May 95
Letter from the Bank of England
Thank you for your letter of the 4th May.
You havenot, however, answered matters raised in our letter dated 21st April, and if you do not contradict them, we must assume that they accurately reflect the position of the Bank under your predecessor.
With the greatest possible respect, what youstate is the role of the Bank of England at the present time does not conform to what was said in 1982 and before when the Lloyd's Act 1982 was enacted. The disasters of the regulation of Lloyd's has, in our submission, only been possible and has been compounded by the attitude which you now state is the current position of the Bank and no doubt this will be taken into account by the Treasury Select Committee in their deliberations as to the way forward for the regulation of Lloyd's.
Quite apart from the above there is what we can only describe as thepolitical issue, as between H M Treasury and the Department of Trade in the last analysis.
11 May 95
Report of Examination of Lloyd's,London as of 31 December 1993 by Paul Cohen, Bernard Ganley, and Joyce N Bushell on behalf of the State of New York Insurance Department.
The examination was conducted at the Corporation of Lloyd's building located at One Lime Street, London EC3M 7HA.
As a result of this examination, it was determined that, as of 31 December 1993Lloyd's failed to maintain the minimum surplus amounts required to be held in trust funds in the United States pursuant to Regulation No. 20 (11 NYCRR 125). It was also determined that although Lloyd's maintained the minimum deposit amount required to be held in trust funds in the United States as of 31 December 1993 pursuant to Regulation No. 41 (11 NYCRR 27), as of 1 January 1994, the effective date of new Regulation 41 (NYCRR 27), Lloyd's failed to maintain the minimum surplus amount required to be held in trust funds in the United States.
As of 31 December 1993, business underwritten at Lloyd's was divided into four areas:Non-Marine (50%), Marine (26%), Motor (14%) and Aviation (10%). Further, Lloyd's world-wide premium income was derived as follows: United Kingdom 37%, United States of America 32%, Europe 12%, and rest of world 19%.
24 May 95
Independent: MPs to slate Sir Alan
TheTreasury Select Committee will tomorrow roundly condemn the performance of regulators at Lloyd's of London with publication of its report into self-regulation in the insurance market.
The MPs want responsibility for regulation at Lloyd's transferred to the Treasury, and not the securities and investment board. They want a fresh investigation of events at Lloyd's covering how Names were recruited during the 1980's.
Thereport specifically criticises Sir Alan Hardcastle, chairman of Lloyd's Regulatory Board, for appearing to want to "draw a veil" over the issue of an alleged cover-up from investors of losses in the 1980s.
The report says: "We are alarmed at his failure to launch an enquiry into the allegations of concealment contained in a 53-page document … presented by solicitors Memory Crystal on 9 March 95."
The attack on Sir Alan willembarrass the Bank of England as Sir Alan is chairman of the bank's board of Banking Supervision examining the Barings collapse.
The report states: "The system of self-regulation at Lloyd's is fundamentally and irretrievably tarnished. Or main concern is that regulation at Lloyd's should give assurance that failures of the past will not recur."
Thecommittee is expected to produce a wide-ranging report on City self-regulation before the summer recess.
29 May 95
Daily Telegraph: There's a will to change, says the sheriff of Lloyd's
29 May 95
Investigator faces tough investigation
Theragging Sir Alan Hardcastle had at the expense of the Treasury select committee for his chairmanship of the Lloyd's of London regulatory board should not have gone unnoticed by the Bank of England.
Hardcastle,, a member of the Board of Banking Supervision, is heading the inquiry into the Bank's supervision of Baring's before its collapse - which has drawn criticism from Labour and calls for the governor's resignation.
Last week,Hardcastle was criticised by the select committee looking at Lloyd's, which said: "Regulatory and market interests remain uncomfortably close," and that he seemed "more interested in drawing a veil over the past than in making a rigorous examination of the available evidence."
Does this worry the Bank? "Sir Alan's status is unaffected by the select committee's findings," says a Bank spokesman.
2 Jun 95
Daily Mail: Just a farm cottage - It cost £+m, but officially it's a rural worker's house - in a manor of speaking
16 Jun 95
Lloyd's List: Lloyd's to see agents over fund mixing
LLOYD'S has called a meeting of managing agents today to explain how it intends to solve theproblem of the intermingling of syndicate funds
Having debated the issue yesterday, the Lloyd'sCouncil has given the task of explaining the solution to Bob Hewes, director of finance.
Lloyd'shas been forced to act because names have become increasingly concerned about the practice, by which managing agents use one name's funds to temporarily meet another name's debts.
