1996

17 Jan 96

Dow Jones News Service: Exxon-Lloyd's: Exxon to receive $300 million as Partial Settlement; Trial on Other Claims set for 8 April.

Irving, Texas - DJ - Exxon Corp. Exxon said it will receive $300 million under a partial settlement of its suit against Lloyd's of London and other underwriters to recover insurance for Exxon's expenses related to the 19689 Valdez accident and oil spill.

In a press release, Exxon said the underwriters will reimburse Exxon for $300 million for a portion of the oil company's costs associated with the Valdez accident.

Exxon said that while it is "pleased" with the partial settlement, it still has "substantial" unresolved Valdez-related insurance claims pending with Lloyd's and other underwriters. A trial date of 8 April has been set in Texas state District Court in Harris County, Texas, to address those claims, Exxon said.

23 Jan 96

Financial Times: Insurers of Merrett agents declare policies invalid.

Managing agents at Lloyd's of London facing claims by hard-hit investors in the Merrett syndicates have been told that their insurance policies against such actions are invalid.

Solicitors for the insurers said yesterday that because the judgement in the Merrett case found that investors had been "wilfully" misled, the errors and omissions policies were void.

The move will be challenged vigorously by the agents and by Merrett Names - the investors whose assets have traditionally supported the insurance market. If the insurers are successful the move could expose other parties to the action to potentially higher claims - especially Ernst & Young, the Merrett syndicates' auditors.

In November the High Court ruled in favour of 2,000 Names on Merrett syndicates, having seen fresh evidence of negligent practice at the market.

The Merrett case centred on "run-off" contracts agreed in the early 1980s by which Merrett Names took on responsibility for claims outstanding on policies sold by other insurers. These left Merrett Names facing rapidly escalating bills for unforeseen US asbestosis and pollution claims. For the first time auditors were also found to be negligent - paving the way for all auditors involved in litigation to make contributions to the market's recovery plan.

A number of Lloyd's agencies handling Names' funds and Mr Stephen Merrett, the underwriter and former deputy chairman of Lloyd's, were also found negligent in the way that they had handled their business.

Clyde & Company, solicitors to the errors and omissions insurers, said: "This is not something that we have relished. The judgement was so fierce - we have been driven to take this step." The solicitors confirmed that the Merrett managing agency had been informed the cover was "void".

"This was prompted by the very trenchant findings of the judge about the behaviour of the Merrett managing agency - particularly that they wilfully withheld information in some matters." Clyde & Company said: "The terms of the judgement took our clients by surprise. The strong implication is that if the Names were kept in the dark - then so were the underwriters."

Mr John Mays, the chairman of the Merrett Names association, said: "They have given us notice of this but we will of course dispute it. We are not pleased, but it is not a shattering blow - it is an encumbrance."

Mr Nick Land, senior partner of Ernst & Young, said: "The whole thing is still a moving feast but this does indicate the uncertainty which springs from the injustice of joint and several liability."

The parties in the Merrett case are attending hearings in the High Court which will decide the principles on which damages will be set. Names want an interim payment while seeking total damages of up to £300m.

30 Jan 96

Annual Meeting of the Institute of London Underwriters: Statement by the Chairman, Mr L N Campbell

The ILU's value and influence

But we cannot put everything in the ILU Notebook. Last year I referred to the agreement between Nationale Nederlanden and the ILU regarding claims arising on certain Institute policies issued on behalf of the Orion Insurance Company and the London & Overseas Insurance Company, both of which, as you know, are in provisional liquidation. To date, the funds remitted to policyholders under the facility are just short of US $36 million.

You will know too that English & America Insurance Company, a former member of the ILU, is also in a scheme of arrangement. As a result of an agreement with a former owner, Marsh McLennan, holders of ILU policies during the time that Marsh McLennan owned the company are having their claims paid in full.

1 Feb 96

Daily Mail: Lloyd's sees an end to five years of losses

It's official: Lloyd's of London is back in the money after a nasty run in the red over the five years up to 1992 when it lost £8bn, the equivalent of one year's premium income.

David Rowland, chairman of the troubled insurance market, forecast yesterday that Lloyd's will make around £1bn profits in each of the three years 1993, 1994 and 1995, for which accounts have yet to be seen.

Lloyd's is approachingthe last stage of its recovery', according to Rowland. It will complete if members agree to settle their outstanding lawsuits.

He believes they will be swayed by the return to profits and fear of ‘the alternative'. Lloyd's would have to appoint liquidators ‘and there would be no sympathy for those who have lost a lot already'.

2 Feb 96

Daily Mail: The bitter lessons from missing billings at LUI

What was the biggest company collapse in British history? Maxwell Communications? Bank of Credit & Commerce International? No, first prize goes to London United Investments.

Yet, while MPs and policemen have huffed and puffed about Maxwell and BCCI, the scandal of LUI and its missing £5bn - possibly more - has gone almost unnoticed.

This is all the stranger since British people pay a levy each time they take out an insurance policy. It was only 0-25pc last year to raise £48m. But this little bill could run to a wretched £500m, paid by you and me.

Even more galling, the cash does not even pay claims to British policyholders. Instead, the Policyholders' Protection Board is shipping it to the US to cover negligent claims against US doctors and lawyers.

It sounds crazy, and it is. But even odder events are unfolding at Lloyd's, where all too many of LUI's duff American insurance policies were reinsured. As that insurance market nears its make or break final settlement, all manner of insurers, US and British, are trying to cut deals to grab cash while it is available.

A policy might seem to guarantee £1m of cover. But if a reinsurer is going to fold before claims fall due, it could make good sense to settle for a smaller amount now, while there is cash in the kitty. The grand word for this is ‘commutation,' and there is a lot of it about.

First, a bit of history. LUI was run by a gentleman called Ronnie Driver. Rumour has it he would have rather liked a knighthood. LUI's board was adorned by the presence of Prince Michael of Kent, whose status at executive or non-executive was never explained. LUI's many offshoots specialised in liability cover for American business. Its customers ranged from huge companies such as Kraft Foods down to individuals and partners in the US professions.

Where other insurers feared to tread, LUI was eager to take customers' money and write them a policy. As a fairly small company, it could not keep all the risk for itself. It shared the odd billion with a host of reinsurers working in the London market. For this, it needed the help of insurance brokers, and few were more helpful than former Sedgwick vice-chairman Jim Payne.

Many of the Lloyd's syndicates that suffered heavy losses were eager customers of LUI and Payne. The LUI story was also enlivened by the £35m of premiums that Driver and two other directors diverted to Liechtenstein.

It was the uncovering of this by LUI director Colin Forsyth that helped to trigger the collapse into administration in May 1990. In September 1993, Department of Trade inspectors reported scathingly on the scandal. But, more than two years later, the Serious Fraud Squad has still not acted.

LUI's operations are now managed by accountant Coopers & Lybrand under a scheme of arrangement that avoids formal liquidation. So far, Coopers have paid out 8pc of recognised claims. Partner Ian Bond reckons he might eventually reach 40pc, if the liabilities settle out at $6bn. If they top $10bn, the dividend will be nearer 24pc, leaving a massive £5bn shortfall.

This all assumes LUI's assets are solid. But Lloyd's syndicates may have other ideas. They now answer to Equitas, the £16bn company set up by Lloyd's to handle all pre-1993 policies. Equitas needs every penny and is understood to be telling the syndicates to get tough. Caught in the middle, some syndicates are pressing for a 90pc commutation. US insurers are currently horse-trading for whatever they can get. A massive discount may also not be quite as outrageous as it sounds. A small amount invested today can fund a large claim several years down the line.

But any settlement near 90pc would blow a gapping hole in LUI's numbers. Understandably, Ian Bond is adamant he will accept nothing of the sort. "We would sue Equitas and Lloyd's if we had to," he says.

No doubt, some sort of compromise will be reached, and the slow agony of LUI will continue. Why has this whole scandal raised so little attention? Maybe because the main losers, the policyholders, were far away in North America. Maybe also because the UK end of the mess has been merged into the general fiasco at Lloyd's

Bond puts the blame on a mixture of reckless underwriting combined with runaway settlements in the US courts. Are there any lessons still to be gleaned? Insurance will always be a promising ground for cowboys. It is hard to regulate because it crosses international borders.

Even where the authorities do scent trouble, it is often far too late for them to repair the harm. The whole episode has done terrible damage to the City's reputation. A full and very public inquiry into LUI and its role at Lloyd's is years overdue.

3 Feb 96

Financial Times: Further delay on Lloyd's vote expected

4 Feb 96

Sunday Telegraph: Germans buy Lloyd's

4 Feb 96

US Names who loved and lost fight $3bn Lloyd's bill

5 Feb 96

Evening Standard: 60 dead as Arctic cold grips America

9 Feb 96

Independent: Names face £100,000 bill to end liabilities

9 Feb 96

Times: Debt cap expected for all names

10 Feb 96

Financial Times: Lloyd's chairman faces court writ

12 Feb 96

Daily Telegraph: MP's plan further inquiry into workings of Lloyd's

Lloyd's of London is to be the subject of an inquiry being planned by the cross- party Treasury select committee, which published a damning report on the insurance market last year.

That report from the committee of MP's claimed that the current system of self-regulation at Lloyd's had been "irretrievably tarnished" and called for external regulation. It also recommended a public inquiry into allegations of a 1980s conspiracy to suppress information about asbestos-related insurance claims.

The government agreed to review regulation at Lloyd's, but not for two years saying the market's structure was changing quickly. The government ruled out a public inquiry because it had seen no evidence that would merit it.

But the committee, frustrated at the government's response, is now planning its own investigation. Since supervision of Lloyd's is the responsibility of the department of Trade, not the Treasury, the MPs are planning an investigation of regulation of the insurance market as part of their long-running inquiry into City regulation.

The Lloyd's market regards the committee's interest in its affairs - spurred by correspondence from constituents who are Names - as a diversion from the urgent task of saving the organisation. A further inquiry is unlikely to be welcomed.

The MP's will return to the subject of Lloyd's today, questioning trade minister Tony Nelson.

Conservative committee member Matthew Carrington said; "We've made no secret of the fact that we found the government's response to our report on Lloyd's unsatisfactory."

12 Feb 96

Daily Telegraph: Lloyd's pay rises to top rate of inflation

12 Feb 96

Times: Lloyd's plan

28 Feb 96

Times: Many a slip possible as Lloyd's nears final hurdle

4 Mar 96

Evening Standard: Price of letting Lloyd's fail

5 Mar 96

Daily Telegraph: Court attack on Dunlop for tyre fault

6 Mar 96

Lloyd's big guns facing the mother of all writs

7 Mar 96

Daily Mail: Asbestosis miseries rumble on at T&N

7 Mar 96

Evening Standard: Lloyd's rescue faces bumpy ride in final furlong

Lovers of the turf a t Lloyd's of London will have more than a few distractions nest week when they attend the Cheltenham Festival.

At the end of this week 32,000 members, the Names, who support the insurance market, will be told of the financial consequences of the ambitious rescue plan now underway.

Switchboards will be near meltdown. At Cheltenham, mobiles will be humming as members seek clarification and comfort from professionals who look after their affairs..

The events taking place in the nest few days represent a landmark the 300-year history of the market. For the first time, Lloyd's central administration has become involved in preparing financial statements for each individual Name, reflecting the seriousness of the difficulties. Usually it is a job left for the underwriting agents. This time they are reduced to no more than post boxes.

A rescue after more than £11 billion of losses over the last few years carries a high cost. Little outside money is being injected to help. Instead, Names existing funds at Lloyd's are to be adequately financed to deal with future liabilities.

If, on current projections by the authorities, further support is needed for the new Equitas vehicle to deal with individual Names' liabilities, more money will be sought from them. Some members, because they have sufficient funds, may not be required to pay anything extra while others will face demands.

Names will be studying the first estimates of what is required is weekend. The bill for members may top £600 million.

Lloyd's aims pump in a total of £5.9 billion into the Equitas project, which together with existing reserves of Names should give the new company assets of up to £13.5 billion.

Names will receive a credit from Lloyd's amounting to £2 billion to help with the Equitas financing and those Names who have gained victory or near victory in the courts over losses will receive a further £800 million.

There are winners and losers in this operation which will create tension and difficulties.

For instance, those who have sued Lloyd's companies successfully will only receive about a half of what they were awarded by the courts. The market hopes the £800 million will bring to an end outstanding litigation.

Officials have argued that while litigating Names face a reduced cash settlement, they will gain the certainty that their losses will not rise above present levels if they accept the rescue plan. If Names agree to the scheme they must waive their rights to future litigation.

Other losers include these who have traded through the difficulties despite having made losses. Half of all Names, although still on Lloyd's register, stopped underwriting over the last few years while the remainder tunnelled through.

Those who did trade on are resentful that their funds are being used for the rescue. Helping other Names in a market not based on the principle of mutualisation is undesirable, they argue.

The say the proposal to limit further demands against names who claim to be the worst hit to £100,000 is unfair. How deserving are some of these cases and how widely is Lloyd's going to test individuals means, they ask?

Moreover, other Names who intend to remain with Lloyd's are worried that they will have to meet the future financial costs of Equitas if things go wrong.

They say Lloyd's will find it impossible to recover assets from members who have been bailed out and left the market as they will have taken suitable precautions against being traced.

Against this disputations background, the communities hard-pressed officials will find it increasingly difficult to gain the support for the plan it desperately needs.

11 Mar 96

Daily Telegraph: Rowland slashes Equitas funding to £1bn

13 Mar 96

Daily Mail: Blast from the past gives Fleming American a jolt

13 Mar 96

Evening Standard: Names threaten against Barclays

14 Mar 96

Financial Times: Accountancy - What the chairman should have said

15 Mar 96

Daily Mail: Lloyd's blocks move to check syndicate's losses

Lloyd's of London is blocking moves by Names to sort out their own syndicate. It has written to names on the giant syndicate 190, telling them it will force the appointment of its chosen managers, Whittingdon.

More than 400 Names had written to current manager Cater Allen telling them to hand over control to their own Names Association. Syndicate 1290's affairs are crucial, because it handled reinsurances for London United Investments, the insurer that collapsed in 1990 facing losses of £6bn.

Lloyd's insiders predicted losses of £1bn or more at 190. But the indicative offer from Equitas, the new company that is taking over old years, put the figure at £100m. Lloyd's chairman David Rowland used to chair broker Sedgwick, which managed syndicate 190 in the Eighties.

15 Mar 96

Letters to the Editor - Responses to the Lloyd's reconstruction and renewal offer to names

16 Mar 96

Times: The bitter bills to swallow

16 Mar 96

Financial Times: Tobacco industry dealt new US blow

18 Mar 96

New York Times: State Regulators Co-ordinate Lloyd's Inquiry

State securities regulators have begun co-ordinating a fraud investigation of Lloyd's of London, the world's largest insurance market.

The North American Securities Administrators, a group of state regulators, have formed a group to co-ordinate the eight state cases filed so far that accuse Lloyd's of breaking securities in its dealings with American investors, Karen A. Silva, assistant director for the Arizona Corporation Commission, said on Friday.

The state committee could be the first step of a formal regulatory task force investigating Lloyd's. So far, Ohio, Arizona, Illinois, Colorado, California, Missouri, West Virginia and Pennsylvania have filed cases against Lloyd's, Ms. Silva said.

The increased state investigation comes at a difficult time for Lloyd's. It lost more than $12 billion in the five years ended in 1992 because it paid out on a wide variety of insurance claims for asbestos lawsuits, hurricanes and earthquakes in the United States.

Earlier this month, Lloyd's sent letters to 34,000 investors, known as "names" on the venerable British market, to settle a dispute concerning insurance claims that shredded their personal fortunes. Lloyd's has offered the names $4.3 billion to absorb some liability.

The spectre of a co-ordinated state investigation could add to Lloyd's already formidable legal settlement costs. Harvey Pitt, a Washington lawyer representing Lloyd's, did not return a telephone call seeking comment. But a Lloyd's spokesman said previously that the state cases wrongly claim that the opportunity to invest in Lloyd's amounted to sale of unregistered securities.

A case filed by Arizona accuses Lloyd's of failing to inform 45 Arizona investors of potential risks when the market had been losing billions of dollars.

20 Mar 96

Financial Times: Sedgwick's £3.5m bonus pay-out.

Seven directors of Sedgwick group earned a total of £3.5m from long-term profit share scheme, according to the insurance broker's 1995 annual report.

It also revealed in the report that it had introduced performance criteria, to its executive share option scheme. The previous scheme, put in place in 1988, had no specific performance conditions attached.

Mr Jeremy Pinchin, company secretary, explained that the initial scheme was "very limited" and "open to senior executives at a time when we were at the peak of an underwriting cycle. We wanted to protect or senior executives from being poached." The large sum reported for 1996 represented seven years of accumulated bonuses.

The scheme has now been altered so that the award of options is based on the achievement of annual earnings per share growth of 2 percentage points above the Retail Price Index on a rolling three-year basis.

Last year Sedgwick's profits before tax and exceptionals slipped to £91.3m ($94.3m), while earnings per share rose 12.6p (11p).

The directors involved:-

 

Sax Riley

Jonathan Gilbert

Quin Healy (USA)

 

Stuart Tarrant

Richard Ridley

R White Cooper

 

Jim Payne

   

20 Mar 96

Times: Names court win could be worth £200m

11 Apr 96

Private and confidential letter from Ron Sandler to Michael Deeny, forwarded in private to his office.

I confirm that I will recommend the following proposals to the Council subject to the proviso that the revised Equitas premium calculations do not improve the position of the litigants to such an extent as to make these proposals unreasonable, and subject to the provisions of the next paragraph. The litigation Settlement Fund should be increased to £1 billion. Groups who have received favourable Judgements prior to 31 December 1985 should receive 38% of their loss to finality. Those groups with funds in escrow should also receive what we are describing as an "escrow cap". This should be a reduction in their finality bill to be taken post Tranche 3 Debts Credits. This amount will be 75% of the damages received by their solicitors. For example, if the overall cap was £100,000 a Name whose share of received damages was £40,000 would only have to pay £70,000. However, this benefit would have a limit of £50,000.

Such proposals should benefit all litigating Names and particularly those whose damages are frozen by the PTD litigation. They are made on the basis that the PTD hearing will be adjourned and that you will express positive and public support for these developments and the likelihood of a final settlement of the litigation.

15 Apr 96

The Times: Action will decide if Lloyd's can seize awards.

A crucial High Court action begins tomorrow that will decide whether Lloyd's of London has the right to seize any court awards made to litigating names. Thousands of litigating names have already won hundreds of millions of pounds of damages from High Court actions and more are in the pipeline.

The damages awards are being held in escrow accounts, while the insurance market is trying to end the mass of actions by offering its 34,000 names an out-of-court settlement. This currently stands at £2.8 billion but is expected to be lifted above £3 billion

Before launching its offer to names last year, Lloyd's had sought approval from the Department of Trade and Industry for planned changes to names' premium trust deeds (PTD's). These changes would give Lloyd's the first call on any court awards or settlements to names where those names have outstanding debts to the market. In March 1995, Michael Heseltine, then President of the Board of Trade, approved the changes subject to a legal ruling.

The planned amendments were met with anger by names as many of them have financial obligations outside the market, such as loans taken out in order to pay their Lloyd's losses.

Names want to be able to choose which debts they discharge first and say the changes to the PTD's are unlawful as they make Lloyd's a preferential creditor.

There is a chance, however, that last-minute talks between Lloyd's and representatives of litigating names may lead to a temporary adjournment of the hearing. This is in spite of the fact that the hearing's outcome has significant implications for thousands of names as well as for the insurance market's future survival.

22 Apr 96

Daily Telegraph: Lloyd's faces up to the hazards

29 Apr 96

North American Securities Administrators Association, Inc.: Media Release - State Securities Regulators Announce Extension of Stand-Still Agreement with Lloyd's of London.

Washington, D.C. - The Lloyd's Co-ordinating Committee of North American Securities Administrators (NASAA) announced today that it had reached a new interim agreement with Lloyd's of London that further protects beleaguered American investors.

The month-long "stand-still" agreement, previously announced on 3 April, is extended until 15 May 1996. The agreement prevents Lloyd's from drawing down on letters of credit supplied by American investors in every state or tapping their other assets. After 15 May, Lloyd's has agreed to provide 14 days written notice to each investor and his or her state securities administrator before drawing down on a letter of credit.

"This is the equivalent of the Colorado restraining order that provides the most extensive protection of any state action to date," says Philip A Feigin, chairman of the NASAA Lloyd's Co-ordinating Committee and securities commissioner of Colorado.

"Due to this agreement, the nearly 3,000 U.S. investors who want nothing more to do with Lloyd's will not have their letters of credit drawn down on 1 May," said Des Harris, NASAA president and Arizona director of securities. "This should give them a measure of peace. Meanwhile, our committee will continue to negotiate with Lloyd's in an attempt to reach a final resolution of this matter."

There is nothing in the agreement to prevent a state from filing a new lawsuit alleging securities registration and fraud violations. Nor does the agreement limit a state from imposing restrictions on Lloyd's communications with investors. The agreement does provide that the committee will recommend that states not restrict the Lloyd's trust funds or restrict communications with investors. Only if the states violate these provisions will the benefits of the stand-still be lost in that jurisdiction.

Organised in 1919, NASAA is the oldest international organisation devoted to investor protection. In the U.S., NASAA is the national voice of the state securities regulators.

7 May 96

The Financial Times: Travelers/Aetna Property Casualty Corp., a Member of Travelers Group

Smith Barney Inc. - Lead Manager in the Share Offering of $2,474,482,850, dated 2 May 1996.

1.

32,000,000

Trust Preferred Securities Travelers P&C Capital 1

Liquidation amount $25 per Trust Preferred Security

Price $25 per Preferred Security plus accrued distribution, if any, from 30 April 1996

2.

31,892,166

Class A Common Stock $25

 

Price $25

 

7,087,148

Class A Common Stock $25

These shares are being offered out in a consorted international offering outside the US and Canada

 
 

38,979,314

     

3.

$500,000,000

6 +% notes due 15 April 2001

 

Price 100% per 5 year note plus accrued distribution, if any, from 15 April 1996 to the date of delivery.

 

$200,000,000

7 +% notes due 15 April 2026

 

Price 99.649% per 30 year note plus accrued distribution, if any, from 15 April 1996 to the date of delivery.

 

$700,000,000

     

7 May 96

The Financial Times: Terra Nova (Bermuda) Holdings Ltd

Share Offering of Class A Ordinary Shares, dated May 1996.

1,320,000 outside USA and Canada

5,880,000

7,200,000

8 May 96

Wall Street Journal: Lloyd's Members in U.S. have a Right to Sue in This Country, SEC Contends.

Ending a long silence over Lloyd's recruitment operations in the U.S., the SEC filed an amicus brief partly supporting 600 disgruntled American "Names" who had sued Lloyd's. The case is now before the U.S. Court of Appeals in Los Angeles. The agency said a lower court was wrong when it ruled that Lloyd's members waived their rights to sue the huge insurance market in the U.S. by signing a "forum selection" agreement with Lloyd's.

11 May 96

Daily Telegraph: Rowland slashes Equitas funding to £1bn - Lloyd's offers Names improved terms and relaxes funding of lifeboat rescue

LLOYD'S of London chairman David Rowland yesterday gave a double boost to plans for the insurance market's rescue with a steep cut in the funds demanded for its new lifeboat and an increased offer to members who stop litigating.

The money to be levied from the membership for funding Equitas, which will take on Lloyd's old liabilities has been cut from £1.9 billion to about £1 billion. The total package of debt write-offs and compensation for litigating members has been raised from £2 .8 billion to £3 1 billion.

Hardly were the improved terms out of his mouth however before leaders of several litigating action groups demanded more. Most of the groups merely quibbled with the details and suggested an extra sweetener of a million or two

Michael Deeny, chairman of the Gooda Walker Action Group and of the Litigating Names Committee praised the move to demand no more cash from members who have conscientiously paid all their losses but wanted in addition a reasonable standard of living for members driven into penury by their Lloyd's losses.

The need for a home and an income for the indigent, and especially the old, was echoed by most of the organisations of Lloyd's Names. But Christopher Stockwell, chairman of the Lloyd's Names Association Working Party wax as usual more combative "There is absolutely no way our members will accept this; as the final offer ‘‘ he said

He claimed most action groups think them should be a substantial improvement in the offer. The £100m contribution from the four firms of auditors and another £100m from brokers was "a pretty poor deal - we have legal claims against them of £1+ billion," he said

John Mays, of the Merrett Names Association has already won a case against auditor Ernst & Young and also thought the accountants' contribution "is rather small." But if his members get a fair share of it they will vote for the new plan.

The improvement in the settlement offer came also from getting £20m more than expected for Lloyd's assets: the sale and leaseback of its two buildings and the disposal of Lloyd's of London Press.

Lower funding for Equitas was simply the result of greater optimism about future claims, and about the ability to recover money from reinsurance, said Mr. Rowland. Mr. Stockwell claimed the recalculation "fills nobody with confidence." The reworked figures mean 6,000 members will get some money back.

Mr. Rowland said the latest set of plans balances "as fairly as possible all constituencies within the Society and continues to provide policyholders with the security they have come to expect from a Lloyd's policy." He urged members not to let "misdeeds that have taken place to cloud the very good business we have here." Chris Messer of the Janson Green Action Group said agents need to pop in a few extra million but "I think it stands an excellent chance of getting through.'' Other action group chairmen thought there was a core of at least 10pc who would vote against almost any proposal but most of the rest would probably accept the deal.

Lloyd's still has substantial problems in America where the Securities & Exchange Commission has entered the legal lists on the side of litigating members.

11 May 96

Daily Telegraph: City Comment: Settlement time in Lime Street

Lloyd's of London thought that it could buy its way out of its endless troubles two years ago by offering its Names £900m. But experience has made the members hard-nosed as well as hard-up, and their can't-pay, won't-pay stance has forced Lloyd's to come back with increasingly better offers.

By February the settlement offer was up to £2 8 billion, and now, after searching behind the cushions of the Lime Street sofas and in the linings of their pin-striped suits, the council has raised that to £3.1 billion. At the same time another look at the liabilities of Equitas, the company that will take on the outstanding pre-l993 business, revealed that things are less bad than feared: the premiums due can be slashed from £1.9 billion to £1 billion.

Persuading brokers, agents and auditors to contribute has involved a big effort from Lloyd's. Like so many of its members, it has even had to sell its own home to fund the gap, and they felt vindicated in holding out for more. So yesterday's reaction from the dwindling band of rebel Names was not to congratulate the council but to strengthen their resolve to resist.