Some names action groups have threatened their managing agents and funds' trustees with legal action. Names leaders say thatmost action groups and managing agents have consulted lawyers about the legality of the practice during the past few weeks.
Solvent namesfear they will be left out of pocket if cash calls are not paid by those names either unable or unwilling to do so and the central fund is unable to pick up the bill because it is running out of funds.
Until now,Lloyd's has maintained that the practice is an "inherent feature of the syndicate system" and that it is permitted by the terms of the premium trust deeds. It does warn, however, that agents and trustees should not lend funds if there is a significant credit risk.
Names say that managing agents with big losses which are finding it difficult to collect cash calls could be inbreach of trust law.
Sturge Names Action Groupand Ockham Holdings, the parent company of the Sturge managing agency, have stated they will seek a High Court opinion on the matter if they and Lloyd's cannot find an alternative long-term solution.
Sturge syndicate 210 is an example of how difficult it can be to collect the calls. Of the£59m ($94m) called in 1990, about 25% remains uncollected, and of the £44m called in 1991, about 18% remains uncollected, according to Sturge.
The Sturge names are not alone. Action group leaders say that most leading action groups and managing agents have consulted their lawyers over the past few week toseek clarification on the legality of the practice and position of the trustees and directors of the managing agents.
A spokesman for Lloyd's said Mr. Hewes plans to meet interested managing agents and outline how Lloyd's believes the problem can be solved. Hewould not explain what Mr. Hewes intended to propose.
3 Jul 95
Forbes Magazine: A Texas gunslinger
27 Jul 95
Daily Telegraph: Anger as inquiry into Lloyd's is ruled out
27 Jul 95
Times: Self-rule at Lloyd's to go on
30 Jul 95
Sunday Express: Lloyd's hit by a new legal action
Lloyd's of London was hit by a new legal blow this weekend as it continued its struggle to restructure the stricken insurance market.
John Hardyment, chairman of the 500-strong Lloyd's Action Group of campaigning names, issued a writ on Friday against the Society, claiming he was misled when he signed up as a member.
Hardymentjoined Lloyd's in 1985, and has since suffered more than £1 million of losses which he has been unable to pay.
He is one ofthousands of names - those whose wealth traditionally supports the market - facing financial ruin from claims over asbestos injuries, and disasters including the Exxon Valdez oil spillage and hurricane damage.
Past legal actions have targeted Lloyd's agents, which were accused ofmismanaging members' exposure to risks concentrating the burden on a few syndicates of names when disasters
occurred instead of spreading it more widely around the market.
But the LAG writ, which is expected to blaze a trail for other members of the 500 strong group thinking of suing Lloyd's, goes further, as it directly attacks the entire institution.
Hardyment claims his original contract with Lloyd's, which dates back to 1985 when he first joined the society, is void, so Lloyd's cannot claim money from him.
The writ claims Lloyd's misrepresented the way the market operated. Hardyment says that when he joined Lloyd's, he understood that - like other names - he would be exposed to unlimited liability if he was required to pay out on claims made to Lloyd s.
But, according to the writ, he
He also claims he was encouraged to believe this in a booklet and brochure produced for prospective names, and was not told of problems he might face at an introductory meeting in front of senior Lloyd's figures when he joined. If the action succeeds, the LAG believes that names will not only be free to leave Lloyd's, but will also be able to claim back losses they have made by joining.
An LAG member said: "We believe that this is the first action to take-on Lloyd's in this way, and we are very optimistic that we will succeed."
"The argument is that contracts with Lloyd's should be void, and if they are void, that puts you back in the position you were in before you joined - and means you have no losses to pay."
"We are also saying Lloyd's should pay back any money which has been paid by names in the past."
He went on to say that the 500 members of the Lloyd's action group were waiting to see how the specimen writ fared, and were keen to serve further writs if it succeeded.
"People are very angry at the way they have been treated by Lloyd's."
"The people they were told would protect them and their interests have simply not done so. The people who were supposed to police the market have simply failed."
A spokesman for Lloyd's confirmed that the writ had been received.
It will be vigorously contested," he said.
The latest round of legal action will be adistraction for Lloyd's as it attempts to finalise its elaborate plan to restructure the market's £8 billion of losses and settle all outstanding litigation.
It wants to float past liabilities into a separate vehicle, called Equitas,to allow stricken names to put a cap on their losses.
0 Aug 95
One Lime Street: Meeting Lloyd's global
The publication of Lloyd's global results earlier this year and the filing of the solvency certificates this month are just two of the roles of Lloyd's market reporting and solvency department.
Lloyd's expects to satisfy the solvency requirements set for the Society of Lloyd's by the Department of Trade and Industry (DTI) at the end of this month. It will mark the culmination of much work for Lloyd's market reporting and solvency department, itself divided into two distinct but overlapping areas. Themarket reporting team deals with a number of areas, including the overall solvency of the Society, the production of the global results, the compilation of Limelight (Lloyd's publication containing detailed information on the trading position of every current Lloyd's syndicate), the collation of information for certain financial aspects of overseas reporting and the analysis of data in respect of high priority finance-related projects. The solvency section's primary function is the administration of individual members' solvency.
Under general manager Gavin Steele, the market reporting team will submit Lloyd's annual statutory statement of business (SSOB) to the DTI at the end of this month. It represents one of thetwo stages Lloyd's must go through in order to satisfy the DTI solvency requirements.
The SSOB isessentially the aggregate solvency statement of the Society and is prescribed under the Insurance Companies Act, says Mr. Steele. It is, according to Patricia Hakong, the manager of the market-reporting section, an analysis of data principally taken from the syndicate annual returns. "There are also various mathematical calculations which have to be carried out within that return," she explains. "For example, the minimum margin of solvency must be calculated in accordance with the method prescribed by the Act."
Although the document is filed at the end of August, it is audited during June and July. "We are not, however, in a position to make a filing until the end of August because the document clearly states thatevery member at Lloyd's is solvent, thus it links in directly with the individual members' level solvency test. The solvency deadline for members is 24 August so we would not be in a position to sign the document until the expiry of that deadline and after the completion of the individual members' level solvency test," says Mr. Steele.
Lloyd's global results
In addition to the SSOB, the market as a whole reports its financial position in the Lloyd's global results. Thus, earlier this year the 1992 global results of the Society were published.
The global results are not in themselves a consolidated view of Lloyd's business: rather, they are anaggregation of the market's trading position at a given point in time, including all active syndicates and runoff years of account. The task of producing the global results falls to the market reporting team.
Work on the global results starts in earnest in autumn, when the syndicate returns forms, which are sent out to agents to gather the appropriate data, are reviewed andredesigned where necessary, in consultation with other Corporation departments and the market associations. These forms, which are more than 40 pages in length, are also used to gain information on other areas of syndicates' business for regulatory matters, and are the basis of the information contained within Limelight.
By early December the structure of thesyndicate returns forms will have been agreed by the Solvency and Reporting Committee and the team then moves onto the next task of assessing all the procedures and systems. These must be fully tested and approved by the Society's auditors before the data on the syndicate returns' forms can be entered in March.
"Come the end of March when the forms have to be returned, we have a rapid turnaround to produce the global results and Limelight by mid-May," says Mr. Steele. "The problem we have is that if everything came in on time it would be a perfectly manageable task. The difficulty is those syndicates which fail to meet the reporting deadline. We can grant extensions for a fortnight, but no longer. During that period however, we will liaise with the agent on almost a daily basis to watch the progress in terms of the preparation and submission of the return." The relevant regulatory departments are informed of agents who fail to meet the deadlines for any action to be taken as felt appropriate, although Mr. Steele does say that, despite the tighter deadlines now required of agents, as a community agents have greatly improved in the reporting activities.
Criticism is sometimes levelled at the department about the amount of time it takes between receiving the syndicate returns forms and publishing the global results. The global results are not however, merely a summation of all the syndicate results. As Mr. Steele points out:-"It is different knowing the final result figure and producing all the analysis which culminates in the global results. Of course it is terribly easy to add up the results syndicate by syndicate to get the bottom line result. What also has to be done is producing the accounts togo around the result - the supporting analysis, identifying and stripping out the double count element, and receiving the approval of our auditors."
Thedouble count element is identified from an analysis of data collected in the syndicate returns, which are audited individually by approved auditors before being submitted to the department. The final global results are also signed off by auditors and as Mr. Steele says: "Our auditors are pretty tough with us."
A team of five people, led by
0 Aug 95
Inside Eye: When Lloyd's lost the A1
Sir, I was interested to Allegra Mostyn-Owen's article in Issue 6. I was a partner from 1940-1960 inRowley Pemberton & Co, a firm of chartered accountants with probably the largest practise then at Lloyd's.