It is just possible that Lloyd's or the professional firms which will profit from securing a future for the City's insurance market can find a few bob more, but the end is now in sight, both of the increasing offers and the serious resistance. The number of Names that can expect a rebate doubles to 10,000 or almost a third of the total vote, while raising the litigation settlement fund from £800m to £1 billion should encourage more to agree.

By refusing to extend the terms now on offer to those who refuse them, Lloyd's can this time probably expect most battle-weary members to take the money. The rebellious minority would forgo these benefits, while spreading the cost of pursuing increasingly marginal litigation across fewer shoulders. It looks like time to settle at last.

11 May 96

Saturday Mail: Settlement time in Lime Street

LLOYD'S of London thought that it could buy its way out of its endless troubles two years ago by offering its Names £900m. But experience has made the members hard- nosed as well as hard-up, and their can't-pay won't-pay stance has forced Lloyd's to come back with increasingly better offers.

By February the settlement offer was up to £2.8 billion, and now, after searching behind the cushions of the Lime Street sofas and in the linings of their pin-striped suits, the council has raised that to £3.1 billion. At the same time another look at the liabilities of Equitas, the company that will take on the outstanding pre-1993 business, revealed that things are less bad than feared: the premiums due can be slashed from £1.9 billion to £1 billion.

Persuading brokers, agents and auditors to contribute has involved a big effort from Lloyd's. Like so many of its members, it has even had to sell its own home to fund the gap, and they felt vindicated in holding out for more. So yesterday's reaction from the dwindling band of rebel Names was not to congratulate the council but to strengthen their resolve to resist.

It is just possible that Lloyd's or the professional firms which will profit from securing a future for the City's insurance market can find a few bob more, but the end is now in sight, both of the increasing offers and the serious resistance. The number of Names that can expect a rebate doubles to 10,000 or almost a third of the total vote, while raising the litigation settlement fund from £800m to £1 billion should encourage more to agree.

By refusing to extend the terms now on offer to those who refuse them, Lloyd's can this time probably expect most battle-weary members to take the money. The rebellious minority would forgo these benefits, while spreading the cost of pursuing increasingly marginal litigation across fewer shoulders. It looks like time to settle at last.

14 May 96

Daily Telegraph: LUI administrators act to recover $50m

ADMINISTRATORS for five insurance subsidiaries of London United Investments the financial conglomerate that crashed with $10 billion of liabilities six years ago, yesterday claimed "satisfactory" progress in recovering $50m of funds wrongfully diverted to Liechtenstein.

The LUI subsidiaries, known as the Kwelm companies, provided public liability insurance in the United States. They collapsed under a welter of claims related to asbestos and pollution and remain exposed to claims related to breast implants and infected blood products.

Creditors include thousands of American legal and medical partnerships.

A Department of Trade inquiry revealed that $50m of insurance commissions had been "wrongfully diverted" to Liechtenstein companies which were "not genuine insurance or reinsurance brokers".

Chris Hughes, one of the administrators reporting to more than 35,000 creditors yesterday said: " We have conducted a full investigation into Liechtenstein and we have made what we regard as a satisfactory recovery." However, he declined to say how much of the $50m was still missing.

As for the prospects of prosecutions over the missing funds, he said: "The Serious Fraud Office still has an open file."

In his report Mr. Hughes said the administrators had collected $263m in the last year at a total cost of $32m. The total set aside for policyholders now exceeds $900m.

British insurance companies keep a close watch on the administrators' work because under the Policyholders Protection Act they are liable to compensate non-corporate customers of collapsed insurers.

They tried, but failed, to convince the courts that American partnerships lay outside the Act and have reluctantly paid £160m to LUI creditors in the last three years.

Yesterday their trade body, the Association of British Insurers, welcomed the administrators' report, saying: "Obviously we're very pleased."

However, Mr. Hughes warned that "they will pay out more going forward."

How much they pay depends largely on his success in extracting money from LUI's own insurers. They "exhibit the complete range of financial health from ‘robust' to simplybust' ", the report said.

14 May 96

The Financial Times: T & N slips as court rules on asbestos

Attempts by T & N, the UK engineering group, to cap its asbestos liabilities have suffered a setback in the US courts.

Shares in the former asbestos producer fell 12p to 163p.

Three US appeal judges have ruled that a so called "Georgine" settlement - in which 20 asbestos companies agreed fixed compensation payments for asbestos victims - failed to meet the criteria of a class action.

T & N had hoped the settlement would reduce its exposure to personal injury, claims in the US, where it has paid more than £300m in legal settlements during the past 10 years.

However, judges on the US appeal courts Third Circuit have decided that: the companies failed to give adequate notice of the fixed compensation systems coming into force.

Moreover, they ruled that the variety of compensation claims and different medical conditions among victims meant the systems would not constitute a class settlement.

The decision follows a six-month appeal by lawyers acting for personal injury claimants.

T & N yesterday described the ruling as a blow, but said the Center for Claims Resolution - representing the companies - would probably appeal. That process could take up to six months and the case could end up before the Supreme Court.

When the class action was first agreed in 1994, T & N predicted it would lead to a gradual reduction in asbestos-related provisions - which have undermined its profit growth in recent years. However, yesterday, it said: "The rate of decline in new claims could slow over the next three years."

In 1994, the, company; made a surprise £100m provision to meet claims from asbestos victims who opted out of the Georgine settlement. T & N is expected to set aside a further £50m this year and next. Despite the latest ruling it said the provisions would provide more than enough cover for all existing claimants.

The company, which earlier this year announced plans to sell its remaining asbestos mines, has long regarded the asbestos legacy as a diversion from its ongoing engineering activities.

14 May 96

Daily Telegraph: US court decision setback for T&N

T&N, the car components group and once one of the world's largest asbestos companies, has suffered a setback in its attempt to settle asbestos-related claims following an American court ruling.

T&N had expected to be able to reduce its annual charge for asbestos-related claims from its current £50m as it dealt with them under an agreed framework which is called the Georgine settlement.

The company now faces potential rising charges because new claimants will be free to pursue it individually.

A spokesman for T&N said it was considering whether to appeal against the ruling.

"Under the Georgine settlement, our liability was capped, at well below the £50m annual charge," he said.

"Under the law of tort, we will have very questionable claims in quite large numbers."

Even if T&N succeeds in getting many of the additional claims thrown out, its legal bill will be far higher as a result of its having to deal with thousands of individual claims, rather than one large class action suit.

The company was unable to put a figure on the extent of its additional costs or liabilities.

Analysts said the ruling yet again plunged T&N into uncertainty about its future liabilities, just months after it had successfully dealt with all outstanding property claims.

NatWest Markets' Sandy Morris said: "Under the Georgine settlement, we (shareholders) shouldn't have got ambushed for very big, wild costs. That possibility now exists again."

The shares ended the day down 13 at 162p.

14 May 96

The Times: T & N

Glimmers of light at the end of the asbestos tunnel have appeared and vanished so often for T&N that investors would do best to ignore them. Yesterday's news that the procedures established under the "Georgine" settlement may be crumbling away is another potential blow to T&N, not so much because of the potential for a huge claims but huge legal expenses.

The main attraction of Georgine was that it enabled claims to be administered without recourse to expensive litigation. But that is not in the interests of American personal injury lawyers who, like estate agents, work on commission and therefore tend to encourage their clients go to court in pursuit of a big win.

Asbestos-related diseases such as mesothelioma take up to 60 years to show, a time lag that leaves T&N with a long tail of liabilities that it cannot avoid. The collapse of Georgine will increase the legal and administrative cost of servicing the claims. For T&N, that increases the need to generate more cash from its business at a time when its customers, the automotive manufacturers, are demanding more investment in research and development. The best solution for T&N would be a partnership with another components group but one of the candidates, Lucas, has its eyes set on a different deal.

17 May 96

Lord Justice Scott decides in favour of the Names.

18 May 96

Saturday Mail: Knock-back for Lloyd's as judge backs Names

Lloyd's of London's survival hopes took a damaging blow yesterday as Sir Richard Scott, the vice chancellor, ruled that he could not snatch Names' court winnings to pay their insurance debts.

Lloyd's said it would appeal against the judgment and tried to downplay its potential impact, even though chairman David Rowland had told Sir Richard only seven weeks ago the issue was critical to the market's rescue plan.

Lloyd's had tried to change its contract with Names the people who risk all their assets on insurance, so that it could have first call on awards made in their court battles against their agents. Lloyd's feared some Names would take the money and run, leaving their insurance debts unpaid.

In his affidavit to the court in late March, Mr Rowland claimed: "The destination of Names' litigation recoveries is critical to the success of reconstruction and renewal."

He added that if, in practice, Names were under no obligation to use court winnings to pay insurance debts and Lloyd's was obliged to sue them "potentially it could be fatal to reconstruction and renewal".

In a hastily issued statement last night, Mr Rowland said: "The conditional wording that I used in late March related to the position at that time. Conditions have altered materially since then."

He said all parties were now agreed that the issue needed to be resolved and added, "this may mean it will ultimately be considered by the House of Lords".

Improvements made to Lloyd's settlement deal this month, "have eased considerably the financial strain on the society and its members", and several legal decisions had "effectively prevented" action groups paying any court awards to the Names.

All monies currently frozen in escrow accounts, "will remain there for the foreseeable future", he said.

Sir Richard's judgment is a victory for dissident Names' action groups led by maverick Christopher Stockwell who demanded cash now rather than the debt write-offs contained in Lloyd' settlement offer.

Yesterday, a jubilant Mr Stockwell said: "It's good news for the worst hit Names who now have some prospect of getting cash rather than this funny money that Lloyd's is offering."

19 May 96

Sunday Business: US Names set to reject Lloyd's £3-1bn settlement

Any hope Lloyd's of London may have of its £3.1 billion "finality" settlement being accepted in the US could be seriously eroded this week as it emerges that many US Names will reject the improved offer.

And in a further blow, another 20 US states are expected to file their own legal actions this week, bringing the total to at least 30, after the expiry last Wednesday of a temporary stay of action agreed by Lloyd's with the North American Securities Administration Association (NASAA).

The news comes on top of UK Names' court victory in the premium trust deeds case on Friday. The judgment means Lloyd's cannot now force litigating Names to use their court winnings to pay off their debts. Lloyd's will appeal to the Court of Appeal

In the US, Names suspect that Equitas, the Lloyd's settlement vehicle for reinsuring the worst losses up to the 1992 year of account, will go bust in the future and will leave many reinsured Names with huge potential exposure to policyholder actions.

Ken Schiate, the Californian commercial lawyer negotiating on behalf of US Names, said: "We are not getting finality, but ‘maybe finality'. We need a release and indemnity from Lloyd's in case of any inadequacy or collapse of Equitas."

A Lloyd's spokesman said: "We hope to reach a negotiated settlement in the US under terms of the settlement offer."

A NASAA spokesman said Lloyd's has also agreed that after last Wednesday's expiry it will only draw down on US Names' letters of credit after giving two weeks' notice in writing to the individual Names and the securities regulator of that individual's home state.

"States have preserved the opportunity of acting to protect their citizens against demands from Lloyd's," said the NASAA spokesman.

Philip Feigin, chairman of NASAA's Lloyd's co-ordinating committee said: "The states will be following Lloyd's actions very carefully in the weeks to come, and are positioned to intervene at any time should Lloyd's attempt to extract more money from US investors."

NASAA, US lawyers acting for Names and the US Names themselves said they were angry but unsurprised over how Lloyd's has presented its case in the UK press. The US view is that Lloyd's is running a heavy public relations campaign to talk down the US legal position, particularly over the legal actions that are being launched by US states regulators.

US securities regulators claim Lloyd's business done in the US with Names is in breach of domestic securities laws, in part because of lack of investor protection. Their actions are geared to stop Lloyd's making further claims on Names and also to force it to compensate for sums already paid to cover losses.

The attempt by Lloyd's to absolve responsibility from alleged failures to register its business under US securities laws, by arguing that Names did business with agents rather than Lloyd's itself, is completely rejected by NASAA, said Feigin.

19 May 96

Sunday Telegraph: Lime Street in revolt over £700m ‘take'

Cash-rich Lloyd's of London professionals will be challenged tomorrow over profit commissions of £700m they are about to take from insurance market Names just as Lloyd's own recovery plan is at its most delicate stage.

Syndicate managing agents are increasing the commissions they take on profits earned on invested premiums, some by more than 20%, and this is provoking a revolt in Lime Street.

Indignant members of the High Premium Group of Names, underwriting £1m or more each, chaired by Lloyd's council member Lady Rona Delves Broughton, are meeting tomorrow with profit commissions at the top of their agenda. The Lloyd's Names Association Working Party, headed by Christopher Stockwell, intends to call a special Lloyd's meeting to resolve the issue.

Names have borne losses of £11bn in the late 1980's and early 1990's and have seen £2-5bn of their assets redistributed to fund most of the proposed £3-1bn litigation settlement. Now, Lloyd's is going through a period of £1bn annual profits, syndicate managing agents, who are putting £155m into the settlement, are moving fast to increase their take.

Among agents wanting to raise commissions are Cockell, Hiscox, and Cassidy Davis. Willis Faber members, agent James Sinclair said others were raising overall premiums to 15 or 20 per cent and called it "clean, straight greed".

Richard Hiscox, whose agency's syndicates made combined profits of £58m - 15 per cent of capacity - was unabashed. "We only take 13.5 per cent. Only in England would you get a business turning on the people who make it profitable. Names will be amazed at the profits they are to make."

Old hands recall profits commissions of 25 per cent in the 1960's and 1970's.

20 May 96

Crains Business: New York's AG readying lawsuit against Lloyd's - Insurer negotiates deal with investors who lost millions; feds launch probe.

The New York state Attorney General is preparing a lawsuit that would charge Lloyd's of London with selling unregistered securities and defrauding state residents of tens of millions of dollars.

The Attorney General's Office will file the suit if it fails to reach an agreement with Lloyd's over steep losses suffered by more than 300 New York investors. Any move by the state attorney general could have national significance because the state Department of Insurance regulates Lloyd's operations in the United States.

"If these discussions aren't fruitful, we are in a position to commence a filing," says a source in the securities division of the Attorney General's Office.

Postal Service begins probe

While the attorney general and securities regulators in many states hope to strike a deal with Lloyd's, the US Postal Service has already launched its own investigation into the huge insurance market's recruitment operations in the United States.

The threat of legal action comes at a difficult time for the 300-year-old Lloyd's, which is close to collapse after eight straight years of losses totalling $12.5 billion.

The losses have spawned a spate of lawsuits from investors, also known as names, and state securities regulators. They claim that Lloyd's playing on its history of prestige and profitability, encouraged investors to dole out millions without disclosing the financial threat posed by claims related to industrial pollution and asbestos-induced lung disease in America. Conservative estimates place the losses suffered by New York investors at about $50 million.

Scrambling for a deal

To rid itself of the lawsuits, Lloyd's has been frantically trying to craft a restructuring deal with its disgruntled investors. The British insurance house already stated that it would cease to exist in its present form if it does not satisfy money-losing investors. That's because an agreement is needed to meet claims by policy holders, according to Lloyd's.

At the same time, the New York division of the US Postal Inspection Service is gathering evidence from investors about Lloyd's dealings in this country. The federal enforcement agency, which typically investigates charges of mail and wire fraud, says that it has received several complaints regarding the British concern.

"We are reviewing those complaints and upon completion of our review will determine a course of action to take," says P.A. Bowers, an inspector at the New York division of the U.S. Postal Service.

A spokesman for Lloyd's last week downplayed the government's probe.

"We know that they've been asking questions," says Jeffrey Mace, a partner of LeBoeuf Lamb Greene & MacRae, Lloyd's chief law firm in the United States. "We are doing everything we can to co-operate and provide them with whatever information they need."

ing names

Steven B. Feigenbaum, a New York lawyer who represents a group of Lloyd's names, says that he and a local investor met last week with federal officials to discuss the investigation. The government has also sent questionnaires to names, asking them for information on how Lloyd's recruited them.

More than 3,000 U.S. residents invested with the British concern. So far 11 states have sued Lloyd's charging stock fraud and securities registration violation. But a suit filed by New York regulators would have considerably more weight because of the role of the state Department of Insurance. Lloyd's is required by the Insurance department to keep $2.8 billion in trust funds at Citicorp to cover U.S. liabilities.

Lawyers say the outcome of the state's negotiations will figure significantly into whether individual investors in New York will initiate a barrage of claims against the firm.

If the state decides, as many expect it will, to limit its settlement to protecting investors from future losses - and does not seek restitution for money that they have already lost - the legal floodgates are bound to open wide.

Lawyers cash in

Mr. Feigenbaum, the attorney, says he has already been contacted by a group representing many of the New York names about the possibility of suing Lloyd's.

A host of individual investor suits against Lloyd's is also likely to fatten the coffers of LeBoeuf Lamb, which has represented Lloyd's in the United States for nearly 30 years. The relationship with the British house is based on an annual retainer against which the firm bills.

Still, "most names will find it a lot more attractive to proceed with reconstruction and renewal than with litigation," says Mr. Mace. He says that Lloyd's is getting ready to mail investors final statements detailing what they would owe, or get back, under the latest reconstruction plan.

The Securities and Exchange Commission gave investors a much needed boost two weeks ago when it filed an amicus brief partly supporting 600 names who are suing Lloyd's in California. The agency said a lower court was wrong when it ruled that names waived their rights to sue Lloyd's by signing an agreement to settle disputes in British courts.

Some local names want to put the last few years behind them. David Baker, a New York lawyer and a name who lost a substantial amount of money, says "I am very disappointed that this investigation is going on."

"Every single name was well aware of his or her risks," he adds. "The idea of bringing down Lloyd's of London because we can't reach a settlement absolutely baffles me."

22 May 96

Evening Standard: Names' bill down again

A further £100 million of help for the 34,000 Lloyd's underwriting members facing financial ruin is being planned by the insurance market's authorities.

Lloyd's intends to slash the cost of financing a new company designated to rescue Names by that amount.

Names were told that the money they would have to provide for financing the new company, Equitas, was to be cut from £1.9 billion to £1 billion. Now it has been decided the amount needed is about £900 million.

23 May 96

Evening Standard: Solvency test raises new questions at Lloyd's

The DTI has told Parliament it regulates Lloyd's lightly, confining itself solely to assessing the financial strength of the market and ensuring that policyholders are protected. Lime Street is left largely in charge of its own destiny, free from conventional legislation.

The inconsistencies between the two solvency tests may be resolved in the future when Lloyd's moves to a more corporate structure as more companies take over from the Names as capital providers.

The case then for the market to be fully regulated by the DTI or some other Government department in the same way as insurance companies will be overwhelming.

Meanwhile, it is not the solvency test that is causing the Lloyd's authorities a headache. The problem is collecting the £1.5 billion still owed by Names to meet outstanding claims.

It will not be an arbitrary solvency test that causes Lloyd's as an entity to founder, it will be poor cash flow. This is why all hopes are pinned on the multi-billion pound reconstruction and rescue package.

25 May 96

Financial Times: Bad weather affects claims

Domestic subsidence and bad weather insurance claims rose dramatically in the first three months of this year compared with a year before, statistics published yesterday by the Association of British Insurers show. Subsidence claims cost £68m compared with £34m in the first three months of 1995. Weather damage claims, resulting largely from a severe freeze around new year, cost £308m, up from £121m. Bad weather also hit commercial property insurance where claims rose from £86m to £111m. Theft claims fell by 3 per cent in domestic property insurance and 25 per cent in commercial.

25 May 96

Financial Times: Awards frozen by High Court

Lloyd's of London has obtained a High Court ruling freezing the pay-out of litigation awards won by Names - even when they do not owe money to Lloyd's. The move - an attempt to persuade loss-making Names to back the insurance market's recovery plan - affects £16m which Gooda Walker Action Group, representing some of the worst-hit Lloyd's Names, hoped to distribute to members. Names are individuals whose assets have traditionally supported Lloyd's. Mr. Michael Deeny, chairman o the Gooda Walker Action Group, said he regretted the latest decision.

Separately, Lloyd's yesterday published a Mori poll showing that 79 per cent of UK Names were likely to back the recovery plan, compared with 58 per cent in November.

The Association of Lloyd's Members has called meetings in Shropshire, Exeter, Southampton and South Wales next week for Names who might be eligible for extra means-tested help under the recovery plan.

26 May 96

Sunday Business: Fresh blow for Lloyd's

Lloyd's of London is heading for another major setback this week when an insurance industry report is expected to show that the beleaguered institution's share of global market capacity has plummeted from over 50% in 1994 to just 12% this year.

The report, which will weaken arguments about Lloyd's indispensability in the insurance market will further discourage Names from accepting the £3.1m finality settlement.

The document, originally prepared for use in one of the court actions against Lloyd's, is to be circulated among the 2,700 US Names, but is likely to be available in the UK this week.

Its timing is bad for Lloyd's, coming during a US roadshow tour in which officials, led by Lloyd's chief executive Ron Sandler, are attempting to clarify the benefits of their reconstruction and renewal plan aimed at cutting the market free of its bad debts.

A US insurance industry source, who is a Lloyd's Name and one of a small handful of people behind the report, said: "It will debunk Lloyd's claims that its collapse would create havoc in the insurance industry. It will show Lloyd's is no longer dominant in the market."

Data in the report will show a massive decline in Lloyd's insurance capacity in the market globally, from 54% in 1994, to 25% in 1995, and a halving again to around 12% for 1996.

"The report shows Lloyd's is going down the tubes, period," said the US insurance source.

US insurance broker Walter Stein, commenting on Lloyd's position in the US market substantiated the apparent drift of next week's report. "Lloyd's business has gone somewhere else. It is not viable business it purports to be. The markets in the US, Germany and Bermuda have astronomical capacity and could pick up any kind of deficiency created by Lloyd's demise in the US," he said. Lloyd's, he added is now "in a life or death situation."

26 May 96

Daily Mail: Names fear secret talks

A multi-billion pound rescue plan for the troubled insurance market is under threat this weekend.

It has emerged that the financial condition of one of the leading syndicates has deteriorated alarmingly.

At the same time rows were erupting among angry Names - Lloyd's investors - who fear secret deals are being struck. between the market's authorities and influential action group chairmen to buy their support for the rescue.

The syndicate in fresh trouble is 317, once managed by one of the foremost underwriters, Richard Outhwaite. Its 1,614 investors included the former Prime Minister Sir Edward Heath, who resigned last year, and the late publishing tycoon Robert Maxwell.

Syndicate losses had been running at nearly £400 million for the 1982 underwriting account and its books could not be closed because of the uncertainties. Lloyd's intends to transfer this syndicate's liabilities along with the liabilities of all the 34,0009 Names, to a new rescue company Equitas.

Names, however, will have to transfer part or all of their existing Lloyd's funds to the new company to ensure that it is properly funded and many may well have to pay more from their own resources. Equitas will then meet all outstanding insurance claims on behalf Names.

The Equitas team and syndicate managers have decided that more money is required for the Outhwaite syndicate. The total has been increased from £491 million to £600 million.

Already the Names have given £252 million towards the payment, but a further £348 million will be required. And Names are to be told that a further £310 million will be required on the Outhwaite 1990 account to pay for Equitas.

Names that continued underwriting and have funds at Lloyd's are furious that their money is being seized to bail out others hit by the worsening situation at Outhwaite.

29 May 96

Daily Telegraph: Lloyd's gives warnings to US

LLOYD'S of London chief executive Ron Sandier has issued a stern warning to American members and regulators that if they prevent the British insurance organisation's financial reconstruction, large numbers of American insurance companies would collapse.

Without the reorganisation, which involves cash raising and segregation of old liabilities, Lloyd's will not be able to pass the Department of Trade's solvency test in August. That means it would have to go into receivership.

That in turn means American companies would be unable to use their reinsurance contracts into Lloyd's as part of their own reserves. According to the National Association of Insurance Commissioners in America results would be "immediate and devastating".

The association recently intervened to prevent the freezing of Lloyd's assets by the California Department of Corporations. In a law suit statement, association president Brian Atchinson said: "Many major US insurers have some form of a business relationship with Lloyd's."

Inability to claim Lloyd's reinsurance as assets "would render a number of these insurers statutorily insolvent and might necessitate formal action against them". As some may themselves have reinsured other US companies, those policies would also become invalid. "That could have a ‘domino' effect, bringing down insurers, which themselves may have had only a marginal relationship with Lloyd's."

State associations are obliged to take on responsibility for claims unpaid by insolvent insurers, and would have to raise funds from existing companies. That levy, adds Mr Atchinson's statement, could maim the surviving businesses.

In addition, without Lloyd's, there would be a gap in the market, some insurance would become unavailable and the prices of the rest would. rise. He is concerned because the American funds of Lloyd's show a shortfall of $6.1 billion and. interference with the restructuring "would be devastating".

Whatever the justice of members' claims against Lloyd's they should not be able to prejudice the integrity of the funds, Mr Atchinson's court submission concludes. Mr Sandler echoed this by saying rejection of the reorganisation "brings the disaster scenario into play". "This package is final," he added, as Lloyd's has said about previous packages.

30 May 96

Daily Telegraph: Hiscox £54.6m rights issue for acquisition

HISCOX Dedicated Insurance Fund is to launch a £54 6m rights issue to pay for its purchase of Economic Insurance and to buy out the whole of Hiscox Holdings.

The l-for-1 rights issue at 115p a share aims to raise £54 6m. Just over £30m of this will be used to pay for Economic Insurance, with £33m being used to pay for the 75pc of Hiscox holdings that it does not currently own.

Hiscox Dedicated, which is the only Lloyd's of London fund that exclusively provides capital to a single managing agency, said that after the acquisition of the remainder of the Hiscox Holdings, it will be renamed Hiscox Plc.

30 May 96

Times: Names call for Lloyd's pension

LLOYD'S OF LONDON is under pressure to provide its hardest hit names with an annual "pension" as part of its multi-billion settlement offer to 34,000 names.

The call for further help is driven by concerns that thousands of names will be financially ruined if they accept the insurance market's settlement offer.

Lloyd's is in the process of a radical restructuring plan, involving names paying a fee to offload all their future liabilities as well as losing their Lloyd's deposits. For an estimated 6,000 names the bill they will receive from Lloyd's will leave them with little or no assets and they will have little remaining income. As a result Lloyd's has offered £200 million of extra assistance.

However, this so-called tranche 4 of debt credits will not resolve many names} problems. In thousands of cases their Lloyd's deposits are in the form of bank guarantees against their homes and the loss of their Lloyd's deposits would in normal circumstances mean the loss of their homes.