At that time,Lloyd's had managed to persuade the Inland Revenue that there was no goodwill attached to a syndicate but only to the underwriter, and that when he died no goodwill passed. The Chairman was Sir Eustace Pulbrook, who had been Chairman throughout the war. Almost directly after the war he sold his syndicate to a broker for, I believe, £100,000, a considerable sum in those days. The Revenue immediately made it clear that this successful sale meant that there was undoubtedly a goodwill in the syndicate and that in future, in the passing of any syndicate on death, it would be subject to death duties,
Arthur Whittall, who was Deputy Chairman of Lloyd's and a much respected figure with a large syndicate, was on the point of retirement. He had left his estate to his wife and now was told that death duties would be payable on a substantial sum when he died. He had no idea what this sum would be and certainly had never seen anything for it. He came to the conclusion that the only thing to be done was to sell his syndicate so that he would realise a sum out of which death duties could be paid. Really the only buyer at that time was Willis Faber, who were the leading brokers.
On his way back from the City of London Club where they had lunched together, Arthur Whittall and the Chairman of Willis Faber had a conversation somewhat as follows:
Arthur Whittall – "Due to changing circumstances following Eustace's sale of his syndicate, it appears to me that if a buyer was forthcoming I might well be prepared f to sell my underwriting interests to a suitable broker."
Mr Reis - "I am very interested in what you say Arthur and will think about it. I do believe that my firm might possibly be of some assistance in this matter."
They then returned to Lloyd's and Mr Whittall came to see me and said that he had sold his syndicate to Willis Faber. I said that I thought that hehad ruined Lloyd's and with that he quite agreed. Up to then, it had been thought absolutely basic to Lloyd's that underwriters and brokers should be entirely separate. Whittall, however, explained to me the difficult position in which he found himself. I asked him how much he had sold it for and he said "Oh, I've no idea of that, that is for you to find out."
Theeffect of this one deal on Lloyd's was tremendous. Within two years I would think 80% of the independent underwriters had sold out to brokers. They could not face the idea of this heavy death duty charge when they had never seen the money on which it was based.
In my view; although I left Lloyd's fairly soon after that, Lloyd's started going downhill from that point. It was not so much that the underwriters were directly influenced by pressure from the brokers, although that definitely took place, but that the brokers were responsible for getting new Names. They did not consult the underwriters at all andflooded them with new Names, and were upset if the new Names could not be fed with premium income. The underwriters became hungry for premium income at any cost and bad underwriting became common. (Name and address supplied.)
1 Aug 95
The Times: Name issues writ for loss write-off
A Lloyd's name has issued a writ against the 308-year-old insurance market alleging that itfailed in its regulatory duties and that. as a result, his membership should be voided and his losses written off.
The move coincides with theGovernment deciding that it will not review Lloyd's self-regulation for at least two years, in spite of a damning report by a House of Commons committee.
John Hardyment, the name, has issued a specimen writ with the support of the Lloyd's Action Group, which has about 500 members.
Mr Hardyment claims that, in the early 1980s,Lloyds ruling council knew that a great weight of asbestosis and pollution claims emanating from America were expected to hit the market. However, he claims, the council failed to pass this information on to names, Lloyd's agents and underwriters. Part of the evidence is the notorious Neville Russell letter, which seeks advice on reserving for asbestosis and pollution given the great uncertainty over claims.
If Mr Hardyment's membership is made null and void, all his payments to, and from, Lloyd's since 1982 will be netted off in order to leave him as if he had never joined. That is, he would have to return any profits, stop-loss proceeds or litigation proceeds that he has received and he would he compensated for any losses incurred.
Thenames successfully argued that the syndicate was negligent by failing to notify the reinsurer of necessary facts, which led to the reinsurance contract being voided. The managing agent is appealing against the judgment.
5 Sep 95
Times: Obituaries - Gordon Dunlop
27 Sep 95
Evening Standard: Lloyd's stop-loss rumpus
Afurious row has broken out at Lloyd's after vital plans drawn up by underwriters and chief executive Peter Middleton to help shape the insurance market's future were allegedly thrown out by chairman David Rowland.
Thepersonal stop-loss (PSL) underwriters who insure Names against excessive losses, have complained to Rowland through their solicitors Clyde & Co and were planning to express their concerns again at a meeting with the chairman today.
Theunderwriters have threatened legal action if Lloyd's pushes through proposals for the new Equitas reinsurance vehicle without their consent.
Middletonhad stepped in to defuse worries among the PSL underwriters that they might be asked to respond to losses they consider should not be covered within Equitas.
He called a series ofmeetings with underwriters on 17 and 30 August but, they told Business Day, a range of proposals later agreed with Middleton was suddenly overturned by Rowland and his deputy John Stace on the grounds that they were "unacceptable to policyholders."
Staceadmits there has been a problem over stop-loss, which was an extremely sensitive issue, but says it was the result of a breakdown in communications.
He explains "WhilePeter Middleton was away on holiday Rowland took over on the PSL issue. It did lead to some misunderstandings but there is no question of a breakdown in relations and talks are still ongoing."
Asked about the threat of legal action by PSL underwriters, Stace says: "I donot think that legal action is the way to solve the stop-loss issue. We need to win the hearts and minds of everyone - and progress on the whole has been good."
18 Oct 95
Swiss Re: Development of Insolvencies and the Importance of Security in the Insurance Industry
A study by Swiss Reinsurance which focused on US, UK rates of insurer insolvency has suggested a direct link between the deregulation of insurance markets and the rise in insolvencies of insurers and reinsurers. The report shows that648 non-life insurers and reinsurers world-wide lapsed into insolvency between 1978 and 1994, with the deregulated US and UK markets accounting for more than 70% of the failures. US companies numbered about two-thirds of the total and UK companies 7%.
"Even allowing for market size, thetwo countries still show above average levels of insolvencies," Swiss Re said. "Their share of non-life premium volume world-wide is appreciably less than their share of insolvencies."
Bermuda's 52 bankruptciesgave it the largest share of failures outside of the US and Europe.
26 Oct 95
The Times: Ruling may hit Lloyd's
ABOUT£1 billion of extra claims could hit Lloyd's of London after the Court of Appeal upheld an earlier ruling that reinsurers have the right to collect their own reinsurance even if they have not paid the underlying claim (Sarah Bagnall writes).
In total, the ruling is expected to trigger claims of up to £3 billion. The ruling has implications for attempts by Lloyd's to put together a £2 8 billion settlement package for its names.
Thejudgmental which follows a ruling by Mr Justice Mance in June, will affect the size of premiums each syndicate must pay to off load liabilities to Equitas the reinsurance company.
28 Oct 95
Daily Telegraph: Landmark win for asbestos women - Pay-out for residents near Plant
TWO women won a landmark legal victory yesterday when a High Court judge ruled that a company was liable to compensate people who developed cancer caused by asbestos dust from a factory near their homes. It wasthe first time a British court has ruled that compensation for mesothelioma or cancer of the outer lining of the lung, was payable to those living or playing as children close to an asbestos plant. Previous cases have covered only those working in a plant.
The ruling by Mr Justice Holland in theHigh Court in Leeds was a victory for June Hancock, 59, who was diagnosed as suffering from mesothelioma last year, and Evelyn Margereson, whose husband, Arthur, died of the asbestos-induced cancer aged 66 in December 1991. Mrs Hancock, who in 1994 was told she has only two years to live, was awarded previously agreed damages of £65,000 for her pain and suffering and Mrs Margereson, who was suing for the loss of her husband and on behalf of his estate, agreed damages of £50,000. Their claim had been brought against J W Robert Ltd., a subsidiary of Turner and Newall Ltd., now T & N plc and formerly one of the world's largest manufacturers of asbestos products. It ran the asbestos factory at Armley, Leeds, until its closure 37 years ago.
In his 51-page reserved judgement,Mr Justice Holland ruled that from 1933 onwards, when as children Mrs Hancock and Mr Margereson were living and playing near the plant, the defendants must have known of the dangers to them of the asbestos dust and had taken no reasonable steps to reduce or prevent the emissions. The judge qualified his ruling by stressing that only those living or playing in the immediate vicinity of the factory might be able to bring successful compensation claims if they later developed mesothelioma as a result of the dust.
But Adrian Budgen, the solicitor for Mrs Hancock, said it wasestimated there were between 30 and 40 other Claimants who lived near the Armley factory and would fall within the criteria laid down by the judge for bringing successful claims against the company. It was thought the judgement could also assist an estimated 1,000 other potential claimants seeking to bring compensation cases for cancer caused by asbestos dust pollution from other plants in Britain.
In his judgement,Mr Justice Holland was severely critical of the conduct of the litigation by T & N. saying he saw the company's approach to discovery of documents and other features of the defence as "reflecting a wish to contest these claims by any means possible, legitimate or otherwise, so as to wear them down by attrition".