In a bid to overcome this Lloyd's is offering names the chance to take out a special mortgage, but this still leaves names with the problem of how to fund the: interest payments.

In a letter to names Michael Deeny,. chairman of the Gooda Walker Action Group, wrote: "This is a particularly. hard fate for elderly names who face an old age of penury and deprivation."

As a result, Lloyd's is being lobbied hard by numerous names' representatives; including the Association of Lloyd's Members and the Feltrim Names Association and Gooda Walker Action Group, to provide an annual income to ruined names.

Damon de Laszlo, chairman of the Feltrim Names Association, said: "there are many names who have borrowed to pay their losses and will be left with these debts after, they settlement offer. They need financial help."

The idea is that ruined names will- receive regular cash payments that provide a minimum reasonable standard of living. Under the now defunct Hardship programme, Lloyd's own bankruptcy scheme, a couple were entitled to £17,500 a year after the payment of major outgoings, such as mortgage payments.

Lloyd's yesterday said it was in favour of the idea but was concerned about the potential cost and how to fund the payments.

Action group chairmen are urging names to apply for the tranche 4 debt credits so Lloyd's can use the applications to assess the magnitude of the income support needed. Mr Deeny said: "Such income support would be means tested and would only be available to those who. have supplied the information required in the past by the Hardship Committee or that required for tranche 4 applications."

So far more than 3,800 names have applied for tranche. 4 debt credits but about 2,500 who Lloyd's believes are eligible for assistance have failed to apply. The lack of response is thought to be due to the deep mistrust in which Lloyd's is held by many names. Some members of the society are wary about revealing financial details in case Lloyd's uses the information against them if the settlement offer founders. Lloyd's has tried to reassure names that the information is for the sole purpose. of the settlement process

Lloyd's intends to send out fresh indicative statements to names at the end of June, followed in early July by final statements which will detail how much each name has to pay Lloyd's. But it is unlikely that names will vote on whether to accept the offer at the market's annual meeting on July 15. Instead the 34-odd action groups will hold extraordinary meetings as soon as is practicable after the final statements are sent to names. It is after these meetings, in mid to late July, that names are expected to make their individual vote on whether to accept the offer.

30 May 96

Daily Telegraph: Stricken names call for Lloyd's pension

30 May 96

The Australian: Names petition ASC in Lloyds battle

Lloyds of London Australian Names have asked the Australian Securities Commission to intervene in their contracted fight to avoid paying an estimated £300 million ($million) owed to the struggling insurer.

In a new strategy revealed yesterday, the Lloyds Australian Names Enquiry Group, representing 35 investors, has asked the ASC to apply to the courts to prevent Lloyds from recovering the money. The group claims Lloyds syndicates contravened prospectus requirements when attracting Australian investors in the 1980s.

The group received legal advice from a Sydney QC, Mr Bernard Coles, that Lloyd's fund raising was illegal before 1991 (when Lloyd's was granted exemption from the prospectus provisions). Mr Anthony Gun, an Adelaide auxiliary magistrate and the name who organised the ASC submission, said a positive ASC response could open the way for names to sue Lloyds for restitution of amounts paid by names to meet past losses.

More than 800 Australians are listed as names - investors in the Lloyd's insurance market - but it is unclear how many are still active or have an outstanding liability.

Mr Gun, who described his own losses as modest, knows of several names who have paid more than £1 million.

"One has paid £800,000 and is being asked to put in another £400,000," Mr Gun said.

The group alleges the names were not informed of the extent of long-term United States asbestos and pollution underwriting risks when they signed up as names with a Lloyd's syndicate.

ASC intervention could also prevent Lloyds from bringing any action against names in Australian courts or enforcing judgments made in British courts.

The group is buoyed by recent action by US regulators in nine States, which have launched legal proceedings accusing Lloyds of securities fraud.

Last month, the Federal Securities and Exchange Commission also ruled that 600 names were entitled to pursue a damages class action against Lloyd's.

Lloyd's has made a revised offer to names, offering the chance to quit in return for payment of a capped liability.

Lloyd's has also signalled it will pursue vigorously delinquent names.

Australian names must decide by July whether to accept the offer.

Under the proposal, Lloyd's will help the worst affected names by injecting almost $6 billion into Equitas, a separate company designed to isolate the worst of the liabilities.

30 May 96

Evening Standard: Running high risks in the long tail game

The world's insurance community as a business specialising in risk is used to all manner of claims on the policies it provides. One class of business always causes it to hold its breath.

In the markets it is described as "long tail" liability business.

It is an innocent enough expression for a class of risk that has threatened to bring down Lloyd's of London and caused countless problems within the international insurance community.

In spite of its reputation as a freewheeling financial circle, the insurance industry likes certainty. Huge risks are insured. But equally a price for premiums is set at an appropriate level which assumes that some sort of pay-out in claims will have to be made in the near term.

The fundamentals of long tail liability business are different.

The final result is unknown when an insurer takes on a risk in the shape of insuring a company and its management against the financial consequences of suits for damages brought by employees who have suffered industrial injury.

Many of the potential claims take years to emerge and are dependent on the whim of the courts.

The eventual awards that might be made against the company with an insurance policy could be much larger than expected.

The company providing that policy will have little idea of what its eventual exposure might be.

This sounds commercial madness on the part of the insurer.

However, this type of business has considerable attractions. It provides immediate premium income on a book of business where claims could take years to materialise.

In the meantime, insurers can generate significant investment income on the premium flowing to them.

This is known as "cash flow" underwriting and usually comes into favour when the competition stiffens.

Obviously, it is attractive while claims are not filed. When they are it poses a nightmare.

Insurers might be able to absorb one-off "catastrophe" risks in the shape of a disaster, such as claims from a large fire or shipping accident, but they dread a run of smaller claims that lasts for years.

A steady stream of small claims means that reserves have to be constantly topped up while money gained on investment income is steadily eroded. This is at the heart of the problems of Lloyd's of London over the past five or so years.

Between 1940 and 1970 Lloyd's specialised in insuring and reinsuring liability risks of American companies.

When the lung disease asbestosis surfaced, Lloyd's, along with other insurance groups, was swamped by a huge volume of claims.

Reliable assumptions on the possible financial extent of the problem could not be established because of the capriciousness of the court awards mechanism in the US.

In spite of that, some of Lloyd's professionals saw an opportunity to make some money out of the mounting problem. They stepped in and provided reinsurance protection for others within the Lloyd's community who were seeking to unload their long tail liability risks.

At first, these bold underwriters gained large amounts of premiums as they absorbed the risks that others did not wish to retain.

The flood of claims caught up with them, too, leaving them as insurers of last resort in a worse financial position than those they had sought to protect.

Lloyd's is now channelling all this business, underwritten more than half a century ago, to a new company, Equitas, which it has set up.

Some experts at Lloyd's argue that Equitas should approach long tail liability claims with a new attitude and set a fresh approach for dealing with the problematic issue.

They say that original policy wordings should be observed which could reduce the amount of money that is eventually paid out to those insured.

Over the years, Lloyd's has been indulgent to its major policyholders in order to keep business.

Lloyd's has offered very favourable terms to its clients so it can hold on to important accounts.

Experts argue that policyholders should be encouraged to pursue the original underwriters for claims rather than other underwriters, such as Names at Lloyd's, who subsequently took over the risks in the form of reinsurance contracts in the past half a century.

Whatever happens, the enthusiasm for business which carries immediate premium income and claims beyond the horizon is likely to remain undimmed in spite of the near-disastrous consequences of the past few years.

1 Jun 96

Evening Standard: Big five insurers come alive again

2 Jun 96

Daily Telegraph: Wellington to change status

Lloyd's of London investment group Wellington Underwriting is to convert itself into an insurance company writing more than £700m of premiums, making it the biggest corporate player in London's £10bn insurance market, as Lime Street's Big Bang gathers pace.

Plans for Wellington Underwriting, a quoted company backing syndicates run by the separate Wellington managing agency, to take over the agency to create a new company, were "very much ongoing", Anthony Haynes, agency chairman said yesterday.

Wellington's move, which hinges on the Lloyd's recovery plan going through follows a restructuring at another Lloyd's group, Hiscox, whose Hiscox Dedicated Insurance Fund is taking over the group's managing agency, to form a £500m insurance company within Lloyd's. The change has been on Wellington's agenda since the investment group was floated 18 months ago.

With overseas companies controlling much of Lloyd's management and investment funds holding nearly a third of its capacity, capital providers will increasingly seek direct control of underwriting agencies. Those investment trusts which have not already planned moves are under intense pressure to do so. But Wellington, which recently revealed a £100m underwriting profit, will not copy other groups, Murray Lawrence, Bankside and Kiln, by merging its syndicates. Wellington boasts it has no bad performers to submerge with the good.

Another structural Lloyd's change, the auctioning of syndicate capacity, is forcing members' agents to alter their charges. This week, Murray Lawrence will announce it will waive profit commission unless its members enjoy above-average returns - it will then take half the difference. Christie Brockbank is moving to a wholly fee-based system.

5 Jun 96

New Central Fund Byelaw passed

The Council of Lloyd ‘s passed the New Central Fund Byelaw at its meeting on 5 June. The Byelaw serves two main purposes:

  • to provide policyholder protection for all liabilities other than those reinsured into Equitas; and
  • to accommodate the reconstruction and renewal proposals and, in particular, the rules for refunding the 1995 members' special contributions.

The new Central Fund will comprise an opening balance of at least £100 million, transferring from the existing Central Fund, and reserve funds of £200 million, which are available to be called from members as and when required.

Subject to agreement at the class meeting, be held at the Royal Festival Hall on 15 July, the members' special contribution will be charged on the 1993, 1994 and 1995 years at l.5 per cent of capacity (this figure will be slightly higher for certain categories of corporate members).

Where applicable, acceptance of the settlement offer and payment of finality bills will enable all members, both underwriting and resigned, to quality for a full refund of these contributions, beginning in 1997. Refunds will largely extend over seven years, depending on future underwriting capacity. Names who die before the contribution becomes payable will not bear the levy.

5 Jun 96

PR Newswire Association, Inc.: NEW STUDY CONCLUDES SKY WILL NOT FALL IF LLOYD'S OF LONDON IS FORCED TO COMPLY WITH STATE SECURITIES LAWS

British Insurance Company Represents Only 1. 73 Percent of U.S. Property and

Casualty Insurance Market

The following release was issued today by the North American Securities Administrators Association, Inc.

A new study authored by a California insurance expert casts doubt upon the myths being propagated by Lloyd's of London in its battle with US. state securities administrators. The report declares that neither a lien on Lloyd's Central Fund United States (CFUS) nor a continued stay on the draw-down of investor letters of credit and other fluids would affect Lloyd's ability to pay claims, render other insurance companies insolvent or significantly impact the Lloyd's marketplace.

"Although Lloyd's has been working overtime to scare everyone into believing that the world-wide insurance business is at risk if the company is made to answer for alleged violations of state securities laws in the recruitment of American investors, this study demonstrates that Lloyd's is far less of a pillar than it pretends to be," says Mark J. Griffin, director of the Utah Division of Securities and president-elect of the North American Securities Administrators Association (NASAA).

According to the study, Lloyd's total premium income of $14. 3 billion in 1994 represented only 2. 7 percent of the $530 billion world-wide property and casualty insurance market. In the United States, Lloyd's total share is a paltry 1. 73 percent.

WASHINGTON, June 5

Commissioned by the Utah Division of Securities and sponsored by NASAA, the report was written by Robert L. Westin, a noted expert with over 40 years of experience in the insurance business and the author of over 70 professional articles. Westin has been professionally affiliated with Lloyd's in the past, including as a senior executive of Penn General Agencies, Inc., where he was involved in the management of a small Lloyd's approved London brokerage. He visited Lloyd's London office on at least four occasions to discuss the management of the brokerage, arrange underwriting authority, and transact business on the floor of Lloyd's.

Of the largest insurance companies surveyed by Westin, only the Travelers Group felt its connections with Lloyd's was significant enough to mention in its 1995 annual report. Travelers stated that it "does not believe that any uncollectible amounts of reinsurance recoverables would be material to its results of operations, financial condition or liquidity." Smaller companies arc also unlikely to be significantly affected. Moreover, insurance guarantee funds would also protect against losses.

The report explains that Lloyd's is seeking approximately $7. 5 billion to fund an attempted recapitalisation of its insurance operations through the creation of a new entity called "Equitas" that would assume responsibility for claims on policies prior to 1993. Existing investors are to provide $1. 95 billion of this amount. Since only about ten percent of Lloyd's investors are U.S. residents, the effect on Lloyd's and Equitas will be minimal if those persons do not contribute additional money.

"The report demonstrates that if U.S. investors never pay another cent, the Equitas fund will fall $114. 4 million short of the $7. 5 billion - a shortfall of only 1. 5 percent, says Griffin.

Even if investors around the world agree to contribute to Equitas, the report emphasises that they will rot be absolved of liability. Due to unquantifiable exposure due to fixture asbestos - and pollution-related claims, investors may be required to continue paying 20 or more years.

With regard to Lloyd's Central Fund United States (CFUS), a lien on the assets of Lloyd's bank accounts in the U.S. and the funds on deposit of the approximately 2,000 U.S. residents seeking to withdraw from Lloyd's would "have absolutely no effect upon the payment of claims to ... anyone insured or reinsured by a Lloyd's policy anywhere in the world."

The report also makes the following key points:

  • U.S. insurance regulators would not allow American insurance companies to conduct business in the manner that Lloyd's conducts business in the U.S
  • No other insurance company would be permitted to offer insurance with the financial structure of Lloyd's.
  • The financial structure of Lloyd's would not satisfy financial standards of U.S. insurance law.
  • Trust funds held by Lloyd's failed to be allocated and segregated to individual investors as mandated by trust documents arid insurance requirements.
  • Premiums paid by policyholders are not promptly paid into trust funds maintained by Lloyd's and &e sometimes not paid at all or are paid in dramatically reduced amounts.

In March 1996, NASAA President Dee R. Harris formed the NASAA Lloyd's Co-ordinating Committee to gather information, serve as a central information repository for actions filed by 11 states against Lloyd's, and negotiate with the British concern in the hopes of reaching adjust settlement of outstanding disputes. State actions are based upon allegations that the recruitment of approximately 3,000 American investors by Lloyd's was conducted in violation of state securities laws.

On Thursday, June 6, at 11.00 a.m., Philip A. Feigin, NASAA Lloyd's Co-ordinating Committee Chairman and Colorado Securities Commissioner will address leaders of the American Names Association and the Association of Lloyd's State Chairman at a meeting at The Plan Hotel in New York. He will talk about current negotiations with Lloyd's and clarify NASAA's position in light of Lloyd's campaign of disinformation. The media is invited to attend.

Copies of the Westin report will be available on Thursday during Mr. Feigin's address at The Plaza Hotel or by contacting Scott Peterson at 202-737-0900.

Organised in 1919, NASAA is the oldest international organisation devoted to investor protection. In the U.S., NASAA is the national voice of the state securities regulators,

CONTACT: Scott Peterson of North American Securities Administrators Association, Inc., 202-737-0900.

6 Jun 96

PR Newswire Association, Inc.: LLOYD'S OF LONDON ISSUES A RESPONSE TO NASAA STUDY

Lloyd's of London today stated that a press release issued by the North American Securities Administrators Association (NASAA) discussing a study it sponsored on Lloyd's of London contains many serious inaccuracies and distortions. Its figures are incorrect and it shows a lack of understanding of basic concepts about the Reconstruction and Renewal Plan and about Lloyd's itself

Some observations about the study include:

  • Contrary to the statement in the report in the press release, a NEW YORK, June 6 lien on Lloyd's Central Fund or a stay on the draw-down of letters of credit could in fact prevent Lloyd's from paying valid claims to policyholders in the United States.
  • Although the report incorrectly characterises Lloyd's share of the U.S. property and casualty market as a "paltry 1. 73 percent," and attempts to downplay its impact on the U.S insurance market, in fact Lloyd's has fully 15 percent of the U.S. surplus lines market, which is the hard-to-place specialist insurance which provides coverage to many important commercial and governmental entities in the United States, including airports, public transportation system:, power plants, and reinsurance for insurance companies, as well as other insurance as medical malpractice and directors and officers insurance. The inability of Lloyd's to participate in this market would have significant impact on the market and on those seeking to place insurance in it.
  • It is not true that Equitas' liabilities are unquantifiable, as the report states. Indeed, Equitas' liabilities have been quantified and Equitas will be prudently reserved to meet them.

The reserving requires $19. 5 billion, not the $7. 5 billion stated in the report. Equitas has been established as a sustainable reinsurance company authorised by the UK's Department of Trade and Industry.

  • Comments concerning the regulation of Lloyd's are totally off the mark and demonstrate a lack of knowledge about how excess lines insurers operate in the United States. The study seems to miss the fact that Lloyd's is not a company but has a unique structure as a market, which has met all valid claims in the U.S. where it has operated for almost 100 years.

A spokesman for Lloyd's stated, "Lloyd's is shocked by the tactics taken by NASAA in their press release of last night. We have all along believed that we have been in good faith negotiations with NASAA; indeed, we have been negotiating with them all week and have additional meetings planned. To issue this release based upon a highly distorted document at this time - before they have even seen the figures of the improved settlement offer - appears to be a purely political attempt to indulge the interests of a small minority of Names in the United States who are attempting to avoid meeting their obligations while placing a further impediment in the way of the majority of Names who support the Reconstruction and Renewal plan and who would like to see Equitas and the R&R plan succeed so that they can finalise their obligations with Lloyd's.

"We take considerable exception to this report, authored by a supposed ‘expert' who had only minor dealings at Lloyd's. In contrast, the unanimous view of the National Association of Insurance Commissioners (NAIC) at their Spring meeting was that ‘Any significant disruption in the normal operation of the Lloyd's American Trust Fund and other Lloyd's trust funds, such as through ‘freezing' of assets or preventing the drawing down of letters of credit, could have permanent, catastrophic effects on U.S. policyholders and beneficiaries, as well as a massive adverse effect on the entire insurance industry in this country."

"We will respond more fully to inaccuracies and distortions in this report in due course."

CONTACT: David Kronfield or Tracey Stearns of Kekst and Company, 212-593-2655.

6 Jun 96

Sydney Morning Herald: ‘Name' takes Part 10 route from Lloyd's

At least one Lloyd's of London Australian "Name", or investor, has chosen the route of a voluntary arrangement under Part 10 of the Bankruptcy Act rather than deal with the uncertainty of what her total liability for accumulated past losses will be and the financial uncertainty that this entails.

Launceston Name Mrs Mills was facing an outstanding claim estimated at $1 million from past losses incurred by her Lloyd's syndicate.

Mrs Mills, who became a Name in 1987 and put $400,000 of her assets on the line to become a member of Lloyd's, had applied for hardship relief from Lloyd's but was refused. Her only other option, according to her insolvency trustee Mr Max Prentice, was to go bankrupt.

Mr Prentice instead advised her to consider entering into an arrangement with her creditors.

He suggested she enter into an arrangement under Part 10 and notice was given of a meeting of creditors to be held in Launceston.

Lloyd's failed formally to detail its calculations which quantified its debt, a requirement for voting purposes. It also sent a faxed proxy form voting against the proposed settlement. Faxed proxies, Mr Prentice pointed out, are invalid pursuant to Australian case law and he rejected it as chairman of the meeting.

Neither Lloyd's nor its Australian representatives attended the meeting and the settlement was voted into force by the six creditors present, representing a little under $370,000 in claims.

As a result of that meeting Lloyd's will receive $10,000 in complete settlement of its claim.

Mr Prentice said Mrs Mills' investment had been placed in a syndicate involved in reinsurance, litigation insurance and high-risk catastrophic areas, such as oil spills, asbestos risk and chemical pollution when she thought she was investing in cargo, aircraft and motor vehicle insurance syndicates.

Mr Prentice said Mrs Mills had tried unsuccessfully for five years to establish her exact liability.

8 Jun 96

Daily Telegraph: Auditors of Barings face £470m claim

TWO accountancy firms which audited Barings Futures Singapore, where Nick Leeson acted as general manager, are being sued by liquidators for alleged negligence.

Barings Futures Singapore went into liquidation last year with debts of more than £800m after it emerged that Mr Leeson had falsely reported his trading positions for three years. He is now serving a prison sentence in Singapore.

Price Waterhouse has filed a lawsuit at Singapore's High Court which seeks more than $1 billion (£470m) from Deloitte & Touche and Coopers & I.ybrand.

Deloitte & Touche acted as auditors for Barings Futures in 1992 and 1993, while Coopers & I.ybrand performed the audit in 1994. Both firms are also being sued in London by the administrators of Barings Bank.

The lawsuit claims that both auditors failed to detect an account, numbered 88888, in which Mr Leeson concealed his trading losses. The account was established just after he arrived in Singapore in April 1992.

It is not yet clear, however, who will receive the funds if Price Waterhouse is successful in its action.

One insider said: "There will be a separate court hearing at which that will be decided. Barings Futures Singapore had a complicated status in the inter-company balance sheet and it is not clear who is entitled to what."

Chew Kia Ngee, chairman of Coopers & Lybrand Singapore, said: "We are confident that our work as external auditors was properly tarried our and we intend to vigorously defend any claims against us."

Deloitte & Touche said it was "completely satisfied that the audits... were conducted with all requisite professional skill and care."

9 Jun 96

Sunday Telegraph: Lloyd's rescue costs plunge

The cost of the Lloyd's rescue plan has plunged from £1-9bn to £200m according to figures circulated to market professions last week.

Hard-pressed Lloyd's Names will rejoice at the news of the fall, which should cut the amount of cash they need to contribute to the market's reconstruction plans. The fall in the cost of setting up Equitas, the vehicle for handling old claims at Lloyd's, calls into question the accuracy of the figures in the market's rescue plan.

News of the plunge in the cost was released by Lloyd's chief executive Ron Sandler to managing agents. He told agents the cost of providing for Equitas, over and above the £13bn found by transferring reserves from syndicates, is now put at £700m. But Lloyd's and the Department of Trade and Industry say this includes a £500m "cushion" required by the DTI before it would authorise Equitas.

Equitas, the Lloyd's company set up to meet claims under policies written before 1993, is essential to "ring fence" new entrants into the £10bn Lloyd's market, in particular corporate backers, from old liabilities.

There remains other costs to be borne however, including the £1-3bn settlement of Names' lawsuits. The Cameron-Webb syndicates will need £400m. Personal stop-loss and estate protection policies could cost £100m.

11 Jun 96

Evening Standard: Lloyd's may break rescue deadline

Lloyd's of London has warned that it may not be able to prove it is solvent by the Department of Trade's 31 August deadline, meaning that it may be forced to stop trading.

The beleaguered insurance market blamed administrative problems with its complex rescue plan for the delay in obtaining sufficient funds.

Observers said Lloyd's has approached the DTI to ask for an extension, arguing that it deserves leniency because the rescue plan is almost certain to receive support from its members, the Names. This follows recent improvements to a £3.1 billion settlement offer designed to induce them to accept.

Lloyd's claims it has been hit by unexpected delays in preparing statements for each of its 34,000 Names, telling them how much they must pay to participate in the rescue plan. As a result, Names are unlikely to receive their final bills before the second week in August, a fortnight later than Lloyd's is still publicly promising. This leaves little margin for error if cheques are to be received and cleared by the end-of-month deadline.

At the heart of the problem is the unusual structure of Lloyd's, where Names historically traded as individuals. In theory, therefore, the financial position of each could be different.

"Whereas with a company doing a £14 billion reconstruction, you could accept some level of error in the figures so long as they weren't materially inaccurate. In the case of Lloyd's all the numbers have to be right because the effect of errors which seem small overall can be dramatic for individual Names," said an observer.

Lloyd's refused to say if it has approached the DTI for a deadline extension. "We are working with a very complex set of interlocking numbers," said a spokesman. "All I can say is that the deadline we have set of 31 August is still the one we are working to."

Lloyd's chairman David Rowland is unlikely to want much publicity given to any deadline extension the market receives. Ever since the current rescue plan was devised last year, Lloyd's has said the deal has to be in place by the end of August.

Observers say Lloyd's fears that if Names action groups discover that the solvency date is negotiable, this will encourage them to continue renegotiating the terms of the rescue plan. The market has been warning Names that the settlement is now final because time has run out.

13 Jun 96

Financial Times: Limit in talks with agencies

Limit, the largest corporate investor in Lloyd's of London, disclosed yesterday it was in discussions about acquiring minority or majority stakes in a number of agencies which run syndicates at the insurance market on: behalf of capital providers.

The move is likely to accelerate the transformation taking place at Lloyd's.

Managing" agencies, which oversee the underwriting, are increasingly joining forces with those who supply capital to their syndicates. This is creating nascent insurance companies - or "integrated vehicles" - trading under the Lloyd's umbrella.

Mr. Jonathan Agnew, chairman, said Limit would remain a "mixed animal" continuing to supply :capital direct to a wide spread of syndicates. But its push to buy shares in agencies reflected the increased difficulty it expected in obtaining free places direct on the best performing syndicates.

Possible partners for Limit -might include the Bankside, Hiscox and Wellington managing agencies. Mr. Agnew refused to detail what discussions were taking place but he expected Limit to invest in "quite a number".

Other agencies have already found new shareholders including large Bermudian and US insurers.

Mr. Agnew's comments came as Limit unveiled results for the year to March 31 which showed pre-tax profits up from £10.8m to £13m. The figures included only investment income. Underwriting profits from 1994, when Limit joined Lloyd's, will not feed through until 1997 under the market's system of reporting three years in arrears.

However, Limit said it expected a return on "capacity" the amount of business it was allowed to underwrite - of more than 9 per cent in 1994. This is before taking account of a proposed special levy imposed by Lloyd's as part of the market's recovery plan. Return on capital would be roughly double the return on capacity.

For 1995, Limit "tentatively" anticipates a return on capacity of about 7 per cent.

This year, Limit has the capacity to underwrite business generating £610m in insurance premiums spread across 95 syndicates.

13 Jun 96

Financial Times: Brockbank almost trebles

Shares in Brockbank, the Aim-listed Lloyd's agency, leapt 65p to 498p yesterday after it announced a tripling of profits generated by syndicates it managed in 1993. Lloyd's reports results three years in arrears, writes Ralph Atkins.

The figures are likely to feed through into substantially higher commission income for Brockbank, which last year agreed a deal with Mid Ocean under which the Bermudian reinsurer would acquire a 51 per cent controlling stake in an enlarged Brockbank group.

Syndicates 861, 588 and 253 produced total profits of £74-1m, compared with £25.7m

in 1992. The syndicate 861 result included business provided in the first year of Admiral, the telephone-based motor insurer.