The company, he said, as a large industrial organisation must inevitably find itself from time to time involved in litigation. "Trying to conduct such an exercise in attrition, particularly against legally-aided individuals, flies in the face of the philosophy of litigation as it should.
At a press conference after her victory, Mrs Hancock, who now lives in Bradford Road, Bramley, Leeds, said she felt elated and pleased it was all over. Mrs Margereson, of Cockshott Lane, Bramley, who pursued the case against T &N that was launched by her husband before his death, was not in court yesterday to hear the judgement because of recent illness.
Mrs Margereson, in bringing her claim under theFatal Accidents Act and on behalf of her husband's estate under the Law Reform Act, had claimed that his cancer was caused by the emission of the asbestos dust when he lived in the immediate vicinity of the Armley factory from his birth in 1925 to his war service in 1943 and from 1948 to 1957.
Mrs Hancock had claimed that her cancer was caused by living in close vicinity to the factory between 1938 and 1951.
In its defence, T&N had claimed there was no foreseeable risk of injury to anyone outside the curtilage of the factory and that any risk that could be established could not be proved to coverMr Margereson and Mrs Hancock as unknown individuals in a wide and ill-defined catchment area. But Mr Justice Holland said there was no dispute that the company owed a duty of care to its employees in the curtilage of the factory and in his view that duty of care did not end at the factory wall. The judge said he accepted that, as a general proposition, injury to health at that time was not to be anticipated from environmental exposure outside the confines of the workroom. But he had no doubt that in the immediate vicinity of the factory, conditions in terms of dust emission were at various points effectively replicated so as to give rise to a like foresight of potential injury to those exposed for long periods.
InMr Margereson's case, he found that while in the immediate vicinity of the factory as a child, the defendants owed him a duty of care and that this duty was breached by their failure to take practical steps to reduce or prevent inhalation of the asbestos dust. In Mrs Hancock's case, he was satisfied that she spent long periods in the immediate vicinity of the factory, including playing in one of its loading bays, between 1944 or earlier and 1950, and that she had similarly had proved a breach of the duty of care.
A spokesman for Irwin Mitchell, the solicitors representing Mrs Hancock, saidmesothelioma's only known cause was exposure to asbestos. It could be contracted from low exposures. There was no known cure.
"The money won't do me any good but it's the only way they can pay"
To the children who played in the streets around the asbestos factory, the men who worked there were the "Abominable Snowmen".
June Hancock and her friends also used the blue and white dust that coated every window-sill, doorstep and pavement in Armley to play snowball fights, or to draw squares for hopscotch.Fifty years later, the childhood game is killing her. Mrs Hancock, 59, has only weeks to live.
In court, lawyers for Turner & Newall did not deny that Mrs Hancock was dying of a cancer known as mesothelioma as a result of living near one of the company's factories in Leeds as a child. Her mother died of the same disease 13 years ago.The company argued that it did not know the full dangers of asbestos until much later.
The court heard thatdust up to two inches thick clogged gutters and, in corners near the factory, it was commonly six inches in depth. Those who grew up in the area described how women would spend every morning brushing asbestos dust from their sills and doorsteps. "My mum was particularly house-proud," Mrs Hancock said: "It wasn't just the inside of the house that was immaculate, the outside was swilled and brushed too. But she was sweeping asbestos. I didn't think anything of the asbestos at the time, and we used to play out all the time."
Mrs Hancock left the area in 1951 at the age of 15, andthe factory closed in 1958. In 1982, her mother, Maie Gelder, died of mesothelioma, an extremely rare form of lung cancer for which the only known cause is exposure to asbestos. The disease becomes apparent between 30 to 50 years after exposure. There is no cure, and death usually follows within 18 months to two years of diagnosis. Mrs Hancock began having breathing difficulties a decade after her mother's death . "I'm an avid Leeds United supporter and the first time I noticed the breathing was a problem was when walking uphill away from the ground," she said. "I used to run up it, yet, all of a sudden I found it difficult to walk up."
She was diagnosed as suffering from mesothelioma in January 1994 and doctors gave her an estimated two years to live.
She decided to take legal action against T & N and has devoted the last two years of her life to bringing the international company to court. Despite her increasing frailty, Mrs Hancock missed only one day of the hearing and the judge paid tribute to her courage. One of the50,000 documents uncovered during the case was a 1974 T & N memo that said: "We hope very much we will never be called upon to discuss Armley in the public arena."
Mrs Hancock said she took the company to court for the sake of justice rather than money.
"It has been very trying and traumatic but it does show how somebody small can triumph and how somebody big can lose. I feel I have been fighting for others and for those who are not here today," she said. "I'd like to see them pay for what they did. The money won't do me any good but there's no other way they can."
"I know how I suffered watching my mother die, and all that I could see was my children watching me. That was the deciding factor in taking the legal action. I thought I'd do it for them, and for my mum. It touches so many people's lives. "I hope this starts the ball rolling and everybody claims from them. Then the shareholders might start asking why they're paying out this money. They've got to be made to answer for what they did."
At least 10 further cases from the Armley area are pending, and hundreds more could follow, according to Adrian Budgen, solicitor for Mrs Hancock. "Theremay be up to 500,000 deaths in Britain during the next 30 years as a result of coming into contact with asbestos," he said.
31 Oct 95
Daily Telegraph: Lloyd's faces renewed allegations
LLOYD'S of London faces renewed allegations of negligence and fraud this week that could lead to further legal actions and compound the difficulties facing the insurance market.
A paper by theNames Defence Association containing data culled both from Lloyd's own statistics and American lawyers reports, accuses "senior figures" in the Corporation of Lloyds and its ruling Council of concealing from the market the true picture of spiralling asbestosis litigation in the US during the 1970s and 1980s.
The market, including existing and new names, were kept in thedark about the true nature of potential losses, claims the association this week in a newsletter to members. "Members of Lloyd's who are now locked into the 584 insolvent syndicates which cannot close their accounts are there because of a long history of massive, probably deliberate, and even possibly fraudulent under-reserving by Lloyd's in US Long Tail Liabilities," says the newsletter.
Under-reserving created a picture of false profits, and allowed new Names to join Lloyd's in ignorance of the risks facing certain syndicates, it says.
John Finlay, chairman of the defence association, who researched the data with solicitors said: "The conclusion is that Names who joined Lloyd's in the late 1980s have been defrauded, but we do not know exactly who by."
1 Nov 95
Lloyd's Press Release: Lloyd's Statement on Merrett Judgment
Thefindings of Mr. Justice Cresswell handed down earlier this week in the case relating to the Merrett 418/417 syndicates raise a prima facie case that there may have been misconduct which could lead to disciplinary action against a number of individuals. In view of the public interest in this matter, Lloyd's investigations committee has decided that it is appropriate to announce that the matters raised by Mr. Justice Creswell's judgment are being investigated.
These investigations will follow Lloyd's established procedures and, consistent with natural justice, no further announcement will be made until the investigation has been completed and disciplinary action (if any) concluded.
Mr.Justice Creswell's judgment also raises questions of the fitness of companies and the suitability of individuals to trade in the Lloyd's market and also of the position of the auditors, which are also subject to review.
5 Nov 95
Sunday Mail: Names in ‘gag' row
28 Nov 95
Judge: Tobacco Executive Can Tell All
AMississippi judge cleared the way today for former tobacco executive Jeffrey Wigand to
tell Government Authorities what he knows about Brown & Williamson Tobacco Corp.'s
research into safer cigarettes and smoking-related disease. The judge ordered Wigand to
give sworn legal statements tomorrow to both the Justice Department and the Mississippi
Attorney General's Office.The Justice Department is conducting an antitrust probe into the activities of cigarette makers. Separately, Mississippi is suing the industry for compensation for tax money spent treating Medicaid recipients with smoking-related illnesses.
13 Dec 95
Evening Standard: Stop-Loss pay-outs owed to Names may total £50m
Up to£50 million may be owed to Lloyd's of London Names by personal stop loss (PSL) insurance underwriters who have failed to pay claims, a new pressure group claimed today.
The PSL Policyholders Association, which reportedly has the support of 1,000 Names, says the money must be paid out if many Names are to give financial backing to Lloyd's proposed Equitas reinsurance company.
Roger Pascall, who established the PSL Policyholders Association, says: "The association is not a Names action group set up to initiate court proceedings. But we want to use our collective power to put pressure on solvent insurers to pay up. One of the remedies we will look at is legal action."
Lloyd's under new chief executive Ron Sandler, has been working hard to resolve the impasse between Names and PSL underwriters who insure Names against excessive losses.Both Lloyd's underwriters and those in the independent company section are refusing to make payments on various grounds.
The issue is made more difficult by the fact that some key PSL independents such asStockholm Re (Bermuda) and Municipal & General Insurance have respectively gone into full and provisional liquidation. Up to 20% of Names covered by PSL policies are believed to have suffered from those insurers becoming insolvent.