14 Jun 96

Financial Times: Lloyd's chief says £3-1bn offer is final

Efforts to secure the financial future of Lloyd's of London moved into their final stage yesterday when the insurance market warned that no further changes were possible to an £3-1bn out-of-court settlement offer. It also said that about 175 "blacklisted" Names would have their benefits from the settlement restricted.

Mr. Ron Sandler, Lloyd's chief executive, said it had to meet deadlines - most importantly the August 31 solvency test imposed by government regulators. ‘There is no further scope for changes in the settlement structure," he said.

Separately, Mr. David Rowland, Lloyd's chairman, outlined to an Association of Lloyd's Members conference how the Names "blacklist" had been compiled from those working at the market who caused losses totalling more than £8bn in recent years.

The list includes underwriters, and directors and partners of Lloyd's agencies. However Lloyd's risked provoking Names' anger by refusing to publish the list for legal reasons.

The latest developments come as the market prepares to send to Names next week revised figures on the individual impact of the market's recovery plan. Names are individuals whose assets have traditionally supported Lloyd's.

Highlighting the growing support for the plan, Mr. Michael Deeny, the chairman of the Gooda Walker Action Group which represents some of the worst-hit Names, told the ALM conference: "The war has gone on long enough, it is time to make peace."

Mr. Sandler warned that further feuding could worsen problems in the US where legal action pending could undermine Lloyd's recovery plan, of which the £3-1bn offer is a part. His remarks were an obvious rebuff to hard-line Names who this week called an extraordinary general meeting to press for substantial improvements .

"I'm worried that the continuing evidence of disputes and dissent will give them [litigating US Names] the confidence that their efforts to make life difficult . . . are the right thing," Mr. Sandler said.

As well as the £3-1bn offer, the recovery plan includes proposals for a giant reinsurance company, Equitas, which would take responsibility for billions of pounds of mainly US asbestos and pollution liabilities.

In the past few months the cost of Equitas to Names has fallen from £1-9bn to about £900m. The settlement offer has also increased from £2-8bn to £3-1bn.

Illustrating the improvements available, the Wellington agency, which runs syndicates at Lloyd's, published figures showing an additional £266m could be released to Names from 1992 and prior years of account because of lower-than-expected Equitas costs. Those benefiting include Names litigating over their losses.

Names on five Lloyd's syndicates are being offered cash for their places by one of the insurance market's new generation of corporate investors, Cox Insurance, Ralph Atkins writes.

In an unprecedented move at the insurance market, Cox announced yesterday that it would pay up to 18p per pound of underwriting "capacity" - the amount of insurance business that can be accepted.

The move is intended to encourage Names who might resign this year to take an early decision, allowing plans to be made for the 1997 underwriting year.

As well as being a corporate investor, Cox also owns a managing agency responsible for running Lloyd's syndicates. It wants to purchase £50m in capacity at a cost of £3.1m.

Corporate investors, trading with limited liability, are increasingly replacing traditional Names who put at risk the full extent of their assets.

14 Jun 96

The Times: Lloyd's cuts Names out of settlement

Lloyd's of London is punishing 172 market professionals for contributing to the £8 billion of losses that hit the market. They will have their share of the settlement offer cut.

The "blacklists of working names covers a string of high-profile underwriters and directors and partners of managing and members agencies and is believed to include a former chairman and deputy chairman of Lloyd's.

In March, Lloyd's gave warning that a small number of names would be excluded in full or in part from the settlement offer.

Yesterday David Rowland, the chairman of Lloyd's, told nearly 800 names gathered at a conference in London that 172 names who were entitled to £32 million of debt credits would now only receive about £14 million. This represents a 56 per cent cut in the names entitlement.

Under the terms of the £3.1 billion settlement plan, Lloyd's is writing off £2 billion worth of names' debts.

Lloyd's has not revealed the identities of the blacklisted working names, but has disclosed the criteria for their selection. These principles for selection suggest that the list might include high-ranking professionals such as Stephen Merrett, a former deputy chairman of Lloyd's and chairman of the Merrett managing agency. All the names have the chance to appeal against the blacklisting.

Other names likely to appear are Tony Gooda, the former chairman of Gooda & Partners, the Lloyd's agency that advised more than 250 names. Mr Gooda's names are among the hardest hit in the insurance market as a result of their involvement in the loss-making Gooda Walker syndicates.

The underwriters of these syndicates, Stan Andrews, Anthony Willard and Derek Walker, are also likely to be on the list. So is Patrick Fagan, underwriter of a Feltrim syndicate. Similarly, Robin Kingsley, chairman of the Lime Street Agency, which placed names on the loss- making Feltrim and Gooda Walker syndicates, is a possible name on the list. Overall, there are 33 former active underwriters who have had their debt credits cut by an amount equal to the average loss incurred by the average member on their syndicate. These underwriters are those whose syndicates have lost more than 100 per cent o f capacity and are subject of litigation or have been the centre of critical- loss review. Virtually all the Lloyd's loss reviews into the background of a syndicate's losses have been critical. The underwriters are not the only ones to be penalised for the syndicate's losses as Lloyd's has decided that directors or partners of the managing agency are to be subjected to the same cut in debt credits. This throws up 131 names. A further 62 working names on the blacklist are directors or partners of members' agencies where the average loss of names was more than 50 per cent in any of the years between 1988 and 1992. The balance comprises of two names who owe debts to Lloyd's and seven names who have been found guilty of serious disciplinary offences.

Earlier in the day, Ron Sandier, chief executive of Lloyd's, had told names at the

Association of Lloyd's Members' conference that there would be no more changes to the settlement offer, in spite of continued lobbying. "The timetable we have does not allow for any change of almost any type," he said.

He added that negotiations with managing agents to increase their contribution to the settlement package from £200 million were in their final stages. The agents are believed to be close to agreeing to inject a further £50 million.

  • A Lloyd's insurer has stolen the march on the insurance market's capacity auctions with an offer to buy £50 million of capacity from investors at up to ten times last years prices. Cox Insurance said the move was designed to secure capacity for next year by September, when it believes 20 to 30 per cent of names could leave the market after the implementation of Lloyd's recovery plan. The company estimates that names leaving its syndicates could be leaving a £30 million - £50 million hole in its £260 million capacity.

14 Jun 96

The Times: Lloyd's goes name drop

JUSTICE comes in many forms and in the case of the Lloyd's of London insurance market it took the manifestation of a blacklist yesterday.

Lloyd's names are on the brink of deciding whether to accept a £3.1 billion settlement offer from those who run the insurance market. Many names will be grudge accepting the offer because they believe that it lets many of the market's miscreants off the hook.

Justice - and in some cases revenge —- is something thousands of names hold dear to their hearts. They have been subjected to five long years of financial torment, largely, they believe because of the negligence if not fraud of a mass of market professionals .

By accepting the out-of-court settlement offer, the names are forgoing their right to see justice done in the courts by handing over on a silver platter their rights to litigate.

Their pain at this predicament is being eased, however, by the disclosure yesterday that about 175 working names are losing out on about £17 million because they are being excluded from the settlement offer.

The individuals, who are entitled to £32 million under the offer, don't yet know their fate and will have to wait another week before the truth lands on their doormats. But for most involved it won't take fantastic powers of deduction to discover their membership.

Lloyd's is declining to reveal the identities of the blackened names, but the selection criteria easily conjures up a long list of possible members. To qualify for blacklist notoriety, a working name had to have done one of five things.

One was to be an underwriter on a syndicate that lost more than 100 per cent of its capacity and is either subject to litigation or has had the background to the losses investigated. This immediately catches 33 underwriters and includes in its number well known people such as Derek Walker, of Gooda Walker.

But it also catches all the directors and partners of the managing agents responsible for the syndicates. So there go another 131 from the list.

And so the roll call continues - 62 directors and partners of members' agents, two members owing debts to Lloyd's and seven members found guilty of serious disciplinary offences.

The names involved have the right to appeal and argue for inclusion in the settlement offer, but the criteria is purely mathematical and Lloyd's decision to write off a name's debts is purely down to the council's largesse.

Lloyd's has the ability to exclude whoever it wants to and yesterday's criteria shows it has not balked at making some tough decisions.

But the really difficult decision now rests with the multitude of names as to whether they accept the hand they have been dealt and whether they can accept the Justice - however meagre - that they have been offered.

14 Jun 96

Financial Times: Reinsurer loses

NRG, the Dutch reinsurance company, yesterday lost its landmark High Court action claiming £400m in damages from actuaries Bacon & Woodrow and accountants Ernst & Young for alleged negligence in giving professional advice.

The case had been closely followed in the City because of its possible implications for the legal responsibilities of advisers during mergers and acquisitions.

Ernst & Young had argued the case was simply one of an investor trying to recoup losses from a bad investment decision by suing advisers.

The result came as an en relief to Bacon & Woodrow. Had the firm lost the case its 45 partners would have been individually liable damages, leaving many facing financial ruin.

The case centred around disastrous £122m acquisition of Victory Reinsurance from Legal & General in 1990.

Victory Re, which specialised in marine and non-life reinsurance unexpectedly proved a substantial loss-maker. The exposure of its and aviation accounts to dis

14 June 1996

The Vancouver Sun: Exxon blasted for Oil spill deal - A U.S. judge said the company used a secret arrangement to undercut the jury system and avoid punishment.

Anchorage - In a strange rebuke to the Exxon Corp. its chair and its lawyers, a federal judge has held that they all had been party of an "astonishing ruse" to attempt to manipulate the jury that awarded $5 billion in damages to pay the victims of the Exxon Valdez oil spill of 1989.

Judge Russel Holland of U.S. District Court here said Exxon had acted as "Jekyll and Hyde" by "behaving laudably in public and deplorably in private."

He criticised a secret agreement Exxon lawyers made with seven seafood processors in 1991 that, he said, had been intended to let the oil company, in effect, share in any future damages it would be forced to pay.

Under the agreement, the seven Seattle-based seafood processors settled claims with Exxon for about $70 million, but then promised to return to Exxon any money they received from awards of punitive damages.

The jury awarded $5 billion in damages against Exxon in September 1994, after a trial lasting more than four months.

The judge ruling this week involved one of the last major issues to be resolved before an entry of final judgment is made in the $5-billion-award.

Exxon, based in Houston, has said that it will appeal the award. The company said Thursday it believed the Alaskan court's analysis "is legally correct."

The issue of the secret agreement came to light in January, when the seven seafood processors put in claims totalling $745 million or 15 per cent of the $5 billion.

They agreed that they would turn over the $745 million to Exxon if their claims were upheld but would get back $12.4 million.

In his opinion issued late Tuesday, Holland said that Exxon had misled the jury and that neither Exxon nor the seafood processors would share in punitive damages.

He declared that Exxon's lawyers, in their statements, and the company's chair, Lee Raymond, in his testimony, created the impression that Exxon had paid the fish processors $70 million in 1991 with no strings attached which turned out not to be true.

"Had the jury been told the whole story, and learned that Exxon had arranged a secret deal to capture nearly 15 per cent of the punitive damaged, the jury may very well have increased the punitive damages by 15 per cent," the judge wrote.

"Public policy will not allow Exxon to use a secret deal to undercut the jury system, the court's numerous orders upholding the punitive verdict, and society's goal in punishing Exxon's recklessness."

The judge also quoted from trial testimony by Raymond saying that Exxon had settled with the seafood processors without asking for a release from future lawsuits.

The judge also said it was probable that more than one of the many lawyers who represented Exxon violated Alaskan judicial rules requiring candour toward the court.

Brian O' Neill, the Chief trial lawyer for the plaintiffs, who included Alaskan natives, fishers and land owners, said that what the judge found was "a kickback agreement" between Exxon and the seafood processors.

"What does that tell you about Exxon and its corporate culture?" he asked.

14 Jun 96

Circular letter from David Rowland, Chairman of Lloyd's to members of Lloyd's

I am writing to advise you of the Ordinary General Meeting and a number of class meetings which are scheduled to take place on Monday 15 July 1996. Notices convening these meetings are enclosed with this letter together with an explanatory guide and personalised proxy and admission cards for your use.

You will receive shortly the settlement information document together with your personal indicative finality statement. The information these documents contain will assist you in deciding how to vote on the resolutions to be put to the meetings. I encourage you to read through this documentation with care, taking such advice as you deem appropriate from your members' agent or other professional adviser, and then to register your vote by returning your proxy in the envelope provided, which must be received by 10.00 am on 13 July 1996.

You are being asked to vote on the special contributions; you are not yet being invited to accept the settlement offer. If these resolutions are passed we expect to make the settlement offer early in August. The special contributions are to be paid into trust accounts. If the settlement offer does not become unconditional they will be returned. If the settlement proceeds the contributions will be refundable subject to certain exceptions and limitations set out in the Guide to Lloyd's Ordinary General Meeting and Class Meetings. It is important that you read this guide carefully.

I emphasise once again that the Council continues to test the reconstruction and renewal plan against the alternatives. The Council is convinced that there is no other viable alternative. If you wish to support the reconstruction plan it is important that you vote in favour of the special contributions.

If you have any questions about arrangements for the meetings on 15 July, please contact either your members' agent or the Lloyd's helpline. Details of the freephone telephone numbers are set out on page 15 of the Guide which is enclosed.

14 Jun 96

Circular letter from David Rowland, Chairman of Lloyd's to members of Lloyd's

The Lloyd's Names Associations' Working Party (LNAWP) and its co-signatories (the Writs Response Group, the Lloyd's Defence Shield and the Paying Names Action Group) have requisitioned an Extraordinary General Meeting of the membership which will take place at the Royal Festival Hall on 15 July, the same day as the Ordinary General Meeting and class meetings. The EGM will be held after the Ordinary General Meeting. Four resolutions promoted by LNAWP and its co-signatories calling for a number of radical changes to the reconstruction and renewal plan will be put to the meeting.

You will find enclosed with this letter the formal notice of the EGM together with a memorandum from the sponsors; a commentary by Ron Sandler and myself on behalf of the Council on LNAWP and its co-signatories' resolutions; personalised grey proxy poll form; and proxy return envelope.

I am encouraged to note LNAWP and its co-signatories' support for the reconstruction package overall. I believe that the practical effect of the resolutions would be to obstruct the settlement. I remind you that none of these resolutions are binding upon the Council.

I urge you to read the enclosed commentary carefully, with particular reference to the introduction. The reconstruction and renewal plan is now entering its final phase, an enormous amount of work has been completed and the Council believes that the time for negotiation has passed. The settlement offer cannot be increased further.

If the offer fails, there will be no second chance. I am, however, confident that the vast majority of members will support the reconstruction and renewal plan.

The Council is aware of each of the issues which give rise to the EGM resolutions and seeks the best achievable outcome for members in all respects. There is nothing to be gained by members in pressing any one issue above another in this complex matter. I urge you to vote against all the EGM resolutions and enable the Council to continue upon its present course.

I particularly invite you to complete the grey proxy form and mark all the boxes in the column headed ‘Against' with an ‘X' or ‘V'.

15 Jun 96

Circular letter from Lloyd's to members of Lloyd's: Lloyd's: Ordinary General Meeting and Requisitioned Extraordinary General Meeting: 15 July 1996

The Ordinary General Meeting of the Society (OGM) is taking place this year at 10 am on 15 July 1996 at the Royal Festival Hall. The business of the OGM is to receive the report and examine the accounts of the Council and for general purposes. The Chairman and the Chief Executive Officer will report to members at the OGM on the progress of the Reconstruction and Renewal Plan. This meeting will be followed by an Extraordinary General Meeting which has been requisitioned by the Lloyd's Names Associations' Working Party and certain co-sponsors calling for a number of radical changes to the Reconstruction and Renewal Plan.

I enclose for your information a letter from the Chairman and an explanatory guide relating to the OGM and a further letter from the Chairman and a commentary in relation to the EGM. These explain in further detail the meetings taking place on 15 July. You will not receive with this letter the other enclosures listed in the guide.

We are making special arrangements for former members with outstanding liabilities (or their representative) to observe the proceedings at these meetings. We are unable however under our byelaws to permit such members or their representative to attend and vote at those meetings.

You will see from the explanatory guide that the OGM and EGM will be followed by a series of separate meetings for members who underwrote for the 1993, 1994 and 1995 years of account to approve special Central Fund contributions needed to fund the settlement offer. No observation arrangements will be available for these class meetings but former members will not be liable to pay the special contributions being voted upon at these meetings.

An attendance card is also enclosed with this letter. This should be completed and returned if you plan to attend on 15 July so that we can ensure that those wishing to observe can be properly accommodated. I should be grateful if you would bring this letter with you should you wish to observe the OGM and/or the EGM on 15 July. Admission will be available from 8.45 am. For your comfort and convenience please arrive in good time for the start of the meetings. Coffee will be available.

Meanwhile, if you have any questions about these special arrangements or any other matter in relation to the meetings, please call our helpline on 0800 454787.

18 Jun 96

Fax Communication: Re: US Names at Lloyd's

Deal agreed between Lloyd's and regulators in return for restitution for US Names.

As a result a supeona issued against Rowland in New York yesterday by the Assistant Attorney General in the SEC case was withdrawn by William H Mohr.

20 Jun 96

Lloyd's Press Release: Lloyd's negotiates loan facility

Lloyd's has negotiated a five-year loan facility up to £300 million as part of the funding of its Reconstruction and Renewal plan. The loan, subject to a number of conditions precedent which principally relate to the success of the Reconstruction and Renewal plan, will be repaid through a mandatory charge on premiums for the 1997 and subsequent underwriting years. The facility is being arranged by Citibank International plc, NatWest Capital Markets Ltd and Royal Bank of Canada Europe Ltd and has been fully underwritten.

This loan, if required, will be available to fund part of Lloyd's contribution to the settlement fund and to enable Equitas to meet its authorisation requirements as soon as possible. Equitas is the reinsurance company established by Lloyd's to assume all the market's 1992 and prior liabilities.

The utilisation of the facility is subject to Council's approval and, to the extent that the facility is drawn, a premium charge will be introduced on all members underwriting for the 1997 and subsequent years of account of up to 1-1 per cent. This charge may be reduced if the facility is prepaid in part before the end of 1996.

21 Jun 96

Financial Times: Owens Corning sues over asbestos

Owens Corning, the biggest US maker of fibreglass insulation, yesterday said it had filed a lawsuit claiming it had been cheated of millions of dollars through a fraud, involving false asbestos damage claims.

It said operators of three testing laboratories doing business throughout the south-eastern US had solicited claimants and deliberately falsified test results so that they could claim compensation from the company over asbestos-related illness.

Owens Corning said that at least 40,000 claims were under investigation and that the sums involved run into tens of millions of dollars. It said it was seeking compensation of three times the money paid out, plus punitive damage.

Mr. Chris Campbell, company secretary and general counsel said: "The significance of this lawsuit is momentous. We believe that our company and other co-defendants have been seriously financially injured as a result of the generation of these false claims.

"We believe that the nature and extent of this fraudulent conduct has significant and far-reaching implications for the entire course of asbestos litigation."

Owens Corning used asbestos in the manufacture of some of its insulation products for 14 years until 1973. As a result, it is a co-defendant, with other manufacturers and suppliers of products containing asbestos, in litigation citing billions of dollars.

Sums already paid by Owens Corning, over damage to health and property, total $2-5bn, most of which has been met through the company's product hazard insurance.

The company said yesterday that it had filed a lawsuit in the US district court for the district of Louisiana, in New Orleans, naming Mr. Glenn Pitts and his cousin Mr. Jewel "Jerry" Pitts, among others.

The Pitts were said to have been owners, officers or consultants of Pulmonary Advisory Services, Pulmonary Advisory Services of Louisiana, and Pulmonary Testing Services. They and their companies could not be reached for comment.

Owens Corning said its lawsuit alleged a deliberate scheme to create fraudulent medical documents based on improperly administered tests which yielded falsified results.

The falsified claims, it alleged made individuals appear to be suffering from asbestos-related pulmonary illness, even though they were not ill, or made individuals appear to be suffering from a more severe pulmonary illness than they were in fact suffering.

Owens Corning also said that it was taking a charge of $545m to cover asbestos claims after 1999, for which it had not provided, and said it was holding talks with 80 law firms in an effort to resolve its asbestos liability.

21 Jun 96

Lloyd's Press Release: Lloyd's sets closing date for £3.1 billion settlement offer

Lloyd's today (Friday) set out the terms of its planned £3.1 billion settlement offer to its 34,000 members world-wide. The closing date for acceptance of the offer will be 28 August this year - a key date in the timetable for the final stages of Lloyd's reconstruction plan. The detailed package of information despatched to members ids designed to help them to plan, ahead of the critical votes on the Names' contribution to the funding of the offer.

The package being sent to Lloyd's members comprises:

  • the 176 page settlement information document describing in detail the terms of the settlement offer which Lloyd's proposes to make to Names at the end of July;
  • updated indicative finality statements, which provide a reliable guide to the final cost of the reconstruction plan and value of the settlement offer for individual Names: and
  • a 52 page guide to the indicative finality statements.

In addition, Lloyd's has produced a 40 minute video, describing the indicative statements, which is available free of charge on request to all members and their professional advisers.

Under the terms of the offer and before taking funds at Lloyd's into account, 12,000 members will receive a release; 6,800 will have a bill no greater than £25,000; 4,100 will have a bill between £25,000 and £50,000; 3,600 will have bills between £50,000 and £75,000; 2,700 will have bills between £75,000 and £100,000; and 4,900 will have bills over £100,000. These amounts are before taking any account of any further debt relief available under tranche 4 debt credits.

In a letter accompanying the detailed information package, David Rowland, Lloyd's chairman, says:

"I deeply regret the events that have made the reconstruction plan necessary. They must never be allowed to recur. I am reminded daily of the damage membership of Lloyd's has caused thousands of people. We in the Lloyd's market have a clear responsibility to develop a solution that offers the best prospect of alleviating that damage."

22 Jun 96

Financial Times: Lloyd's rescue may exclude US Names

Lloyd's of London warned yesterday that it may have to exclude US Names from its recovery plan, which includes a £3.1 billion out-of-court settlement offer. Its move highlighted the headaches posed by US legal action against the insurance market.

The warning came as Lloyd's sent details to 34,000 Names world-wide of how substantial improvements in the recovery plan would effect them individually. A 28 August deadline has been set for acceptances.

Figures released by Lloyd's revealed that, after funds held on deposit at the market are taken into account and the £3-1bn offer distributed, just £359m in new money is required from Names. Lloyd's has reported losses of more than £8bn in recent years. Some 23,500 Names - individuals whose assets have traditionally supported the market - could settle without having to pay any new money.

In spite of broad support in the UK, Lloyd's has run into serious difficulties with US securities regulators, which are pursuing legal action alleging investment in Lloyd's was mis-sold. Lloyd's could probably proceed without US Names - unless assets held in trust to support American business were frozen.

Mr. Ron Sandler, Lloyd's chief Executive, said problems may arise with Equitas, a giant reinsurance company which, under Lloyd's plan, will take responsibility for billions of pounds of mainly US asbestos and pollution liabilities.

Some in the US argue that Names' interest in Equitas is akin to investing in a security, requiring adherence to onerous local securities laws.

Mr. Sandler said this "could have a very serious impact on our ability to include all US Names in the settlement offerI cannot rule out the possibility that we may not make the offer to US Names, either generally or in certain states."

If US Names were excluded, they would be treated as if they had rejected the plan - and pursued through courts for funds they owed. But Mr. Philip Feigin, the Colorado securities regulator who is co-ordinating negotiations with Lloyd's, is in London for talks next week and Lloyd's expressed optimism that a deal was possible.

The improvements in the recovery plan follow a substantial fall in Names' Equitas premium, from £1-9bn estimated last May to £859m. The position of 90 per cent of Names has improved since individual estimates were sent to Names in March. About 9 per cent are better off by more than £100,000.

22 Jun 96

The Times: Lloyd's sees updated offer as "last chance" to settle - Bills cut for 90% of names with losses.

Nearly 90 per cent of Lloyd's names have had their bills to the insurance market cut, as a result of the increase in the settlement offer from £2.5 billion to £3.1 billion.

Yesterday Lloyd's of London dispatched letters to its 34,000 names, providing updated estimates of how much they will have to pay in final settlement of all their debts with the insurance market. The letters supersede the initial statements sent in March, before the settlement offer was increased. In total, Lloyd's is demanding £359 million in new money from names, over and above the assets already held to support names' underwriting.

The biggest beneficiaries of the increased offer are the 3,100 names who have seen their bills tumble by more than £100,000, while the bills sent to about 9,000 further names have fallen by more than £50,000. Furthermore, the number of names who are owed money by Lloyd s has swollen from about 6,000 to 12,000.

At the other end of the spectrum are an estimated 540 names whose bills have increased by more than £15,000 and 2,000 whose bills have risen by less than £15,000.

Lloyd's has lost more than £8 billion in the past five years and the settlement package is an attempt to consign its problems to the past. The package involves an out-of-court settlement with names aimed at ending the mass of legal actions that have swamped the market, and the writing -off of more than £2 billion of names' debts.

In the letter, Mr. David Rowland, chairman of Lloyd's, wrote: "I deeply regret the events that have made the reconstruction plan necessary. They must never he allowed to recur. I am reminded daily of the damage membership of Lloyd's has caused to thousands of names."

He admits there are shortcomings to the offer. "It is not perfect: we do not command unlimited resources and time is no longer on our side. But it offers better prospects than continued litigation."

As a result of the improves offer, 4.900 names will receive demands above £100,000. This is before taking into account their funds at Lloyd's, which are the assets held to support a name's underwriting and, often, are in the form of bank guarantees against the name's home. Under the offer, all names' debts are capped at £100,000 after their funds at Lloyd's have been exhausted.

Again. before taking into account funds at Lloyd's, a further 6,800 names have had debts capped at £25,000, while 4,100 will be sent bills of between £25,000 and £50,000; a further 3,600 names between £50,000 and £75,000; and 2,700 names between £75,000 and £100,000.

Mr Rowland said he was confident that the revised estimates were "a reliable guide to names' finality bills", which will be sent in late July. Names have until mid-August to accept the offer, with payment of any money owed due by 30 September.

"We are entering the final weeks of the reconstruction plan and the time for talking and negotiating is over. Members must now prepare to make their decisions," he writes, adding: "If the offer fails, there is no second chance."

28 Jun 96

Financial Times: Regulator criticises deputy chairman

Mr. John Charman, joint deputy chairman of Lloyd's of London, has been publicly criticised by the insurance market's other deputy chairman and by its director of regulation in a row over the future of the traditional Lloyd's Name.