Some Names have beenwaiting a year to obtain payments under their excessive loss policies. One of the most high-profile cases involves four independent companies that provided stop loss to Names through broker Carritt & Partners. That company was taken over by Holman Wade which itself ceased operations and gone into run-off under the organisation of broker IRISC.
A spokesman for IRISC confirmed thefour companies were refusing to pay out because of alleged irregularities in the way the "binding arrangement" agreements were drawn up.
Although the figure of£50 million is small in relation to the amount of money that will be needed for Equitas, as many as 10,000 Names are believed to be affected by the stop-loss problem
Their ability or enthusiasm for supporting the total Lloyd's reconstruction and renewal package is likely to be affected by the outcome of the PSL row. Lloyd's is already in talks with PSL underwriters about their direct contribution to Equitas.
These talks have been fraught with difficulty. The underwriters have already threatened legal action if Lloyd's pushes through any Equitas proposals against their wish.
(Carritt & Partners and Holman Wade accounted for in excess of 80% of all PSL's placed for Names).
15 Dec 95
The Times: Partner for Brockbank.
Brockbank, one of the biggest and most profitable managing agencies at Lloyd's, has ended its search for a strategic partner with thesale of 51 per cent of its equity to Mid Ocean, the Bermuda reinsurance group, for £50 million. However, Mid Ocean can unwind the deal if certain events occur. These relate to Lloyd's attempt to restructure and recapitalise. If Lloyd's future is secured, Mid Ocean is required to acquire the remaining 49 per cent. Brockbank shares were suspended at 240p valuing it at £28.3 million.
The directors of Mid Ocean:
15 Dec 95
The Times: Cater Allen acquisition
Cater Allen, the financial services group, is to spend £7.25 million on acquiring City Deal, a bought share dealing and settlement company from Sherwood Computer Services and City Consultants. City Deal, set up in 1993 to rival Sharelink, specialises in private clients and accounts for 5 per cent of the daily equity trades on the London Stock Exchange. Audited pre-tax profits last year were £346,000. The deal needs the approval of Sherwood's shareholders, who will be called to an extraordinary meeting on December 29.
15 Dec 95
Letter to the Times: Action, yes, but fair value for all from a united Council of Lloyd's
Sir, I note that MrDeeny, on election to the Council of Lloyd's, announced to the press that there is now a real prospect of a realistic level of compensation being paid to Names.
I assume he means that the Action Group leaders elected to Council will press hard for compensation in excess of the existing offer, which isabout three times the amount that litigants could hope to achieve in court.
Membersof Lloyd's are elected to the Council to act on behalf of the whole Society, not one part of it. They are not supposed to act as delegates.
The Council of Lloyd's should not be like Parliament with people with opposite views, representing different factions, fighting each other, but should be like a board of directors, united in their efforts to bring value to all shareholders.
29 Dec 95
Daily Telegraph: Denver block
ADenver District Court blocked Lloyd's from seizing assets of American Names whom the State claims were duped into supporting insurance underwriting.
29 Dec 95
Daily Telegraph: Lloyd's plan hit by losses of £1-7bn.
Losses of £1-7bn feared on two Lloyd's syndicates could jeopardise rescue plans for the troubled insurance market. Members, Agents and Names onSyndicate 190, whose former underwriter was ex-Lloyd's Deputy Chairman Richard Hazell, believe its potential insurance losses could run to £1-2bn and prove an intolerable burden on the market. Another syndicate, Richard Outhwaite's 317, faces losses of as much as £500m dating back to 1982. This is £100m worse than earlier estimates.
A spokesman for Lloyd's said that syndicate 190 is not yet seen as a problem. But run-off specialist Tim Oliver, whose MSM group is bidding to handle 190's past claims, said: "Losses could easily go to £800m or much more."
Equitas, the Lloyd's company set up to handle pre-1993 claims, which already needs a £1-9bn top-up, says 190 has adequate reserves. Robin Gilkes, of syndicate manager Cater Allen, said Names would be pleasantly surprised. But Oliver said 190's reserves would be exhausted within two years from future claims.
Syndicate 190 was managed by broker Sedgwick until 1985. It reinsured a Sedgwick client, London United Investments, which later collapsed, leaving losses running into billions.
Boston insurer, Liberty Mutuallater became 190's sole backer. It recruited Hazell and Jim Payne, a former Sedgwick deputy chairman, criticised for his LUI role.
Outhwaite's 317 also wrote long-tail policies. A name who wrote £10,000 could lose £120,000. High rollers could lose several millions each.
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