Mr. David Gittings, director of regulatory services, said Mr. Charman was "not complying with the spirit" of rules requiring underwriters to have personal financial interests in their Lloyd's syndicates. Mr. Charman is the underwriter on syndicate 488. Mr. John Stace, the other deputy chairman, accused Mr. Charman of an "appalling display" which had let down Names supporting the syndicate.

The rules are intended to ensure underwriters' interests are aligned with those of Names, individuals whose assets have traditionally supported syndicates with unlimited liability. But Mr. Charman favours the new generation of limited liability corporate capital.

The row is embarrassing for Lloyd's because Names' support is needed this August for the market's rescue plan. It also highlights the tension between Names, many of whom are expected to leave in the next few years and the newer Lloyd's investors.

Mr. Charman said that without corporate capital his business would have folded. Syndicate 488 has been profitable for the past decade.

However, the moderate Association of Lloyd's Members has accused Mr. Charman of "conduct unbecoming a deputy chairman of Lloyd's." In a letter to Mr. Gittings, the association said Mr. Charman had sent the wrong signal to Names "who have re-capitalised the market through a traumatic period" and whose support was vital.

This letter added: "Some ?? that Mr. Charman should resign his post on the [Lloyd's] council and lose the Lloyd's franchise for his business." The association said it was "remarkable" that … a senior figure should cock a snook at the rules."

The cause of the row is Mr. Charman's announcement of his intention to reduce his unlimited liability participation on syndicate 488 from £300,000 to £1,000.

Names see the move as a signal that Mr. Charman expects limited liability capital to replace their assets. At the end of 1994, Mr. Charman's agency split syndicate 488 into two. One syndicate is backed by traditional Names, the second by a limited liability investment vehicle to which Mr. Charman and many of his staff are substantial shareholders. Mr. Gittings said Mr. Charman had complied with the letter of Lloyd's requirements. But Lloyd's regulatory board has been asked to review whether the rules are adequate.

29 Jun 96

The Times: T & N

T & N has turned into something like a sponge for American personal injury lawyers. Just as investors hope that a bit more might come their way, the US courts give it a squeeze and wring it dry.

The collapse of the Georgine procedure will do little for genuine asbestosis sufferers; should the settlement be scrapped they will have to join the queue in the courthouse alongside less deserving claimants. Another irony for the litigants is that the success of their claims depends upon the resources of a prosperous T & N.

For investors, the problem is quantifying the potential liability, including the huge legal cost of defending bogus tort actions. T & N has paid out some £500 million in claims and some estimate that under Georgine the net present value of ??? claims might total £400 million, suggesting a net value per share for T & N of 160p.

Without a settlement procedure, T & N is clearly worth less, but how much less is unknown. That has not deterred some investors, notably PDFM, the fund manager which has just increased its holding to 16.1 ? T & N could tell a very positive investment story. The company should be playing a pivotal role in the consolidation of the vehicle components sector, but it risks being left on the sidelines as potential partners fret about asbestos. A share in T & N is option money for those with very patient funds.

29 Jun 96

Daily Telegraph: T&N shares hit by US court setback

Shares in T&N fell 9p to 140p - their lowest level this year - yesterday after the automotive group suffered another setback in its attempt to limit its exposure to asbestos claims.

T&N, formerly Britain's largest asbestos producer, had been hoping to cap its potential liabilities under a settlement in which about 20 companies agreed fixed compensation payments.

But the US Court of Appeal last month ruled that this agreement - called the Georgine settlement - failed to meet the criteria of a class action, where a large number of plaintiffs join in a single case. Yesterday the court denied a petition for the case to be reheard. T&N will now petition the US Supreme Court to review the decision.

Claims already filed will not be affected. T&N has paid £350m in out-of-court settlements during the past 10 years and made a provision of £100m in November 1994.

Robert Speed, automotive analyst at Henderson Crosthwaite, said: "I think the market has heavily overdone it. We would expect that over the course of time some sort of ‘son of Georgine' will emerge.

"The reason this settlement has been kicked out is because it was too broad."

Mr. Speed said Georgine would have settled 100,000 claims over the next 10 years with a maximum liability of £787m.

T&N, which accounted for 19.3 per cent of the total, would have had a maximum liability of £152m.

29 Jun 96

Financial Times: Lloyd's threatens to exclude US Names

Lloyd's of London will exclude many of its US Names from underwriting next year unless US state securities regulators back down in their legal actions against it.

The move will add tension to Lloyd's confrontation with the regulators, whose actions have created a significant obstacle to the insurance market implementing its recovery plan this summer. Last week Lloyd's said that US Names might have to be excluded from the recovery plan - which includes a £3.1 billion out-of-court settlement offer to Names - because of the legal problems.

Mr Nicholas Demery, a Lloyd's solicitor, said in a memorandum yesterday that Names in 12 states could not participate on Syndicates in 1997 "unless their securities regulator can be persuaded to modify their positions".

Further increasing the difficulties for US Names, Mr. Demery told agents at Lloyd's that Names in the 12 states would not be allowed to take part in cash auctions for syndicate places starting next month. That means the Names will not be able to sell their stakes on 1997 syndicates they are being forced to give up.

Mr. Demery said Names in other states, besides the 12 Specified by Lloyd's, would be allowed to take part on syndicates or in the auctions only "if Lloyd's is satisfied that it can permit such participation without undue legal risk".

The memorandum came as a delegation of US securities regulators completed a week long visit to London as part of continuing negotiations with Lloyd's. The market said, however, that the move to exclude US Names had been under consideration for some time and was not intended to increase the pressure on the regulators. Lloyd's stopped recruiting new US Names last year.

Lloyd's said that the latest move was "defensive" and it hoped that a deal with securities regulators would allow it to treat US Names in the same way as those elsewhere.

Lloyd's problems with the US regulators centre an allegations that investment in Lloyd's was mis-sold. According to yesterday's memorandum, regulators in 12 states "have issued orders, or are involved in ongoing proceedings, taking the position that annual syndicate participations constitute securities. Lloyd's contests the allegations. If investment in Lloyd's was deemed a security, the market might have to comply with onerous local laws.

Last night Lloyd's would not comment on progress in negotiations with the securities regulators but it expressed optimism that a deal was possible.

Lloyd's has 3,000 US Names with only about 700 still underwriting. It was unclear last night how many were in the states affected by the exclusion order. The states are Arizona, Arkansas, California, Colorado, Illinois, Missouri, Ohio, Pennsylvania, Tennessee, Utah, Virginia and West Virginia.

29 Jun 96

Financial Times: Leopold Joseph beats Coutts to Equitas contract

29 Jun 96

Daily Mail: Cater cuts its links to Lloyd's

Discount house Cater Allen Holdings is slowly being reborn as a specialist small bank doing a bit of this and a bit of that. "We cherry pick," says chairman Patrick Barclay. "We tend to do things others don't bother with."

The Cater empire stretches from stockbroker City Deal Services, which deals in shares from £9 a time, in Tyndall Bank, which takes deposits but never lends money.

One cherry Cater no longer wants to pick is Lloyd's insurance market. It is providing £6.5m to close its managing agency and contribute to the rescue plan.

Cater's year to April pre-tax profits fell from £25.9m to £14.6m but dividends rose 1p to 30p. The shares added `18p to 397p. "Our tails are up," says Barclay.

29 Jun 96

Daily Mail: Asbestos slams brakes on T & N shares again.

Motor components group T&N has been dragged back again into the legal quagmire of claims from asbestos victims - a saga that has savaged its share price for 30 years.

The ‘Georgine' settlement, a peace deal on claims against 20 asbestos companies, looks dead after a US appeals court turned it down.

T&N sold its last asbestos business in March, but is nowhere near ending its long struggle through the courts. It has already provided close to £350m.

In Britain, the court of Appeal upheld £105,000 compensation awards in May, one to a 60 year old woman who played near T&N's Leeds factory as a child.

The long drawn-out affair has slashed the share price. It fell another 9p to 140p yesterday. The shares, back to the levels of the mid-Sixties, have performed miserably relative to the FTSE All Share index.

Nick Cunningham at broker BZW says: "Until we can quantify liabilities, it will be difficult to value them. T&N is a good company, but the market cannot see an end to the claims."

Robert S[peed at Henderson Crosthwaite is more optimistic. "The news is a blow for confidence but, if all US claims were met, T&N's share would be £147m. They could write a cheque for that."

T&N is now valued at £740m - pathetically low for a business with £2bn sales and £120m profits.

As claims drag on, chairman Sir Colin Hope will come under increasing pressure to isolate them somehow from the rest of the business.

If the Lloyd's market can hive off old claims into a separate vehicle, why not T&N?

"Without asbestos, the shares would be over £3," says Sped. "There is unrealised value. It is time management looked at ways to realise it."

2 Jul 96

Evening Standard: Lloyd's lottery leaves question mark over Equitas

3 July 96

Daily Telegraph: Insurance market rate slide - Reckless underwriting and depressed premiums as the gloom deepens for London insurers.

THE London insurance market is in the grip of fierce competition with premium rates sliding across most classes of business, according to two influential market surveys that confirm gloomy reports from underwriters at Lloyd's of London.

While the most urgent task in the insurance world is Lloyd's struggle for survival, London market professionals are at least as concerned about depressed rates and reckless underwriting in some sectors.

Some fear a decline into weak rating conditions of the early 1980s, which led to devastating losses in UK companies and at Lloyd's. "A combination of steady or gradually falling rates typified the London market's annual reinsurance renewal season," reported the highly influential London International Insurance & Reinsurance Market Association yesterday on the renewals season, which ended in January.

Its members, which include the big continental reinsurers Swiss Re, Zurich Re, Munich Re and the British Mercantile & General, work in the international business of protecting insurance companies against big losses.

Association spokesman Nick Edwards added: "The high point of the reinsurance cycle passed in 1994 and terms and conditions have been softening ever since."

Property rates in the excess of loss market, where insurers cover themselves against loss above a specified level, had been cut by 10pc to 15pc on top of similar cuts last year, with rate reductions in seven out of 10 cases, he said. Rates were increasing in the personal injury business, where rising compensation awards encouraged underwriters to be cautious.

While insurers are notoriously slow to admit publicly when market conditions turn dangerous, the providers of capital are more blunt. At Lloyd's, Christie Brockbank Shipton, one of the leading advisers to capital providers, has chilling news for clients in its regular market survey:: "At mid-year, rates in all markets are still falling, as the downturn in the insurance cycle continues."

Charles Harbord-Hamond managing director of CBS, says a breakdown of discipline in the marine market is hitting hull, war and energy rates, points to a continued slide in non-marine, and regarding motor, he warns "In spite of many companies expressing both the hope and intention of increasing rates, this is not happening yet. The latest trend to become clear suggests that underwriters are now writing sub-standard business at standard rates. It will take another 12 months before the results show how short-sighted a policy this is."

Lloyd's underwriters continue to complain of reckless competition from the British composites. Earlier this year, General Accident hastily withdrew a promotional offer sent to thousands of small business after Lloyd's underwriters complained of "suicidal underwriting".

One professional indemnity underwriter warned yesterday: "Watch out for the mad scramble of the solicitors' renewal season." Solicitors are due to renew their professional indemnity cover by September 1, in a business worth about £200m.

Another Lloyd's non-marine underwriter said: "This is a difficult market for everyone. What

the market requires at the moment is something that is not very good for the general population, some large losses."

4 Jul 96

Financial Times: Lloyd's may be close to deal on US lawsuit

9 Jul 96

Daily Telegraph: Lloyd's change

Lloyd's of London may abandon the present system of members joining for only one year at a time. The annual joint venture system means each syndicate has to close its books at the end of each year.

9 Jul 96

Daily Telegraph: Perry pay

Brian Perry, chairman and managing director of Hogg Robinson, the travel and financial services group, received a £240,000 bonus last year, taking his pay package to £556,000

12 Jul 96

The Times: US deal removes last obstacle to reshaping Lloyd's

Lloyd's of London yesterday overcame the last remaining major obstacle to the success of its radical £14 billion restructuring by striking a deal with American regulators.

In return for a £40 million sweetener payable by Lloyd's to American names, US authorities have agreed a framework deal aimed at ending a string of legal disputes.

The framework agreement was signed yesterday morning just hours before the 12-strong committee of the Gooda Walker Action Group delivered an unanimous recommendation to its 3,000 members to accept their share of Lloyd's £3.1 billion settlement offer, which forms part of the restructuring plan. The action taken by GWAG members is crucial to the success of the settlement offer

Lloyd's restructuring plan had been under threat from legal actions in America, centring on allegations that a Lloyd's investment is a security and so contravenes US securities law. The fear was that US state securities regulators would bar Lloyd's 2,700 American names from participating in the settlement offer.

David Rowland, chief executive, said: "This agreement removes the final significant obstacle to the resolution of our past problems. I am delighted that we have been able to achieve this through negotiation and compromise, rather than through litigation."

The agreement was signed by the North American Securities Administrators Association (NASAA) Co-ordinating Committee, which represents the state securities regulators in all 52 American states. The next stage is for the individual states to accept the terms of the framework agreement. For the deal to be finalised, 18 specific states have to sign up. These states are those that have started legal actions or announced that they intend to. In order for the full £40 million sweetener to be paid to NASAA, for use in reducing American names bills from about £250 million, states representing at least 80 per cent of names must accept the framework offer.

Michael Deeny, GWAG chairman, said that "no amount of money can ever compensate names for what they have gone through" but he urged names to "put aside their anger" and accept the offer.

Mr. Deeny said that, under the terms of the offer, GWAG names were getting more than the High Court judge ruled they were entitled to and far more than they could ever hope to receive in cash. Litigating GWAG names were getting 97 per cent of their £540 million GWAG losses and 74 per cent of all their syndicate losses, he said.

An indication of whether the Lloyd's settlement offer is likely to fail or not will be seen on Monday when names vote at Lloyd's annual meeting on whether to pay a special contribution towards the settlement offer.

12 Jul 96

Financial Times: Lloyd's deal set to end US legal action

Lloyd's of London is close to removing the biggest obstacle facing its recovery plan after striking an outline deal yesterday to end legal action brought by US state securities regulators.

The agreement requires Lloyd's to find up to £40m extra to help US Names - a fifth of the sum it is seeking to collect from them to cover underwriting obligations. In return, the regulators would not take any action to derail the implementation of the market's recovery plan this summer.

However, the US concessions will fuel demands from hard-line Names in the UK for extra help and are unlikely to prevent some of the most angry US Names from continuing legal action.

In a separate boost for Lloyd's, leaders of the Gooda Walker Action Group, representing some of the biggest Lloyd's losers, said they were recommending the recovery plan unanimously.

The decision and the US deal improve further the chances of the market making a dramatic comeback, after losses of more than £8bn in recent years, by winning sufficient support for the recovery plan by the August 28 deadline set by Lloyd's.

The plan includes a £3-1bn out-of-court settlement for loss-making and litigating Names, individuals whose assets have traditionally supported Lloyd's. The £3-1bn will help offset the cost of drawing a line under Names' affairs at Lloyd's. In return, Names would have to drop litigating rights.

The US deal is a particular relief for Lloyd's because the state regulators could have prevented US Names from accepting the recovery plan, vital to securing the market's future. The regulators could also have scuppered the plan by freezing more than $10bn (£6-4bn) of assets held by Lloyd's in the US to support local underwriting.

Mr. David Rowland, chairman, said the deal "removes the final significant obstacle to the resolution of our past problems".

The agreement was reached with a negotiating committee set up by the North American Securities Administrators Association after a series of allegations denied by Lloyd's - that the market was mis-selling investment.

The deal has to be agreed with states by tomorrow but Lloyd's is confident of winning approval.

12 Jul 96

Financial Times: Gooda Names back rescue

Leaders of a group representing nearly one in four of litigating Lloyd's of London Names yesterday swung behind the insurance market's recovery plan, further increasing its chance of success.

Mr. Michael Deeny, chairman of the 3,093-strong Gooda Walker Action Group, said the deal was "a very considerable victory" for his members, who had been victims of appalling negligence, he said.

Members of the group expect to receive £524m for losses on Gooda Walker action group syndicates - 97 per cent of total losses - and more than £1bn, or 74 per cent, in respect of losses across all Lloyd's syndicates.

Lloyd's is planning to unveil figures today showing that the insurance market, after incurring losses of more than £8bn in recent years, bounced back with a profit of more than £1bn in 1993. Lloyd's maintains the practice of issuing its reports three years in arrears.

This Monday, Lloyd's is hoping at its annual meeting in London to win support for measures to finance the recovery plan, which includes an out-of-court settlement offer worth £3-1bn.

The action group's recommendation is important because the group represents some of the biggest losers from whom Lloyd's needs to collect outstanding debts and whom it seeks to persuade to drop litigation.

Lloyd's last settlement offer, worth £900m, failed largely because it was rejected by Gooda Walker Names.

"We are actually being offered more than we can be confident of recovering through the courts," Mr. Deeny said. The largest losers in the group "are being offered two or three times as much as continued litigation is likely to provide".

Mr. Deeny criticised a minority of Names who, in the past week, have said they plan to reject the offer and continue legal action.

"When members are offered alternative views of the settlement, they should consider whether the organisations offering these views have actually obtained any judgments on behalf of their members or tested their theories in court. Those of us who have been in court since 1992 . . . are very conscious of the limitations of litigation."

The Gooda Walker action group will hold a special meeting on July 30 to seek members' approval for settling their litigation. Individual Names will then have until August 28 to decide whether to accept or reject.

Mr. Deeny responded to concern that leaders of litigating Names were poised to reward themselves large performance related bonuses, saying that an independent compensation committee would set the payments for Gooda Walker action group leaders. Terms had not yet been decided. He said: "We don't regard this as an urgent piece of business, unlike some action groups."

13 Jul 96

Financial Times: Lloyd's confirms turnaround with record profits of £1bn

Lloyd's of London yesterday confirmed its turnaround in some style, reporting a record £1-084bn ($1-68bn) profit for 1983 under its three-year accounting system.

The news is a positive back-prop to Monday's annual meeting which is expected to back decisively the rescue plan for the long-troubled market.

Lloyds expects endorsement at the meeting for a special £440m levy on Names underwriting between 1983 and 1985 to finance its recovery plan. The plan's success is essential for the market's survival after heavy losses in recent years. Individual Names, whose assets have traditionally supported Lloyd's, have until August 28 to accept.

Lloyd's is also expected to see off convincingly a challenge by rebel Names seeking substantial improvements to the package, which includes a £3-1bn out-of court settlement.

Meanwhile, results of the first auctions this year for places on Lloyd's syndicates indicate a high level of demand by Names to continue underwriting into 1997, a clear reflection of confidence in the role played by traditional Names.

Lloyd's is braced, however, for protests over an unresolved element in the plan's financing. Mr David Rowland, chairman, is expected to say on Monday that only £25-£30 has been raised from syndicate agents on top of the £260m committed so far.

Loss-making Names pressed for a much larger increase and last night Mr Michael Deeney, an influential loss-making Names' leader, described the rise as "deplorable".

Lloyd's is also expecting last-minute legal challenges by hard-line Names to obstruct or derail the plan, notably over allegations that he scale of asbestos losses was concealed by senior market figures in the 1980's. However, the plan has won the backing of most large Names "action groups".

Mr Rowland hailed 1993's figures as among the best in Lloyd's history. Projected profits for 1994 are £1-008bn and £883m in 1995.

The 1993 result followed a £358m loss in 1992. Including extra reserves needed to cover outstanding liabilities on old policies, such as US asbestos and pollution claims, losses in the previous five years topped £8bn.

The 1993 figures were helped by strong rises in premiums and the absence of any natural catastrophes.

13 Jul 96

Financial Times: Lex - Lloyd's of London

Mr David Rowland, Lloyd's of London's chairman, probably feels pretty battered. But events are moving in his favour. Not only is Lloyd's finally close to drawing a line under its messy past; it is producing healthy profits as well. And remarkably, demand for underwriting capacity is running high: yesterday's auction results suggest many Names are trying to extend their exposure to the market, not cut it.

Of course, if profit figures like yesterday's were anything to go by, this enthusiasm would be more than justified. In 1993, Lloyd's profits amounted to a fat 12.6 per cent of premium income. Even better, Lloyd's expects this figure to hold up surprisingly well even in 1995, when rates had already started to slip. But Names should not gate carried away: profits like these will not last. Not only has the world insurance cycle turned; Lloyd's also has too much capacity chasing too little business. Arguably, a burst of enthusiasm from Names is the last thing the market needs.

There are fundamental worries too. In some markets, Lloyd's underwriters still have specialised knowledge which gives them a powerful competitive edge. But the market can no longer trade on what used to be big selling-points: Lloyd's size, and its claim to offer unlimited liability. Now it has to compete with huge insurers. And its disaggregated high-cost structure puts it at a disadvantage.

Fortunately, the market has this bit between the teeth: its planned cost-cutting drive is excellent news. But it will not be enough. For Lloyd's to keep its edge, there will have to be widespread consolidation among underwriting syndicates. And the market's management will have to drive through structural changes - as always, in the teeth of strong opposition. The wasteful system of churning syndicates' capital annually, for instance, will probably have to go. Mr Rowland and his colleagues may deserve a quieter life, but they are not going to get it.

14 Jul 96

Sunday Mail: Lloyd's sees bright future as profits bounce to £1bn

14 Jul 96

Sunday Mail: Vital day in Lloyd's fight for life

14 Jul 96

Sunday Telegraph: Lloyd's ‘confident' on vote

14 July 96

Sunday Telegraph: Lime Street's optimistic survivor

15 Jul 96

Daily Telegraph: Lloyd's chief raps rebels

15 Jul 96

Times: Lloyd's future may yet be an insurable risk

15 Jul 96

Evening Standard: Lloyd's pours extra £100m into rescue

25 Jul 96

Daily Mail: Open years could still sink Lloyd's great salvage plan

Rebuilding an insurance market is never the easiest of tasks but the reconstruction of Lloyd's of London represents an entirely unique scale of difficulty.

Next week 34,000 Names will be issued another bundle of paper that will provide them with more details about the £3.2 billion rescue plan designed to help them with their financial troubles.

The new information, contained in this settlement offer document, will also include final and definitive figures of what the cost of the rescue plan will mean to each Name.

By the end of next month the investors will have had to make their minds up whether to accept Lloyd's rescue plan or fight on for better terms in the law courts.

At this late stage Names have identified a new problem in the proposals, which they argue could undermine any potential benefit provided by the rescue package and leave them with yet more uncertainty over their financial affairs

Their fears arise from the market's current accounting practices. Names, as sole traders with unlimited liability, join insurance syndicates in which the accounts are left open for three years.

It is a practice that allows taxation on profits to be deferred and liabilities to be more accurately assessed

But the structure of the market is operating at variance to its own accounting practices. At the end of each calendar year the syndicate winds up its operations and the liabilities are rolled over into a newly formed syndicate consisting of Names on the old unit and other Names joining the syndicate for the first time.

During a time when the market made large losses the relationship between Names who joined and left the syndicates at different times has been strained. Those joining later have claimed that they have been stuffed with the liabilities of the past.

In order to deal with the problem Lloyd's has encouraged accounts of syndicates to be left open where future liabilities cannot be qualified.

By this highly expedient arrangement, a measure of protection has been offered to Names who have joined the market more recently against the possibility of picking up past liabilities.

Those Names on the open syndicates, however, have had to bear the entirety of the emerging losses without the possibility of them being more widely spread throughout the market.

In a short space of time Lloyd's built up a position in which, up until the end of 1992 no less than 580 syndicate years of account had been left open. Once the books were left open Names on the affected syndicates could not relinquish the involvement with Lloyd's as they still had to meet claims which had fallen on their accounts.

It was to deal with the problem of thousands of "trapped" Names that Lloyd's devised its rescue plan.

The aim was to produce a scheme that would allow the books to be closed and Names to sever their connections with the market if they so wished.

With this in mind Lloyd's set up a new company, Equitas to take over the open year accounts and other loss-making business.

It has now become clear that in spite of the rescue plan thousands of Names who continued trading throughout the troubles could still be trapped on open years which have emerged since 1992.

Lloyd's has said that affected Names will be able to buy insurance protection against large losses from Equitas. That is a strictly limited offer and will not apply from this year onwards when Names will have to fend for themselves.

And the earliest Names can purchase reinsurance protection from Equitas will be at the end of next year.

So far 50 open syndicate years of account have developed since l992. The situation could mean that the 12,798 Names who have traded forward this year could be hit at any time by fresh and unquantifiable losses that are not dealt with in the current rescue plan.

Lloyd's has said that this is an unavoidable consequence of syndicates trading as annual ventures.

In the rescue plan Names are being asked to give up their rights to sue over past losses if they accept the terms.

Now they are concerned that if they waive their legal rights they might not be able to sue over losses that emerge subsequently on their accounts.

Some affected Names hope to mobilise enough support through an action group to deal with these crucial issues.

After the nightmare years they are in no mood for compromise.

27 Jul 96

Financial Times: Lloyd's Names to get an extra £4.4m from insurer

About 4,000 litigating investors at Lloyd's have won a provisional £4.4m "top up" to their agreed market settlement from Ockham Holdings, the quoted insurance group.

Ockham which includes the former Sturge agency businesses, announced that it was to pay £21m to Lloyd's to settle claims from Names - the investors who support the insurance market.

But in an extraordinary move, £4.4m of the total "may become payable to Lloyd's direct to Names" who had been litigating through the Sturge Names Action Group (SNAG).

Mr Tom Benyon, speaking for SNAG, said: "We are the only action group to have achieved more money for members in the last three months."

Ockham wanted to be included in Lloyd's overall settlement plan being considered by Names. SNAG wanted it excluded in order to pursue its own claims.

Ockham had made provisions for the payment to Lloyd's but it said 1996 pre-tax profits would be reduced by £3m-£4m as a result of the SNAG agreement which relies on Names entering into an undertaking not to take any further action. SNAG said the top up payment related to a dispute over the valuation of the assets transferred to Ockham from Sturge. Ockham said the payment covered a variety of claims.

Meanwhile the Paying Names Action Group said it would apply for leave to seek a judicial review of Lloyd's recovery plan. The group represents those who paid losses during the market's worst years and say the settlement is unfair. If leave is given, a further hearing would decide if a judicial review will be granted. A review could disrupt Lloyd's recovery plan. Names will receive their final settlement offers early next week.

28 Jul 96

Mail on Sunday: ‘Orphan' alert for Names

The most powerful body representing Lloyd's Names will warn this week that a £3 2 billion rescue plan may not end their troubles.

The Association of Lloyd's Members says those seeking to leave the market immediately after the rescue - which aims to help 34,000 Names meet more than £8 billion of losses - may find themselves locked in.

The problem centres on ‘orphan' insurance syndicates in which Names invested.

Lloyd's intends to transfer all the business traded on behalf of Names up to 1992 to a new company called Equitas, which will meet outstanding liabilities.

When the business is transferred later this year it will include the equivalent of 580 syndicate years of account, where the books have to be left open because of uncertainties over future insurance liabilities.

Until the financial position of syndicates with open years of account can be resolved, Names cannot sever their connections with Lloyd's as they are still responsible for outstanding liabilities.

Many Names hoped that once the rescue plan was implemented they would be able to leave.

It has become clear that 50 or more Syndicates have had to leave their books open since 1993 and are not covered by the rescue plan. As financial aid will not be given to these syndicates they have become known as orphans

The Association of Lloyd's Members, representing 9,000 Names estimates that 12,000 are affected, including 1,300 who have stopped underwriting.

Lloyd's will allow those on the 1993, 1994 and 1995 trading accounts to buy reinsurance cover from Equitas from the end of next year onwards and close their accounts.

Only when that is done will Names be allowed to leave Lloyd's, taking their deposits with them.

Lloyd's is understood to be looking at the problem and this could mean last-minute improvements in the rescue package, which goes to Names on Tuesday. They have a month to reply.

28 Jul 96

Sunday Telegraph: Ex-Lloyd's chief on ‘blacklist'

A former chairman of Lloyd's of London has been included on the insurance market's "blacklist" of 174 leading insurance market professionals who will be excluded, all or in part, from this week's £3-2bn settlement offer, a Lloyd's spokesman confirmed yesterday.

Sir Peter Green, chairman of Lloyd's of London between 1980 and 1984, heads a roll of Lloyd's past elite, including Stephen Merrett, a former deputy chairman, and Richard Outhwaite, the loss-making asbestos underwriter, who are barred from their share of the "debt credit" package worked out under the Lloyd's Reconstruction and Renewal plan.

Lloyd's says the blacklist contains those whose actions cost the Names on their syndicates more than 50 per cent of their underwriting capacity and "those whose are deemed guilty of misdemeanours". Green chaired Lloyd's when several scandals, notably PCW, were breaking.

However, he has recently played an important behind-the-scenes role in persuading American pollution claimants to lop millions off their demands.

Not all on the list are taking it lying down: John Emney, former deputy underwriter on Merrett's loss-making Syndicate 421, has protested to Lloyd's and says he intends to take legal action.

Names not on the blacklist should receive their 326 page "finality statements", detailing their share in the £3-2bn settlement this week.

28 Jul 96

Sunday Express: Lloyd's trust faces revolt over merger

SHAREH0LDERS in HCG, a Lloyd's of London investment trust, are threatening to revolt over the terms of a £71.5 million merger announced last week with CLM, another Lloyd's vehicle.

The investors believe another merger plan, put to the board a month ago but rejected might have offered a better deal.

The agreement with CLM would result in CLM shareholders owning 58 per cent of the new company, to be called Corporate Insurance Fund. It will be one of the largest vehicles in the Lloyd's market, offering investors access to the market on a limited liability basis.

But some HCG shareholders - Including Abbey Life, which holds more than 10 per cent of the shares, and Gartmore - believe the merger terms do not offer them sufficient value. They are also said to be annoyed that they have not been consulted about the way CLM calculated the value of the merger terms.

The CLM terms may be lower than an alternative proposal put to the board by a third Lloyds investment trust a month ago and turned down.

According to sources that proposal did not include as many advantages for HCG directors, many of whom will be staying on the board following a merger with CLM.

As part of the deal Michael Wade, chief executive of CLM and a former director of Holman Wade, a stop loss insurer, receives more than £3,000 00 in cash for terminating his rights to certain profit commissions.

The advisers' fees for the deal amount to £1.2 million.

CLM says the deal will allow the two companies to cut costs and take advantage of new deals on offer when the reconstruction plan at the Lloyd's of London insurance market is implemented.

Analysts estimate the merged company would save close to £1 million in costs during its first year.

Corporate Lloyd's vehicles were first introduced to the market in 1994 to give investors a way into the insurance market without having to take on unlimited Liability.

But over recent months the sector has begun consolidating, with several firms joining forces.

31 Jul 96

Mail: The Green green grass of Lloyd's

31 Jul 96

Napier v Kershaw appeal judgement

The Court of Appeal upheld an appeal by Lloyd's to the earlier Napier v Kershaw decision and ruled that litigation recoveries are caught by the trust deeds. In 1992 the High Court had ruled in the case of Napier v Kershaw that litigation recoveries were not caught by the terms of the premiums trust deeds. That decision led to the amendments to the premiums trust deeds in March 1995 which have also been the subject of court proceedings.

This is an important decision. It establishes firmly that litigation recoveries in the form of damages for negligent underwriting fall within the terms of the premiums trust deed, regardless of the amendments made in March 1995. Such recoveries must therefore be paid to the trustees of the premiums trust deeds and used to discharge members' liabilities at Lloyd's before being paid to members.

The Court of Appeal will give its decision on the validity of the March 1995 amendments to the trust deeds at a later date. However, in the light of the recent decision on appeal in Napier v Kershaw, the decision on the March 1995 amendment is no longer of such significance.

1 Aug 96

Financial Times: Names to contest legality of Lloyd's recovery scheme

A group of Lloyd's of London Names last night launched a high-risk legal challenge to the insurance market's recovery plan in a bid to win extra concessions for those who have met underwriting commitments.

Lloyd's dismissed the last minute move as not having the remotest chance of success. But it signalled a tense few weeks for Lloyd's, which must implement the recovery plan this summer to pass regulators' solvency tests.

The intervention coincided with the despatch to 34,000 Names world-wide of nearly 48 tonnes of paperwork setting out the final details of a £3-2bn out-of-court settlement offer which is part of the plan

Names in Tennessee arc being excluded because of US legal obstacles but otherwise Lloyd's has widespread support for the plan from Names, the individuals whose assets have traditionally supported underwriting throughout the world.

Yesterday Lloyd's strengthened its hand by winning a Court of Appeal ruling that damages won by Names in court should be used to repay Lloyd's debts before those of third parties.

But the decision by the Paying Names' Action Group to seek judicial review of the plan raises the possibility of the market's future again being thrown into doubt. Mr. Tony Welford, the action group's chairman, said the objective was "to bring them [Lloyd's] to the negotiating table". The application would be withdrawn if its members were given extra help. However, the group's lawyers acknowledged there was "a risk" of the action wrecking the recovery package.

Mr. John Abramson, of legal firm Warner Cranston, said an application for judicial review would be made "at the earliest opportunity" - likely to be this morning. The case could be heard this month, with a judge recalled from the summer legal holiday.

The application follows the breakdown of negotiations with Mr. David Rowland, Lloyd's chairman. The Paying Names argue the insurance market has acted unfairly and beyond its statutory powers. They want extra help for those who continued underwriting, despite heavy losses, meeting bills by borrowing elsewhere.

The group's members say they are unfairly disadvantaged compared with Names who refused to pay bills and are having debts written off. The 3,000 Paving Names are being asked to provide a £3m litigation fund.

Separately, Lloyd's warned it might face a delay in declaring the out-of-court settlement offer unconditional after the deadline for acceptances on August 28. This is because the market's funds may be insufficient to cover shortfalls resulting from Names who reject the offer and have to be pursued for outstanding debts.

It also said some prominent loss-making Names' representatives had been appointed trustees of Equitas, a reinsurance group, as part of the recovery plan would be responsible for billions of pounds of mainly US asbestos and pollution liabilities.

Those appointed include Mr. Michael Deeny, chairman of the Gooda Walker Action Group, and Mr. John Mays, chairman of the Merrett 418 (1985) Names' Association.

• Lloyd's said it hoped to allow Names to trade next year as Scottish limited liability partnerships. These have similar tax advantages as the traditional sole trader basis on which Names underwrite but without the unlimited liability commitment.

4 Aug 96

Mail on Sunday: Fraud call by Lloyd's watchdog

The chief regulator of Lloyd's has called for papers that allege fraud contributed to £8 billion losses.

The huge losses hit the insurance market's 34,000 Names over five years.

Sir Alan Hardcastle, chairman of Lloyd's Regulatory Board, has written to Catherine Mackenzie-Smith and Edward Benfield, who chair two leading action groups fighting for help for Names.

He has asked them to produce documents said to support claims that Names were defrauded or misled.

Problems

Benfield, a former insurance broker who has fought for help for Names who invested in a particular syndicate, has told Sir Alan he has evidence that Names who Joined Lloyd's after 1979 were given insufficient information and were misled.

Benfield has already passed papers to Sir Alan Hardcastle that state that Lloyd's recognised as long ago as 1980 that problems could arise for the reinsurance industry out of asbestos-related claims.

The lung disease asbestosis led to the largest run of claims in Lloyd's 300-year history. Companies claimed on their insurance policies after they were sued by employees who contracted asbestosis.

Sir Alan is studying papers issued at a meeting of European reinsurers in Berlin in 1986 and addressed by Robin Jackson, chairman of the London Asbestos Working Party of insurance company representatives and senior Lloyd's underwriters.

The meeting was called to deal with the emerging crisis.

Papers distributed at the meeting contain the admission that in 1980, London Insurers ‘recognised the potential problems that could arise'.

Losses from asbestosis steadily grew and the full effect was felt on five underwriting accounts from 1988 to 1992.

Benfield argues that Names joining after 1980 were not made aware of the scale at the problems, which ‘may well have resulted in Names being misled'.

Mackenzie-Smith is forming a new action group, the United Names Organisation, to pursue civil fraud cases against Lloyd's after a proposed £3.2 billion rescue plan goes through.

She says Names were encouraged to join Lloyd's without knowing the state of the business and that market insiders arranged deals to benefit themselves and their businesses.

5 Aug 96

Barran's: Death Rattle. Asbestos claims yet another (Corporate) victim

Keene is no more. Having lingered since late 1993 in Chapter 11 bankruptcy proceedings, the long-suffering company had its life support systems yanked last week; its shrivelled corporate husk was buried within its only remaining subsidiary, a flyspeck of a firm that makes composite materials. Asbestos was the killer.

As already chronicled (Barran's 29 March 1993), Keene's woes date back to the late Sixties, when it bought a much smaller company that made "insulation products." A quarter-century later, the once formidable conglomerate had been bled dry by costs of paying out more than 90,000 asbestos-related claims against the unfortunate acquisition; and another 10,000 still are outstanding.

Also left is Reinhold Industries, with annual sales of about $15 million and shares that trade on the Newdaq Bulletin Board. Fifty-one percent of its stock is held by a creditor's trust that elects two of Reinhold's three directors; the trust also has about $20 million of Keene's remaining assets with which to settle claims. A permanent channelling injunction, says Reinhold President Mike Furry, shields the company from any new asbestos-related litigation.

5 Aug 96

Barran's: What's in a Name? Anger at Lloyd's, as 300 sue to block a settlement

Lloyd's has steadfastly maintained that names, in pledging their fortunes to Lloyd's syndicates, are merely sellers of insurance, not buyers of securities. The dissident names maintain that Lloyd's fraudulently sold unregistered securities as memberships in syndicates that Lloyd's knew would be hit by disastrous losses. Lawyers representing some 300 names last month filed a federal suit in Virginia to stop Lloyd's from soliciting Equitas participations until it produces disclosure in conformity with US securities laws. A hearing is set for 19 August.

If the court sides with the dissidents, it will implicitly adopting the view that Lloyd's membership are securities, potentially unleashing billions of dollars in fraud claims against the venerable British institution

"Lloyd's made a ram-it -down-your-throat offer to the states," observes Jeffrey Peterson, executive director of the anti-Equitas American Names Association. "But the Virginia suit goes straight to Lloyd's own jugular."

Or as Lloyd's spokesman Nicholas Doak more decorously concedes, "Obviously, there is a danger that the judge will enjoin the agreement. We might also be stopped from making any claims on US names." To say nothing of the fate of Lloyd's already tarnished name.

10 Aug 96

Financial Times: Surprise award against US tobacco group

The US anti-smoking lobby scored a surprise victory against the US tobacco industry late yesterday when a Florida jury awarded a smoker and his wife $750,000 (£490,000) in damages for health injuries sustained through smoking.

If the award is upheld on appeal, it will be the first time a US tobacco company has been made to pay compensation to a smoker as a result of a legal action claiming damages. The case could prove pivotal if it indicates that juries are starting to shift the blame for the health consequences of smoking on to the tobacco companies instead of smokers themselves.

As reports of the verdict began to emerge late yesterday, it appeared that a six-member jury in the Duval County Circuit Court in Jacksonville had awarded $500,000 to a lung cancer patient and $250,000 to his wife.

The plaintiff had claimed that he was misled by advertising into thinking that smoking was safe.

News of the award began to emerge only minutes before the New York Stock Exchange closed, but US tobacco stocks plunged in after-hours trading. Philip Morris was down $12+ at $93 and RJR Nabisco was down $4 at $28+ .

The award made in the case of Carter -v- American Tobacco, was against American Tobacco, now part of Brown & Williamson Tobacco, the US cigarette-making subsidiary of Britain's BAT Industries.

Brown & Williamson said last night it was disappointed by the verdict. "We are convinced that it is the product of error that is subject to appeal, with a very good possibility that the verdict will be reversed," it said.

"The trial was prejudicially tarnished by allowing the jury to receive inadmissible evidence and to hear testimony based on speculation."

The tobacco companies took consolidation from the fact that in the only other case where a US jury awarded damages to a tobacco plaintiff - the so-called Cipollone case in 1988, where an award of $400,000 was made - the verdict was overturned by a higher court.

10 Aug 96

Financial Times: Tobacco injury award knocks Dow

The Dow Jones Industrial Average of leading US companies slid sharply in the last hour of trading yesterday, hurt in part by a hit to tobacco company stocks from an unfavourable court ruling in Florida, writes Richard Waters in New York.

News of a rare smoking-related jury award against Brown & Williamson, a subsidiary of BAT Industries, sent tremors through the market, sending Philip Morris, a member of the Dow, down $12+ in after-hours trading to $93 a fall of 12 per cent.

Only a small part of that fall was caught in the official closing level of the Dow, however, due to an imbalance between buying and selling orders. Had the full impact shown through, then the index, which ended the day down 32.18 at 5,681.31, would have been 20 points or so lower, analysts estimated.

Among other tobacco stocks to feel the draught from the Florida award were RJR Nabisco, which had fallen to $285/8 , a fall of $35/8, at the same time the stock market closed, and Loews, which was also $35/8 lower, at $787/8.

10 Aug 96

Financial Times: Alternative duo set up at Lloyd's

10 Aug 96

The Times: Tobacco shares hit by award

Shares in tobacco companies fell heavily in late trading on Wall Street last night after a jury in Florida awarded a couple $750,000 in damages from a subsidiary of BAT, the British tobacco giant (George Silver writes).

The award to Grady and Millie Carter, of Orange Park, Florida, followed a claim against Brown & Williamson, a BAT subsidiary for damages resulting from smoking.

BAT said it was disappointed by the verdict which it said was subject to appeal. The company sees a good possibility of a reversal.

Philip Morris said: "We believe it to be an aberration that runs contrary to all but one previous verdict in smoking and health cases and that verdict was later reversed on appeal."

In after-hours trading, shares in Philip Morris fell to £94 from $105+ and RJR tumbled to $28+ from $321/4.

Mr. Carter, 66 retired as an air traffic controller in 1991 after he was diagnosed as having lung cancer. He alleged that he was misled by advertising that led him to believe smoking was safe.

The jury foreman said that the panel reviewed medical articles and other technical documents entered in evidence to help them to resolve liability questions.

10 Aug 96

The Times: Syndicates at Lloyd's to limit names' liability

10 Aug 96

Daily Telegraph: US tobacco shares hit after cancer legal victory

Tobacco stocks plunged in the final minutes of trading last night, after a man who started smoking almost 50 years ago said he could not kick the habit until he got cancer was awarded $750,000 in a lawsuit against BAT Industries subsidiary Brown & Williamson.

The decision is only the second time the tobacco industry has been ordered to pay damages in a smoking liability case. The other award against the industry, in 1988, was overturned on appeal.

The verdict came shortly before the stock market closed, sending shares of Philip Morris and RJR Nabisco down 13pc. American Brands, which sold the Lucky Strikes brand to Brown & Williamson two years ago, was down moderately, as was Bat Industries.

"This is a severe blow to the industry," said Allan Kaplan, tobacco stock analyst at Merrill Lynch.

A judge in Florida said the cigarettes were a defective product and that their makers were negligent for not telling people how dangerous they were.

10 Aug 96

Daily Telegraph: Let's have a look at another five? No, deal me out of Lloyd's

11 Aug 96

Sunday Times: BAT shares to fall after US court ruling

Shares in BAT Industries are expected to slump this week after an American jury on Friday awarded $500,000 damages to a smoker who contracted cancer.

The verdict has raised investor fears of an avalanche of compensation payments to smokers. Shares of American tobacco companies fell heavily in late trading last Friday.

But cigarette makers say the decision is flawed and will be overturned by an appeal court. A similar award against three firms in 1988 was later overruled.

BAT's spokesman Michael Prideaux said yesterday: "This is a setback, but investors will hopefully bear in mind that, in 40 years of these cases in the United States, the industry has never ended up paying out."

Martin Fieldman, a Smith Barney analyst, said: "I don't think this is serious for the industry. It has more shock value than anything else."

Grady Carter, of Orange Park, Florida, smoked from 1947 until 1991, when lung cancer was diagnosed. Last Friday he won a court battle against American Tobacco, the maker of Lucky Strike cigarettes. It is owned by Brown & Williamson, a BAT's American tobacco arm.

Carter, a retired air-traffic controller, said adverts portrayed smoking as safe. He was awarded damages of $500,000 (£320,000), his wife $250,000 (£160,000). He said: "I'm well pleased. It was a just verdict."

The result came through too late to be reflected in London share prices. But it was released five minutes before the New York Stock Exchange closed. American tobacco companies then took a thumping in after-hours trading.

Philip Morris stocks were being sold for $91+ , a fall of $10+ on the New York Stock Exchange price. RJR Nabisco was down $4+ after-hours at $27+.

Despite this, Prideaux said Bat would not make a statement to calm investors' worries tomorrow. He said BAT had less exposure in America than Philip Morris and R J Reynolds, RJR Nabisco's cigarette arm. Its market share is 17%, a quarter of what the other two control between them.

As a result, BAT suffered less from Wall Street's nervousness on Friday. Its American Depository Receipts closed at $17.75, down $1.

In Britain, the share price was boosted in May after an American court decision to disallow "class-actions" - litigation on behalf of several parties - against tobacco companies. It currently stands at 509p.

The appeal against the Florida decision should be heard in a year. Prideaux said Brown & Williamson will challenge evidence it claims was speculative. Prideaux said the original judge might also overrule the jury's decision in the 20-day review he is allowed for comment on the case.

11 Aug 96

Sunday Telegraph: Lime St review in peril

11 Aug 96

BAT braces itself for share slump

12 Aug 96

Daily Telegraph: Lloyd's to oppose any delay in legal review

12 Aug 96

Daily Telegraph: BAT braced for court battles after $750,000 award in US

Tobacco companies operating in America yesterday braced themselves for a steep rise in litigation cases after a Florida court awarded $750,000 - $500,000 - in damages against BAT to former smoker Grady Carter and his wife Millie.

Britain's BAT revealed it already has "a couple of hundred" cases outstanding in America while the lawyer who represented the Carters said he has about 200 other "similar" product liability actions pending in Florida alone.

The victory by Mr. Carter, 66, retired air traffic controller who argued he had been misled into thinking cigarette smoking was safe, threatens to force a tobacco company to pay damages for the first time.

The only other victory for a plaintiff - $400,000 in 1988 for the family of Rose Cipollone, a New Jersey woman - was overturned on appeal. The American Supreme Court ruled then that tobacco companies could not be liable for failing to tell smokers of the dangers before 1972, the year that health statements were introduced in cigarette advertising in America.

Mr. Carter, said he smoked Lucky Strike, one of American Tobacco's brands, from 1947 to 1972 and then switched to other brands. He was diagnosed as having lung cancer in 1991 and stopped smoking.

BAT, which already spends more than $50m a year defending tobacco litigation, said it would appeal against the ruling and that it is confident of victory.

"In hundreds of cases over 40 years, the industry has never ended up paying out," said a BAT spokesman. "We said to shareholders in our annual report that we must expect setbacks along the way but that we expected to prevail in the end. This is clearly a setback but we think there are good grounds for appeal."

BAT will argue that the judge, Brian Davis, allowed inadmissible evidence to be heard. It claims that one of the plaintiff's witnesses should not have been allowed to argue that its American Tobacco subsidiary should have marketed a "safer" cigarette. The Carter case is the second scare this year for tobacco companies. In March, Liggett, the smallest of the leading American cigarette producers, broke ranks by agreeing to settle a huge class-action lawsuit that accused it of manipulating nicotine levels to keep people smoking.

In May, the industry won a major victory in the Castano case when class-actions - in which several plaintiffs join together - were banned in tobacco litigation at a federal level.

Legal Annals

1988:

Rose Cipollane's family win $400,000 against Liggett. Overturned on appeal. Supreme Court says tobacco firms cannot be sued for failing to tell smokers of the dangers before 1972.

March 1996:

Liggett agrees to settle class-action over nicotine addiction - but deal abandoned after Liggett fails to merge with RJR Nabisco.

May 1996:

Castano class-action rejected. New Orleans Appeal Court rules that in federal courts liability cases should be ruled individually.

August 1996:

Grady Carter wins $750,000 damages.

1996-97:

American states sue tobacco industry for medical costs of treating smokers.

12 Aug 96

Times: No smoke without fire on tobacco's bumpy road

12 Aug 96

Circular letter from David Rowland, Chairman of Lloyd's to members of Lloyd's

In earlier communications with members I explained that in mid-August we would provide each member with a further copy of, their finality statement together with supporting data.

I enclose with this letter, a folder which contains this additional information which I trust you will find helpful and informative. This material is accompanied by a document entitled Guidance Notes which I encourage you to read in conjunction with your finality statement and supporting data.

In the period which has elapsed since the dispatch of the settlement offer document on 31 July, many members have already returned their acceptance and payment forms. I am enclosing with this letter a further copy of the payment form for your use. May I urge you to obtain guidance from your professional adviser where appropriate and to ensure that the acceptance and payment forms are completed in accordance with the instructions.

The closure date for receipt of forms of acceptance is 12.00 noon on Wednesday 28 August. It is not necessary to return the payment form by that date: the deadline for payment is 12.00 noon on Monday 30 September.

If you have any queries or require further guidance in connection with the settlement offer, please contact your members' agent, professional adviser or the settlement helpline. The helpline numbers are listed in the foreword to the accompanying Guidance Notes.

15 Aug 96

Times: Lloyd's rescue irrational and perverse, says QC

Lloyd's of London £3.2 billion rescue plan is an unlawful scheme that "infringes fundamental principles" governing the insurance market, the High Court was told yesterday. The "irrational and perverse" package discriminated against names who had faithfully discharged their underwriting liabilities.

16 Aug 96

Times: Names fail to block Lloyd's

16 Aug 96

Daily Telegraph: Rebel Names fail to halt Lloyd's rescue

16 Aug 96

Daily Telegraph: Lloyd's lawyers turn to US for final act

17 Aug 96

Daily Telegraph: Out-of-court deal a $68m bonus for Maxwell creditors

CREDITORS of the late Robert Maxwell's Maxwell Communication Corporation are in line for a bigger payout after a settlement involving a claim against the American practice of accountants Coopers & Lybrand.

Price Waterhouse, the MCC administrators, yesterday made another break- through in its series of legal battles with Coopers & Lybrand by reaching an out-of-court settlement in which Coopers will pay $68m (£44m) .

The claim involved the Coopers audit of the accounts of Macmillan, a former US subsidiary of MCC, and the removal of shares in Berlitz International from Macmillan's control to Maxwell private companies.

The latest settlement means creditors are now likely to receive between 46pc to 51pc of the $3 billion (£2 billion) owed to them after the crash of the 400 Maxwell group companies. Previously it was estimated they would. get between 44pc and 48pc.

Mark Homan, the Maxwell administrator, said a distribution of at least another 3p in the pound is planned for late next month. He added: "We are pleased with the settlement having regard to the costs and risks of litigating the matter to a finish."

The action against Coopers in the US was launched shortly after Price Waterhouse was appointed administrators in 1991. Negotiations have been protracted and Price Waterhouse lowered its sights in reaching a settlement after weighing up the risks of taking the case to court.

A spokesman for Coopers' US practice said last night: "We are pleased the matter is behind us. It is unfortunate when professional advisers are blamed for the fraud and misfeasance of their client."

Banks were the biggest Maxwell creditors but many of them have now sold on a significant part of their claims to American debt traders. They are estimated to hold about half of theft total due to creditors.

Price Waterhouse is still pursuing other cases through the courts and says the chase for the Maxwell money could stretch until the turn of the century

They include Claims against Coopers & Lybrand, the MCC auditors in the UK, banks involved in the Berlitz share episode, other American banks and insurance companies with whom MCC was insured against fraud .

Price Waterhouse is claiming substantial damages against the insurance groups. There have been a number of preliminary hearings on the issue largely aimed at deciding whether the policies applied to the group as a whole or individually to the 400 companies.

17 Aug 96

Daily Telegraph: Ministers knew of De Lorean risk. Confidential Cabinet papers show that successive governments put £78m into Ulster car plant despite warnings. ‘One of the gravest cases of the misuse of public resources for many years', Public-Accounts Committee on De Lorean; ‘I take it this is the last help we give to this unwise project', Margaret Thatcher in 1981.

AN AMERICAN court has forced the government to open secret Cabinet papers, showing that two successive governments poured taxpayers' money .into the controversial De Lorean sports car plant in West Belfast, despite serious doubts about the project's viability.

Labour's Northern Ireland minister Roy Mason told the Cabinet in 1978 that it was "of the utmost political social and psychological importance" that the project should go ahead. "It would be a hammer blow to the IRA," he said.

The documents include evidence from former prime minister Margaret Thatcher, recorded in 1992, saying: "We assumed everything was all right." John De Lorean's futuristic "gull-wing" car plant collapsed in 1982, having consumed £78m of taxpayers' money. In July 1978 Mr Mason told Labour cabinet members including Jack Cunningham, Gerald Kaufman and Roy Hattersley, that if any progress was to be made in West Belfast, a Catholic area with exceptionally high unemployment - "risks had to be taken". Mr Mason's comments came a week after consultants at McKinsey had told the government "the chances of the project succeeding as planned are remote".

A Cabinet paper from February 1981, when the company was in a new cash crisis and Mrs Thatcher was in power, records: "We cannot settle this on commercial grounds alone. The De Lorean venture has become something of a symbol for HMG's commitment to Northern Ireland."

On one memo at that time, asking for the government to guarantee a bank loan, Mrs Thatcher scrawled: "I take it this is the last [double underlined] help we give to this unwise project."

The papers for 1978 to 1982, which would fill four filing cabinets, would normally not be disclosed until 2008 under Britain's 30-year rule on government papers. They were made public yesterday by a New York judge in the latest twist in an 11-year legal battle between the government and Arthur Andersen. The government is suing De Lorean's former accountants for negligence, conspiracy and fraud, but its claims have been severely reduced since the American court rejected the bulk of its claim last April.

The documents include a seven-hour testimony from Mrs Thatcher, which was video-taped in 1992 but has never been seen. Other evidence from former Treasury chief secretary Sir Leon Brittan, and from former Northern Ireland secretaries Roy Mason, Humphrey Atkins and James Prior - now all peers - will be played before the court when the case eventually comes to trial, possibly next year.

Estimates of the potentials damages at stake range from about £20m to several hundred million pounds. A Cabinet Office spokesman said last night: "The government has accepted this outcome in the interests of justice and the need to continue its claim for substantial damages in the interests of the British taxpayer."

It took just seven weeks in the summer of 1978 for John De Lorean, now aged 73, to convince the Northern Ireland Department of Commerce to give him an initial £35m in grants and loans for his Ulster sports car factory. Four years later the company collapsed.

The Public Accounts Committee report in 1984 said: "We have concluded that there was misplaced optimism by government and its advisers when the original decision was taken and when additional investments were made."

Arthur Andersen hopes the documents will help clear its name. The firm has effectively been blacklisted from bidding for public sector accountancy work since the De Lorean debacle.

18 Aug 96

Sunday Times: T&N seeks insurance to cap payout on asbestos claims

T&N, the motor components group, aims to boost its flagging share price by taking out insurance that would cap its liability for compensation over asbestos-related diseases, writes Andrew Lorenz.

Analysts reckon the possible move, reported by insurance-industry experts, could add £500m to T&N's stock-market value. The share price has been savaged in recent weeks by investors' fears about the unquantified scale of the company's exposure to asbestos-related claims dating back to the 1950's.

But ending that uncertainty by taking out insurance could also expose T & N to a take-over bid. Among possible predators are continental European and American groups, now expanding overseas to establish the capacity to supply vehicle makers world-wide. However, any foreign bidder could face competition from GKN, the world leader in driveline vehicle components.

GKN, believed to be tracking T&N, is thought to be particular interested in its engine components - pistons and bearings - and its materials operations.

GKN would itself own many of these businesses had the Monopolies Commission not prevented it from taking over the old AE group in 1984. AE was instead bought by T&N two years later, after a bruising take-over battle.

With more than £300m in net cash and a market value of £3.6 billion, GKN has abundant resources to fund a bid and signalled earlier this month that it was embarking on the acquisition trail.

Analysts say T&N, led by Sir Colin Hope, chairman, could foil a predator by achieving an overnight re-rating of its shares as a result of the insurance move. Robert Speed, of Henderson Crosthwaite, estimates that, without the asbestos problem, T&N would be worth at least £1.8 billion. Yet at its current share price of 132p, it is valued at only £700m.

Speed says that by insuring the asbestos liability, T&N could boost its share price to more than 208p in the short term. Insurance experts say the group could take out a policy that would pay out if asbestos costs exceeded a set figure. The policy would be similar to an excess-loss household or motor insurance policy.

19 Aug 96

Daily Telegraph: Taurus was Rawlins' second computer disaster in 7 years

21 Aug 96

Daily Telegraph: Solvency test for Lloyd's in balance

Lloyd's of London rescue plan could be thrown into question today, less than a week before members have to vote on it, when Judge Robert Payne gives his ruling on an attempt by 93 American Names in Virginia to block the plan.

Lloyd's chief executive Ron Sandler made it clear during six hours of testimony that this is a critical case for the insurance market.

"If the plan is not complete, Lloyd's cannot pass its solvency test," he told the court. Lloyd's must pass a solvency test administered by the Department of Trade & Industry each year at the end of the month.

The 35,500 Lloyd's Names must decide to accept or reject "reconstruction & renewal" by noon next Wednesday. However, any constraint on Lloyd's relationship with its 3,600 American Names could jeopardise the rescue plan.

A Lloyd's spokesman said yesterday that if it lost the case, "we have a contingency plan. We'd appeal immediately". However, he declined to say if the rescue could survive a defeat in the case, "because it hands the initiative to the other side".

He added that an extension of the Lloyd's deadline beyond next Wednesday is "not an option we can live with".

The US Names claim Lloyd's is selling a security as it seeks premiums for Equitas, the new company into which pre-1992 liabilities will be reinsured, and that Lloyd's should be subject to American securities laws.

Lloyd's maintains that membership is covered by contract law ands that Names have agreed to be bound by English law.

The US Names say Lloyd's has not provided adequate financial statements for Equitas or firm information on its management, costs or how its funds and proceeds will be used.

22 Aug 96

Daily Telegraph: Solvency test for Lloyd's in balance

22 Aug 96

Daily Telegraph: Trouble over new name at Lloyd's

23 Aug 96

Times: Now the tobacco giants begin to feel the heat

Grady Carter an unlikely figure as the man who may go down in history for felling one of the world's oldest and more powerful industries. Mr. Carter, a 66-year-old retired air-traffic controller, has passed most of his life in the happy obscurity of Orange Park, Florida. Like many of his generation he smoked - enjoying his favourite brand of filterless Lucky Strikes for most of his adult life - before he contracted lung cancer in 1992.

Mr. Carter and his wife, Millie, decided to seek compensation for his illness, which resulted in him losing part of a lung from Brown & Williamson, an American tobacco company owned by BAT.

The omens were hardly good for Mr. Carter even though his lawyers, Norwood Wilner, had cut his teeth winning millions of dollars of compensation from asbestos companies. But the tobacco industry was different: it had faced hundreds of damages cases in the past 30 years and had never lost a case.

But to everyone's surprise, a jury found in favour of Mr. Carter and awarded him and his wife a total of $750,000 in damages. Paying up is unlikely to prove a problem for BAT. The sum is small for a company that makes total profits of £2.4 billion last year, including £1.6 billion in its tobacco division, and which spends £50 million a year on fighting cases such as these.

Nor did Mr. Carter establish a legal precedent that could be employed in hundreds of similar cases to reach favourable settlements. But the case has brought to an end the industry's apparent aura of invincibility - just as it is facing an escalating battle to fend off punitive regulation on other fronts.

It is perhaps premature to pronounce the death of the tobacco industry. Smoking remains one of the world's favourite addictions - or "habit" as the industry prefers to term it.

An estimated 15 billion cigarettes are smoked every day, including more than a billion a day in America, one of the many Western markets regarded as being in long-term decline. Philip Morris, the world's second largest cigarette company after, the state-owned Chinese tobacco company, believes that the world's market will grow 20 per cent by the end of the decade.

Morris which owns the Marlboro brand, reckons that Western companies have barely scratched the surface of the markets in the developing world. In China, for instance, just 10 per cent of the market is for Western cigarettes.

BAT, meanwhile, announced only yesterday that it was setting up a new company in India in alliance with ITC, its existing Indian partner, to help to sell its main export brands - 553 State Express and Lucky Strike.

The industry is also able to produce tobacco products with profit margins that make most other industries green with envy. Imperial Tobacco, which is about to be floated off as part of the demerger of Hanson, makes an estimated margin of 45 per cent on brands such as Embassy and John Player Special.

In the contest of a world market that seems to offer a licence to print money, the battles in America become almost parochial. The industry rightly points out that it is long way from paying any real damages. There have been few breakthroughs for the anti-smoking lobby in other Western markets, with about 300 cases in the UK recently denied the support of Legal Aid.

In America itself, recent cases have still been concluded mainly in favour of the industry. The Castano class-action, a legal attempt to establish a nation-wide precedent for damages, was dismissed in May. The decision by Liggett, the fifth largest tobacco company in the US, to settle two anti-smoking actions shocked the industry back in the spring. But the dust has since proved to be a damp squid, with a series of complex get-out clauses limiting its impact, and the market concluding that it was really only part of complex machinations by Bennett LeBow, Liggett's chairman, to take control and demerge RJR Nabisco, a rival group.

There is also a very real chance that the Carter case will be overturned, when it goes to appeal, as happened with a similar case in New Jersey in 1988. But the victory has given the anti-smoking lobby new hope. If a widow in Indiana succeeds in winning damages in the next few days for the death from lung cancer of her husband, there is a real possibility that the industry will face a torrent of new cases.

The tobacco companies are also facing a number of other legal challenges, including 13 states suing for the medical costs of treating smokers and a series of class action cases also being lodged at state level. There is a growing feeling that under huge legal pressure the industry will eventually have to concede some ground.

The tobacco company's predicament is compounded by the increasing legislative threat to smoking. Several states have already passed laws restricting smoking in public, while President Clinton is on the verge of accepting recommendations from the federal Food and Drug Administration to ban cigarette vending machines and further restrict advertising.

President Clinton enjoys the odd cigar, but smoking has been banned at the White House and he seems keen to make the habit a political issue.

The industry has responded by pouring serious money into the Republican Party's coffers - BAT has donated $250,000 in the campaign of Bob Dole, the Republican contender for the Presidency - but the politicisation of the debate only increases the likelihood that when anti-smokers have the political advantage, further restrictions will be invented.

At the same time, the leaking of documents suggesting that the industry has lied for 30 years about its understanding of the addictive qualities of nicotine has made the tobacco companies appear hypocritical and shabby. Just two years ago, senior executives in the industry certified to Congress under oath that they did not believe nicotine was addictive.

The companies can still argue that the hammering that their share prices have taken in New York and London is simply sentimental and serious financial damage has not yet been inflicted on the industry and, even if cases continue to go against it, the companies' ability to bear huge costs should not be underestimated.

But America will always remain fundamental to the tobacco companies in spite of the promise of new markets. The US is the home of the industry and its history and marketing image is reliant on this link. If Marlboro Man becomes ostracised in his home market, how easy will it be to sell smoking as a "cool", Western pursuit to consumers in the developing world.

Equally, will investors want to continue pumping money into companies that have become the pariahs of the corporate world? For all its insistence that nothing has been lost yet, the tobacco industry may yet come to hate the name of Grady Carter.

23 Aug 96

Daily Telegraph: BAT shares plunge on US fears. Billions wiped on tobacco giant's value as lawsuits mount and America's drugs agency bares its teeth

Trouble over new name at Lloyd's

Lloyd's of London has been trying desperately to stamp on the stubborn pockets of resistance to its recovery plans. But now I learn of a fresh dispute concerning the rescue vehicle, Equitas, which is causing tempers to fray at Lime Street.

Lloyd's chose the name Equitas in October 1994 after a competition, apparently unaware of a company with the same name trading in Edinburgh, run by former Hambros corporate financier Gavin Don. His management consultancy was set up in March 1994 and he has advised Scottish Financial Enterprise on the setting up of Aim.

Don is now fighting a Lloyd's application to have the name registered at the patent office and has received "unreasonable replies" in correspondence with Lloyd's chairman David Rowland. Says Don: "if he thinks we are frightened or do not have enough money to fight them he is mistaken." Lloyd's is remaining coy and the matter is unlikely to be resolved for several months.

Tobacco firms may lose billions

23 Aug 96

Daily Telegraph: High noon and Names are in the last chance saloon

24 Aug 96

Daily Telegraph: Taxing time for Names as deal deadline looms. The Revenue plans to treat written-off Lloyd's debt as income.

High noon on Wednesday is the deadline by which 34,000 Lloyd's Names must accept or shun a £3 2 billion lifeline to settle their debts.

But, as Money-Go-Round reported last week, the "reconstruction and renewal" offer may result in massive tax bills and there are other worries for embattled Names.

Under the deal Lloyd's will effectively write off part of their debt - 80pc or more of the sum owed in many cases. With a small number of exceptions, there will also be an overall cap of £50,000 if the Name has paid his or her cash calls or £100,000 if they have not. Any funds they may already have lodged at Lloyd's are excluded from these limits.

So far so good, at least in relation to the massive debts outstanding. Unfortunately for many Names, the Inland Revenue says it will tax the written-off debt as income.

That means many Names will escape their Lloyd's liabilities only to get a tax bill amounting to 40pc of the debt they have avoided.

Not all Names will be hit by the tax and many that are will be able to pay it. The effect will depend on their circumstances and the complexities of the Lloyd's offer.

Anyone trying to understand the implications of accepting it faces a daunting task. Although the consensus seems to be that most should accept, some big losers are warning against. Some will already be so bust that they will not have the means to pay even a small percentage of their debt.

One group for whom the reconstruction offer may prove most disappointing are Names who have already used losses from previous years to reduce tax bills on other income. Names, whose losses are always on the basis of unlimited liability, can set them against any other form of taxable income and even against capital gains.

As a result many Names with other interests have used this concession to survive what might otherwise have bankrupted them.

The Inland Revenue argues, not unreasonably, that these losses are now being paid off by Lloyd's and so any tax relief given on them should be recouped.

That is being done by making the written-off debt count as a receipt of income in 1996-97 with the tax due for collection in full on January 31 1998.

The tax bill will normally be 40pc of the written-off amount. But, while there is controversy over whether the Lloyd's debt is enforceable there is no doubt that the Revenue's will be.

Names who have not used losses in the past to reduce their tax liability will be able to carry forward all losses on their Lloyd's accounts, including those which have not been "called". That should mean that there will be no net tax liability as the losses will more than offset the value of the debt credit.

Some campaigning Names blame Lloyd's for the tax liability. Christopher Stockwell, of the Lloyd's Names Association's working party, told The Daily Telegraph: "Lloyd's didn't take proper tax advice at the right time and they didn't think it through properly. Individuals should reject the offer and consider making their own deal with Lloyd's."

However Charles Sturge, of Lloyd's insurance analysts Chatset, forecasts that many people will accept. He said: "Those who are getting large debt credits and whose debts are being capped at £50,000 or £100,000 would be foolish to throw it away."

"If they have used their losses in the past for tax planning they probably have the income now to pay the tax bill. At the other end, anyone with a bill of under £50,000 will probably be glad to take it and draw a line under their Lloyd's experience."

Robert Hiscox, chairman of Lloyd's underwriters Hiscox and a former deputy chairman of Lloyd's, believes it would be madness for most Names to refuse. He said: "Only the bankrupt can have a reason to decline it."

"The Lloyd's debts are enforceable. If Lloyd's ceases to trade, the DTI will step in and its duty is to protect the policyholders."

"It will take over and enforce the debts with all the majesty of the law. Some people have got too emotional and have lost the power of rational thought."

Whatever the complexities of the decision Names have to make, they should not forget simple logistics. Their response must be received by Lloyd's by noon on Wednesday, August 28.

So, bearing in mind the Bank Holiday on Monday and backlogs caused by the postal dispute, they should get their answer in the post without delay. It may even be worth sending a fax of your response to Lloyd's, on 01634 392002, marked "hard copy to follow".

Reasons for acceptance

  • Your debts are capped at £50,000 or - if cash calls were not paid - £100,000; this is most valuable for large debtors.
  • You will have no net tax liability if losses have not been used for tax savings in the past.
  • You can escape at least 80pc of your debt to Lloyd's.
  • You will draw a line under a financial disaster and get on with the rest of your life.

Reasons against acceptance

  • You could create a tax liability, equal to up to 40pc of your debt, which must be paid in January, 1998.
  • You may be made bankrupt, if you cannot pay your tax bills.
  • You will give up any rights to sue Lloyd's or any of its syndicates or individuals.

24 Aug 96

Times: Late US ruling casts shadow over Lloyd's reconstruction plan

An American federal judge sitting in Virginia late last night ruled in favour of US members of Lloyd's, casting a shadow over the insurance market's reconstruction and renewal plans, which names have to vote on by August 28.

The office of lawyers representing the 93 American names who had sought an injunction in Richmond, Virginia, said that their request to block Lloyd's recovery plan had been granted.

Lawyers said that, in his 100-page order, Judge Robert Payne granted relief for all 2,700 American Lloyd's names, and not just those who had filed lawsuits.

David Rowland, the Lloyd's chairman, last night made clear that Lloyd's will launch a rapid appeal against the judgment. He has said that the ruling would not jeopardise the £3.2 billion rescue of the London insurance market.

However, the ruling, delayed for much of the past week, leaves Lloyd's officials with a frantic few days before the voting deadline on the reconstruction and renewal plan.

Under the terms of the plan Lloyd's would reinsure billions of dollars worth of existing pollution and asbestos-related liabilities into a new company, to be called Equitas, using names' money.

Judge Payne heard two days of testimony from Ron Sandler, Lloyd's chief executive, this week, after which he said that he did not want to stop the recovery plan from going ahead world-wide. However, a group of 93 American names want the recovery plan halted at least until they can receive more information on Equitas.

The US names are being asked to pay up to $150,000 each to help to fund the company and they claim that Lloyd's declined to provide detailed financial information about Equitas as required under American laws.

Lloyd's has so far declined to say how many names support the Equitas move, but David Rowland said this week, that a substantial number of names had already accepted. However, Lloyd's said that it had made a contingency plan for such late legal challenges to the reconstruction plan.

24 Aug 96

Financial Times: Lloyd's still awaits US ruling

Last-minute jockeying over the legal rights of US members of the Lloyd's insurance market continued yesterday as it awaited a ruling from a US Federal court that could determine the success of its restructuring plan.

Judge Robert Payne was due yesterday afternoon to issue his ruling on an application by a group of US Names for an injunction which could have the effect of blocking the Lloyd's plan. Names are individuals whose assets have traditionally supported Lloyd's.

The Virginia case comes just days ahead of Wednesday's deadline for Names to accept or reject the £3-2bn out-of-court settlement offer which is part of the recovery proposals. Lloyd's last night refused to comment on the level of acceptances so far but said they were running ahead of where they had been expected at this stage. Mr. David Rowland, chairman, expressed confidence that sufficient support would be forthcoming.

Earlier it emerged that Mr. Dennis Vacco, the New York attorney general, had written to Judge Payne urging him to allow US Names who do not accept the Lloyd's restructuring plan to pursue any legal claims through the US courts. Lloyd's has so far been successful in arguing in other US hearings that all disputes should be heard in UK courts.

The New York state intervention comes in spite of a settlement between Lloyd's and a group of states, including New York, last month. In that agreement, the states' securities regulators agreed not to take action against Lloyd's in return for extra financial compensation for US names.

An official at the New York attorney general's office said yesterday, however that the state had reserved the right to fight for the Names' right to sue Lloyd's in a US court. He added that this would not jeopardise the July settlement but would provide an alternative avenue for any Americans who did not want to accept the Lloyd's plan.

An official at the New York attorney general office said yesterday, however, that the state had reserved the right to fight for the Names' right to sue Lloyd's in a US court. He added that this would not jeopardise the July settlement but would provide an alternative avenue for any Americans who did not want to accept the Lloyd's plan.

Once the recovery plan is declared unconditional, Lloyd's might allow Names who had not accepted a few days extra to fall into line.

  • Lloyd's yesterday reported a steep rise in the volume of business transacted in the latest auction for places on syndicates at the insurance market, Ralph Atkins writes.

The "capacity" traded this week was equivalent to £357m in premium income bringing the total traded in the four auctions this year to £735m - about 7 per cent of Lloyd's total capacity.

24 Aug 96

Financial Times: US ruling threatens Lloyd's recovery plan

The £3-2bn recovery plan of Lloyd's of London was thrown into doubt last night when a US federal court judge in effect, put the proposals on ice in the US, despite warnings by Lloyd's that any delay could wreck the plan.

The Virginia court ruling is a severe blow for Lloyd's which is seeking to win Names' support for the plan by noon on Wednesday. Without Names' agreement, Lloyd's risks failing solvency tests set by the UK Department of Trade and Industry at the end of the month.

Last night Lloyd's said it would appeal immediately - a hearing might start as early as Monday - and Mr. David Rowland, the chairman, emphasised the strong support for the plan shown already by Names, the individuals whose assets have traditionally supported the market. The ruling appeared not to stop US Names accepting, if they wanted to by Wednesday.

"I do believe that we shall deliver the plan," Mr. Rowland said early this morning.

Lloyd's had hoped any injunction would be restricted to the 93 Names who brought the Virginia action. But Judge Robert Payne'' injunction affected all 3,000 US Names.

In an order issued during the evening in Virginia, the judge ruled that Lloyd's plan should be covered by US securities laws, a decision which will require the market to disclose far more information about the plan to its members.

His decision marks the first time that a US court has ruled that Lloyd's fell within the scope of US securities legislation, and comes despite the market's vociferous arguments to the contrary.

The danger Lloyd's faces if it fails to win an appeal is that the extra work ordered by the judge will prove too time consuming. One option might be to exclude the US Names and use bank borrowings to cover their liabilities. But excluding US Names from the plan could alter the offer to such an extent that it cannot proceed elsewhere. It is possible also that the DTI might delay a solvency test, but not for long.

In testimony before the Richmond court earlier in the week Mr Ron Sandler, Lloyd's chief executive, had warned that the market would not be able to make the sort of disclosures required by the securities laws in the time allowed.

Yesterday, however, judge Payne said that the harm to US Names if the disclosures were not made "significantly outweighs any demonstrated harm to Lloyd's in complying with its obligations under the securities laws of the US".

The judge gave Lloyd's until September 28 to disclose the information. After that, he said, all the market's US members would have until September 30 to pay their contributions to the Lloyd's reconstructuring plan into an escrow account at the Virginia court, and then a further 30 days to decide whether or not to accede to the proposal.

In the meantime, he said, Lloyd's should not have the power to force the US members to take part in the scheme.

Opposition to the plan has been strongest among American Names leading to a series of legal obstacles in recent months. (Edited out in later editions)

24 Aug 96

Financial Times: Man in the news - David Rowland. For whom the bell tolls. Ralph Atkins finds the Lloyd's chairman hoping for a happy ending.

The chairman of any business that had lost £8bn, had ruined families world-wide, and who was awaiting a US court ruling that threatened at the last moment to wreck his attempts to sort out the mess, might be a little restless.

Mr. David Rowland, chairman of Lloyd's of London, admitted to being "fairly strung up" this week. After all, the insurance market's ambitious recovery plan has been in the final, tense stages of implementation.

A deadline of noon next Wednesday has been set for the 34,000 Names (the individuals whose assets have traditionally supported Lloyd's) to accept or reject a £3-2bn out-of-court settlement offer. Without a deal, Lloyd's risks failing UK Department of Trade and Industry solvency tests later this month, and having to close after 308 years.

To the frustration of Lloyd', many Names have been holding off until a federal court ruling in Virginia, where 93 rebel US Names have been seeking an injunction delaying the plan until the market provides more figures on the proposals.

However, Mr. Rowland, 63, was not sweating unduly. The trick, he says, is to "think in compartments". "I do have abilities to stop myself and start thinking about something else, to switch of. I play golf in bed at night if I can t sleep. I go around favourite golf courses. I play extremely well at night. No, I do play the odd bad shot."

Colleagues say his ability to survive is remarkable. "He goes home, has a shower and it's over for the day," says one. "It's a fantastic facility." Mr. Robert Hiscox, former deputy chairman, says Mr. Rowland "has been steady as a rock throughout".

He has become accustomed to the Lloyd's roller-coaster. Mr. Rowland became chairman at the start of 1993, having headed a "task force" which a year earlier made first proposals for reforming some of Lloyd's more antediluvian practices.

On his election, he remembers "absolute fury on the part of large chunks of the membership". Names were bearing the cost of negligent and incompetent underwriting which had compounded the impact of a succession of natural catastrophes in the late 1980's and early 1990s, plus an unexpected explosion in US pollution and asbestos claims.

It was soon clear that muddling through was impossible. "1 have always thought there was a chance we might lose Lloyd's... Your brain tells you that of course there is a very substantial risk. But emotionally, looking at the quality of the underlying business, I said to myself "there must be a way - sensible people wouldn't let this happen."

Under his leadership, a team also comprising Mr. Hiscox, Mr. Peter Middleton, chief executive, Mr. Stephen Merrett, another deputy chairman and Mr. Charles Roxburgh, seconded from McKinsey, the management consultancy, began drawing up a business plan.

An essential element was a jumbo reinsurance company, New Co (now called Equitas), to "reinsure" outstanding US asbestos and pollution liabilities. Pooling liabilities would create economies of scale and release Names trapped on hundreds of "open years" - syndicate accounts which could not be closed because of uncertainties over future liabilities.

At the end of 1993, Lloyd's made a first out-of court offer, worth £900m, to Names seeking damages in the courts for their losses. Mr. Rowland was criticised at the time for not selling the offer hard enough . Now, he says, he had a duty to act in the interests of all Names. "I knew it was good for a lot of them but it was impossible at that stage to say it was the best for all of them."

His insouciance meant that the offer's rejection was not seen as a disaster. But within a year it was clear that Names' legal attempts to avoid paying debts were putting an intolerable strain on central finances.

Over the winter of 1994-95, Lloyd's accelerated plans to secure its future. New Co was to take responsibility for liabilities on policies sold before 1993, rather than 1986 as previously envisaged. Actuaries faced a massively increased workload assessing liabilities and assets from thousands of policies dating from the last century.

The settlement offer was more than tripled, eventually reaching £3-2bn, thanks partly to contributions from insurance brokers, agents running syndicates at Lloyd's and the market's auditors.

Mr. Rowland's contribution was not finding solutions - most are credited to his colleagues - but in diplomacy and consensus building. Prior to becoming Lloyd's chairman, he was chairman of Sedgwick, the insurance broker, and his working life has been all about striking deals. One wounding blow was the resignation last November as Lloyd's chief executive of Mr. Middleton, who left for a better-paid management job at Salomon Brothers, the US investment bank. Mr. Rowland was angry because he felt let down.

He now says - recognising the implied insult that "some of these things which happen unexpectedly, turn out for the best". Lloyd's may have benefited from Mr. Middleton's efforts but his successor, Mr. Ron Sandler, "enabled us to build on that in a way which might not have been possible if Peter had continued."

In private, Mr. Rowland is demanding to work for, snapping angrily when he is caught out unexpectedly or arrangements fall through. But to the outside world and crucially, to embittered Names - his manner is almost saintly, no matter how great the temptation.

An early decision was to telephone Names who filled his mailbag with vitriol and obscenities. "Almost without exception, nobody has then continued in the same vein when you talk to them," he says.

Last month, Names were sent final bills setting out the cost to them of drawing a line under their affairs at Lloyd's. When - if - enough finally accept, Mr. Rowland plans to ring the Lutine bell twice in Lloyd's underwriting room, the traditional signal of good news at the market. He then plans a staff party - and a golf-free night's sleep.

25 Aug 96

Mail on Sunday: SFO urged to launch new probe at Lloyd's

A call for a fresh inquiry into how the bulk of £8 billion of insurance losses arose at Lloyd's of London has been made to the Serious Fraud Office.

Chethams, the solicitor acting for the underwriting member Wilfred Sherman, has urged the SFO to investigate after it emerged that Lloyd's own enquiries were carried out with incomplete information.

The SFO had previously decided that no formal inquiry was justified.

It has been established that Lloyd's was never supplied with a full set of the minutes of a working party formed by underwriters and insurance company representatives in 1980 to deal with the expected rush of asbestosis-related claims.

Problem

Lloyd's has carried out two inquiries in the past five years following a report by underwriting agent John Donner that there had been high-level concealment of the extent of the problem by senior market professionals who had early access to the working party's information.

It decided that there was no evidence of wrongdoing or misconduct.

But correspondence in the last month by Robin Jackson, chairman of the working party, indicates that edited minutes of the group's meetings were provided to lawyers Freshfields when they were studying the Donner allegations last year.

The working Party's lawyers, Barlow Lyde & Gilbert, had advised that privileged information should not be submitted to Lloyd's.

25 Aug 96

Sunday Telegraph: Lloyd's chief confident of settlement. ‘US Names won't block £3-2bn deal'

The nightmare that has haunted Lloyd's of London for almost a decade is set to end this week with the acceptance of a rescue package by 33,000 past and present members, the Names, the chairman of Lloyd's said last night.

David Rowland said that "a substantial majority" of Names had approved the £3.2 billion survival plan in time for this Wednesday's deadline.

Speaking after an American court ruling that threatened to jeopardise the timing, Mr. Rowland claimed all indications were of "overwhelming support from the United Kingdom and abroad" for the "Reconstruction and Renewal".

Lloyd's 3,000 American Names were still being urged to vote by Wednesday in spite of the US judgment giving them until the end of September to decide on the deal.

The Names' acceptances are needed for Lloyd's to prove to the Department of Trade and Industry that it has the backing to go on trading next year. The DTI had planned to give its authorisation on September 2, but this date has been put back by two weeks.

Without DTI authorisation, London's £10 billion insurance market would have to cease in 1997 after 300 years in business. One of Britain's most venerable institutions would be consigned to the dustbin of history.

Early last week, barely 30 per cent of the members had sent in acceptance forms. But an 11-hour surge of support has made Lloyd's confident that it has enough backing to persuade the DTI.

Lloyd's has already appealed against Friday's ruling by a federal court judge ion Virginia. Apart from allowing Names to delay a decision on the Lloyd's proposals, it gives them until October 30 to pay the £166 million they are being required to contribute.

Lloyd's believes the DTI might "live with" a delay in American acceptances, but Judge Robert Payne has laid down an even tougher condition. He wants Lloyd's to back its proposals with detailed figures about the business of insurance market going back five years.

Mr. Rowland said this would be "virtually impossible". However, last night, he was confident that Lloyd's could overturn the US judge ruling.

The survival plan has two key elements. First, Equitas, a £15 billion company set up by Lloyd's, will handle claims from policies written before 1993. It will be funded by syndicate reserves plus £360 million from Names. Second, Lloyd's will provide £1.1 billion to settle outstanding lawsuits brought by aggrieved Names and £3.1 billion to meet syndicate debts for those who cannot afford to pay them.

Some 12,500 Names would receive money under the scheme, some as much as £150,000. The terms of the settlement would cap personal liability at £100,000 plus whatever deposits the Name held at Lloyd's.

Lloyd's, named after the coffee house, where underwriters used to meet to insure ships' cargoes, receives some £10 billion a year for insuring risks around the world. Underwriters set the premium rates and conditions for insurance companies world-wide to cover risks from shipping losses to sports' stars loss of sponsorship.

Until the 1970;'s, when there were only a few thousand Names, the system worked well. Then things started to go wrong. The Conservatives cut income taxes, which dramatically reduced the market's attractions as a tax hedge. It became important for syndicates to make real profits, a task that proved difficult.

Other chickens came home to roost. In the 1950's and 1960's, many Lloyd's syndicates had insured companies against having to pay compensation for industrial illnesses and against damages arising from pollution.

Thirty years later, victims of diseases such as asbestosis began to sue.

Still people continued to become Names, often lured by agents who implied that investment in the insurance market was easy money. If you had at least £100,000 in assets, you were in. Membership soared to a record 33,000 in the mid 1980's, with new money being used to limit exposure to losses on natural disasters.

But between 1988 and 1992, it fell apart. Lloyd's began losing money on an unprecedented scale - £8 billion for that period alone. Names who had piled into syndicates in the booming mid-1980's suddenly faced enormous bills and began to sue agents for negligence. Dissatisfaction festered among those who had paid their debts over early rescue plans designed to help others in trouble.

Susan Hampshire and her husband Sir Eddie Kulukundis

Joined: 1965. Resigned in January this year. He still has over £1 million in deposits at Lloyd's.

Losses before settlement, thought to be more than £1 million in the past four years, with a further £400,000 before that. The debts were paid in full. Without the settlement, Ms Hampshire could have faced further losses of £800,000. She will pay £75,000.

Sir Eddie said: "the settlement hasn't meant so much to me because I paid my debts as they were called. But my wife has paid by depleting her deposits. The settlement is helping her a lot. I do feel the settlement is unfair to those who have paid all the time, but I'm in favour of it."

The rescue package will mean different things to different Names, and while many welcome the settlement, others are left feeling angry and betrayed.

Peter and Colin Vine, twins, 80.

Joined: 1964. Resigned in 1990.

Losses before settlement: each had four-year losses of over £300,000. But they also had earlier losses of £60,000 each. Colin paid his from private funds but Peter paid his by running down his deposit in Lloyd's. Now Colin is being asked to pay substantially more than Peter because he has more funds remaining in Lloyd's.

Peter said: "There is no justice in this at all. I have accepted the settlement, but it's a form of blackmail I am grateful the nightmare of the past few years will finally be over - and that's what Lloyd's is banking on. But at our age we don't need any of this. We are now the ones who have suffered most - not those who said they could not or would not pay".

Colin Said: "I am lucky my family and friends rallied around. Without them I would be bankrupt.

Sir Edward Heath

Joined: 1979. Still a Name in 1993. Losses before settlement thought to exceed £50,000 in the past four years. With earlier losses of £200,000. Potential future losses could have exceeded £500,000. How much he has paid is unknown. Did not want to comment.

Virginia Wade, former tennis player. Joined: 1979. Still Name in 1993.

Losses before settlement thought to exceed £80,000 for the past four years. Further losses of around £400,000 in a syndicate.

Not available for comment.

Dr Edward de Bruno, author. Joined: 1978, resigned in 1991.

Losses before settlement believed to exceed £800,000 for the past four years, with a further £60,000 from before. His wife is said to have losses exceeding £1 million.

He didn't want to comment.

Lord and Lady Archer

Joined: Lord Archer, 1973, Lady Mary, 1978.

Losses before settlement said to be more than £110,000 over four years, with one syndicate incurring potential further losses of £50,000. The couple paid the losses as called.

Lady Archer said: "There is a sense of the goodies paying for the baddies here, but that is what happens in life, isn't it? I recognise that some people need financial help. In principle, the non-payers should, I believe, be pursued. But I believe the settlement is an equitable solution. We intend to remain Names."

Henry Bellingham, MP for Norfolk North West.

Joined: 1979. Still underwriting.

Losses before settlement thought to be £500,000 in the past four years. Deterioration in syndicates could mean another £500,000.

"I will not comment on my personal situation other than to say I have paid the losses and I did not belong to any group which turned to take litigation. I am also accepting the settlement," he said, there are a number of people who have paid and stayed loyal to Lloyd's who have a very real sense of anger and betrayal. A couple of years ago, Lloyd's was going to give a lot more help to people who did not litigate and continued to underwrite - people who stayed loyal. Now those people feel penalised for their loyalty".

Sir William Arbuthnot, deputy chairman of Lloyd's High Premium Group, those who take in premiums of more than £1 million.

Joined: 1972. Still underwriting.

Losses believed to be in excess of £500,000 for the past four years, but significant profits in Eighties.

Sir William said: "I prefer to look to the future rather than the past. I feel fortunate that I'm coming out with a cheque, for profits last year, after paying my losses. I have lost money, but I also made money in the past. I intend to stay a Name."

Henry Cooper, former boxer.

Joined: 1972. Resigned in 1985

Losses around £40,000. Sold Lonsdale belt to pay the debt.

Not available for comment.

25 Aug 96

Sunday Express: Ruling derails Lloyd's rescue

27 Aug 96

Times: Last-ditch Lloyd's bid to overturn court ruling

Lloyd's of London will make a last ditch effort in a US court today to overturn an injunction against its £3.2 billion reconstruction proposals that 34,000 names have to accept by noon tomorrow.

Lloyd's is appealing against a ruling by a court in Virginia in favour of 93 US names who are demanding more information about the proposals.

The US names are prepared to fight a lengthy legal battle beyond tomorrow's deadline. John Head, spokesman for the Association of Lloyd's State Chairman, said: "We want our day in court Iron-clad, total, legal and financial recission from Lloyd's with restitution." One loss-making US name, Traver Smith, a 79-year-old pensioner from California, said that the legal effort represented a last chance to save what little he had left. "We're hanging on to spider webs," he said.

Lloyd's problems were heightened further yesterday when the New York insurance regulator declared that £7.7 billion in Lloyd's US trust in America could be frozen.

On Monday, Lloyd's said that 75 per cent of the 34,000 names had already agreed to the reconstruction proposals.

But a London-based Lloyd's action group yesterday protested that this figure was meaningless as an indicator of potential success because the remaining 25 per cent were likely to include those names who have to pay the most. Alfred Doll-Steinberg, representing the Gooda Walker action group said: "The people that have signed up are the people that have very little to pay. The decision is on a knife's edge. This can't be solved by August 28, that's totally unbelievable. There will have to be a second attempt to pick up the stragglers."

Under the proposals, names were divided into six groups. They range from a group of 12,500 names who will receive money from Lloyd's to a group of 4,400 names at the opposing end of the scale who will have to pay Lloyd's more than £100,000.

27 Aug 96

Daily Telegraph: Lloyd's passive owners must make for the exit

28 Aug 96

Financial Times: Court lifts threat to Lloyd's plan. Insurance market wins eleventh-hour appeal in US

The Lloyd's of London insurance market was last night poised to announce a dramatic comeback after overturning a US court order that had threatened to undermine its £3-2bn recovery plan.

An eleventh-hour appeal court ruling in Baltimore yesterday dismissed an injunction imposed last Friday by a federal court in Virginia and clears the way for Lloyd's to declare its recovery plan unconditional later this week.

Earlier the UK Department of Trade and Industry had warned that failure to overturn the injunction - which would have forced Lloyd's to comply with US securities laws and supply considerably more information about the plan - could have forced the market out of business.

Lloyd's had been under acute time pressure because it has to pass DTI and US regulators' solvency tests within the next few weeks.

Although hard-line US and UK Names have mooted other possible legal remedies, the Virginia ruling was the last hurdle faced by the recovery plan which was forced by losses of more than £8bn. The convincing appeal court win looks set to end most of the litigation that had crippled debt collection and frequently cast doubt over Lloyd's survival.

The appeal result came less than 18 hours ahead of a noon deadline set for Names - the individuals whose assets have traditionally supported the insurance market - to accept or reject the plan. An extension of four or five days is now expected.

Earlier, Lloyd's announced that 82 per cent of its 34.000 Names had accepted a £3-2bn settlement offer. That is almost certainly enough to declare the deal "unconditional" - and the total now looks set to rise to nearer 90 per cent.

Lloyd's ruling council meets tomorrow with an announcement expected shortly thereafter. Last night, Mr. David Rowland, Lloyd's chairman, said: "This decision removes the remaining major legal obstacle to implementation of the reconstruction plan. We always believed that we were doing the right thing for the membership of the society [of Lloyd's]."

There is no precise level of support required for the plan to go unconditional because Lloyd's has to meet two objectives. It must persuade Names to drop litigation for damages for their losses and it must raise sufficient funds from Names to finance Equitas, a giant reinsurance company that will take responsibility for billions of pounds of mainly US asbestos and pollution liabilities.

Support for the recovery plan has been higher in the UK than in the US but it exceeded 50 per cent among the 3,000 US Names.

Lloyd's has warned those who reject the plan that they will be pursued rigorously for outstanding debts.

With only a few thousand rejecting the plan there is likely to be little support for further litigation. However, Mr. Tony Welford, the chairman of the Paying Names' Action Group which earlier this month launched a last-minute legal challenge in the UK, said the appeal court ruling was "a disgraceful victory over the rights of the individual".

28 Aug 96

Financial Times: Lloyd's may face further US legal challenges

Lloyd's of London could face more damaging legal confrontations in the US following a change of heart by Mr. Dennis Vacco, the influential attorney general of New York State.

In a letter to US investors in the insurance market, Mr. Vacco appeared to prepare the ground for his withdrawal from a landmark settlement, signed in July, under which 38 states agreed to scrap securities fraud suits against the insurance market.

His decision highlighted the mounting unease in the US over the terms offered to 2,7OO US Names under Lloyd's £3-2bn restructuring plan, due for approval this week. Names are individuals whose assets have traditionally supported the insurance market.

Although no states have yet reneged on the July deal, Colorado is planning an action charging Lloyd's with consumer fraud. In a separate development on Monday, New York state insurance regulators said they were prepared to freeze $12bn (£7-7bn) of Lloyd's assets if necessary.

"We are in a new ball game," said Mr. Kenneth Chiate, a leading official of the American Names Association, which represents 1,000 Names and which has led the campaign against the terms of the Lloyd's recovery plan. He claimed ANA's aim was not to derail the Lloyd's recovery but to force the market to provide enough details to allow Names to make informed decisions.

Mr. Vacco's letter, sent before yesterday's appeal, said: "In the light of . . . changed circumstances and the prospect of future financial disclosures of Lloyd's, my agreement to the settlement proposal may be affected by any new information disclosed." The settlement was engineered under the leadership of Mr. Philip Feigin, Colorado securities commissioner. He was persuaded that a deal was preferable to court action because the 38 states' lawsuits depended on the untested contention that becoming a Lloyd's Name was effectively the same as buying a security.

Although Mr. Feigin persuaded Lloyd's to reduce US Names' liabilities by more than 2O per cent in return for dropping the fraud suits, he was later denounced by the ANA, which said he had been hoodwinked. Mr. Vacco said he felt at the time that the proposed settlement offered New Yorkers the best opportunity to recapture their losses.

Mr. Vacco wrote in Monday's letter: "At the time, I felt that the proposed settlement offered New Yorkers the best possible opportunity to recapture their losses in a bad situation while at the same time preventing future liability and preserving their rights. . .." First signs of Mr. Vacco's unease emerged during last week's hearing in Virginia when he wrote to the judge urging him to give any US citizen rejecting the terms offered by Lloyd's the right to sue in the US, rather than in England.

28 Aug 96

Financial Times: Lex Column

Lloyd's

Lloyd's appears to have secured itself a future. The successful US court appeal yesterday should allow the passage of its reconstruction plan later this week, closing the chapter on five miserable years and £8bn losses. At issue now is the shape of that future. Initially, it may be a baptism of fire. There are increasing concerns about the soft state of the market, and 1997 and 1998 may prove difficult years.

In the longer term, there are grounds for optimism. For all the bad publicity, the Lloyd's brand remains a powerful asset. Many Names are justifiably bitter, but policy-holders have had a happier time. Lloyd's has never defaulted on a pay-out, and its good name still generates quality business. Record results in 1993 also show that Lloyd's remains capable of generating good profits. But to whom will these profits accrue? The advent of corporate capital is dramatically changing Lloyd's capital structure. Many individual Names continue to expose themselves to unlimited liability, but the trend in the market is towards larger, consolidated groups. Mergers have also started to bring capital and underwriters under the same roof, making Lloyd's increasingly resemble a conventional insurer. Listed insurance vehicles have benefited from this spate of activity, but the benefits to Lloyd's itself are less clear. Better management and risk control will help avoid the more egregious errors of the past. But the outcome may be to stifle the flexibility and innovation which won Lloyd's its name.

Prudential

The Prudential was apparently hoping to lure trade buyers out of the woodwork when it said it planned to float its M&G Resubsidiary. The ploy has worked well: the £1-75bn sale price is around 30 per cent more than it could have hoped for from a flotation; moreover, it gets all the money upfront rather than in tranches. If the stock market was less than euphoric, it is largely from concern about how the Pru will spend the cash. The group's aim is to buy either a mutual life group or a building society. Investors see sense in the former, as overlapping costs could quickly be cut; buying a society is less obviously attractive as few costs could be cut. In both cases, the Pru is dealing with mutuals and so has to woo them patiently - hostile bids are not an option. Investors will not want the Pru to overpay by rushing a deal. But if it cannot redeploy the cash fairly quickly, pressure may mount for a share buyback.

Swiss Re

Swiss Re's acquisition of M&G Re looks altogether a better deal for shareholders than this month's purchase of American Re by Munich Re. Both deals are driven by the same industrial logic: sheer size allows risk to be spread more effectively, theoretically enabling a company to earn a better return for the same level of risk.

The difference is that Swiss Re is paying 111/2 times last year's earnings, while its German rival paid over 20 times earnings. The two businesses are not exactly comparable and the price Swiss Re is paying is certainly not a steal. But the Swiss company will immediately earn nearly a 9 per cent return on investment. Add in cost savings and it is looking for a 13 per cent return in the short term. If Swiss Re hits its 15 per cent target in the medium term, the deal will enhance shareholder value - something which cannot be said of Munich Re's purchase.

28 Aug 96

Daily Telegraph: Lloyd's hails victory in US Names hearing.

Lloyd's of London last night breathed a sigh of relief as a US federal appeals court overturned a Virginia judge's ruling that could have scuttled the insurance market's rescue package and threatened the 300-year-old market's future.

Lloyd's welcomed the decision, saying it will press ahead with the recovery plan which includes a £3.2 billion out-of-court settlement and allows outstanding liabilities to be transferred to a new company, Equitas.

David Rowland, Lloyd's chairman, said: "This decision removes the remaining legal obstacle to implementation of the reconstruction plan. It is clear that the vast majority of Names have not allowed themselves to be deterred from accepting the of offer by the uncertainty generated by these court proceeding."

He announced that Lloyd's had already received acceptances for its plan from over 82pc of its 34,000 members around the world, including 53pc of the 2,700 American Names. However today's noon deadline for acceptances and rejection is being extended to a date to be determined tomorrow . "The court cases created sufficient uncertainty for many Names to sit on their hands," a spokesman said.

Lloyd's was appealing against Friday's decision by a federal judge in Richmond, Virginia who ruled that Lloyd's investors must be given more time to decide whether to join the plan, and must also be given more information about the market's finances.

A three-judge panel in the US Court of Appeals for the Fourth Circuit began hearing testimony in the appeal yesterday morning in Baltimore, Maryland. Lloyd's argued that furnishing Names - the individuals whose assets have traditionally supported the insurance market - with extra financial details would take many months of work and may jeopardise the plan altogether.

The market's lawyers argued that a chain reaction started by the injunction imposed by the Virginia decision could bring down Lloyd's altogether and damage tens of thousands of its policyholders.

Lawyers representing a group of 93 US Names suing Lloyd's for alleged breaches of US securities laws, yesterday argued: "We are not imposing any harm on Lloyd's by asking them to wait."

28 Aug 96

Daily Telegraph: Minet Review

St. Paul's the American Insurance company has appointed investment bank Goldman Sachs to consider the future of Minet, the British insurance broker acquired in 1988, in a move seen as signalling the sale of Minet. Last year, Minet made a $13.1m, (£8.5m), pre-tax loss.

28 Aug 96

Daily Telegraph: Swiss Re to buy Mercantile

Prudential, Britain's biggest insurer, has agreed the sale of Mercantile & General to Swiss Reinsurance Company for £1.75 billion.

The sum is several hundred million pounds more than it expected to raise when it announced a proposed flotation of the reinsurance business in June.

The deal is not expected to be finalised until the end of the year, after securing regulatory approval, but has aroused speculation as to what Prudential will spend the proceeds on.

Swiss Re, the world's second largest reinsurer after Munich Re, and which owned about half of Mercantile until it sold it to Prudential in 1968 is understood to have beaten a much lower offer from Employers' Re. The only other serious bidder.

The deal is the third big reinsurance transaction in two months. It continues the consolidation in the industry and makes Swiss Re the world's largest life and health reinsurer.

In July, General Re acquired National Re for $940m (£600m). This month, Munich Re acquired American Re for $3-3 billion (£2-1 billion), in a bid to boost its standing in the world's largest reinsurance market.

Prudential chief executive Peter Davis was delighted: "The [stock] market was expecting £1.2 billion to £1.3 billion, and is a little more difficult than it was. This is a very, very good premium, and we get it all at once. Its a very clean deal."

Swiss Re's life and health business will now have headquarters in London, a major move for a Swiss company and a recognition of the importance of Mercantile to the whole group's business.

Most of Mercantile business is in the more stable life and health reinsurance, which accounted for 77pc of its £1-33 billion gross premiums last year.

Swiss Re hopes John Engestrom, the Swedish chief executive brought into Mercantile following a set of poor results in 1992 and credited with turning it around will remain with the group. However, his position has yet to be decided.

John Coomber, head of Swiss Re's life and health reinsurance business, said there would be job cuts among Mercantile's 1,300 world-wide staff and Swiss Re's 700 life and health employees, but said they had not decided how many.

29 Aug 96

Financial Times: Most Names agree with £3-2bn offer. Lloyd's declaration expected

29 Aug 96

Financial Times: Legal gravy train hits the buffers. Insurance crisis has been good for City lawyers but now it may be over

With Lloyd's of London's £3-2bn recovery plan finally looking secure, City lawyers are bracing themselves for a jolt. The Lloyd's legal gravy train is about to hit the buffers.

The Lloyd's crisis has been good to the legal profession. Over the past four years more than 50 law firms have been knee deep in Lloyd's-related litigation, including the legal costs associated with the construction of Equitas - the large company that will reinsure Lloyd's syndicates' liabilities dating back to the 1950's - the Lloyd's crisis is estimated to have generated up to £140m in legal fees.

The bulk of those fees - £90m - has been generated by the litigation between Names' action groups and Lloyd's agents, and action groups and the Errors and Omissions underwriters - who provided insurance against damage awards to Lloyd's agencies. By August last year 245 High Court writs had been issued by 27 action groups against 280 defending agencies, 50 of which were in liquidation. Since then 17 more action groups have issued writs.

According to Mr. Michael Payton, senior partner of Clyde & Co, the City firm which co-ordinated the law firms running the E&O underwriters defence, legal costs on the agents and underwriters' side are estimated at between £30m and £40m.

The action groups' legal costs are said to be higher still, partly because more law firms were involved in representing them. Lloyd's has agreed to reimburse them up to £70m as part of the settlement offer, although it says some of that figure relates to the costs of setting up and running the action groups and not just to legal fees.

Nor are militant Names in the UK unlikely to give up the struggle completely.

But Mr. Payton says the acceptance of the reconstruction and renewal plan will effectively bring most actions to a close.

The polls show that only 4 to 5 per cent of Names will vote not to accept the settlement. Litigation is enormously expensive and if the cost was shared between 3,000 Names as in the Gooda Walker litigation {one of the first action groups to go to court} and 4 per cent don't accept, there is no way 120 Names can afford to continue

Clyde & Co derives 40 per cent of its turnover from insurance work but it is unlikely to be badly hit. "If you say our side earned £30m-£40m over four years, that's £10m a year divided by eight firms, and Clyde & Co's annual turnover is £50m - work it out for yourself. It's no big deal," Mr. Payton says.

If it is no big deal for Clyde & Co, the firm which appears to have most to lose from the settlement as Freshfields, the firm which helped to put it together. Freshfields - Lloyd's own legal adviser - has had more than 75 lawyers on

reconstruction document negotiated the £3-2bn settlement proposals, handled the litigation against Lloyd's itself, including the Clementson anti-trust litigation, which accused Lloyd's of anti-competitive agreements; and did the legal work on setting up Equitas.

Its reward for all this is estimated at £30m-£40m in fees. Lloyd's estimates the final cost of establishing Equitas at £110m, about 70 per cent of which is actuarial fees. Most of the remaining 30 per cent - £33m - is legal fees, the bulk of which will go to Freshfields. The litigation is thought to have cost the corporation more than £5m so far, and other legal fees associated with the reconstruction plan are put at about £10m.

Even though Mr. Geoff Nicholas, the partner co-ordinating the Lloyd's work, says this is the biggest single job the firm has ever undertaken the resolution of the crisis will not leave it with a big gap to fill.

While £30m-£40m spread over three and a half years sounds a lot, it must be compared to an annual turnover put at more than £140m.

If there are firms which are going to take it will be the smaller practices which have made a speciality out of representing Names, Mr. Nicholas says.

29 Aug 96

The Times: New angst for old at Lloyd's

29 Aug 96

The Times: Lloyd's poised for £3bn step as rescue is backed

The Lloyd's of London council is today expected to declare the ground-breaking £3.2 billion settlement offer unconditional after receiving a resounding endorsement of its recovery plan for the insurance market.

More than 90 per cent of the 34,000 Lloyd's names world-wide had accepted the settlement by yesterday's noon deadline, giving Lloyd's a strong mandate to move forward.

Lloyd's said it would continue receiving acceptances from names in America - many of whom had delayed responding while court proceedings were going on. Rebel US names secured an injunction of the reconstruction and renewal plan in court in Virginia on Friday, only to see the ruling overturned on appeal.

Lloyd's said that 66.7 per cent of the 3,000 American names had accepted the offer by 4pm yesterday. By then 31,001 names - or 90.3 per cent of members - had agreed to the offer. Lloyd's was inundated with faxes from names in America after Tuesday's ruling in the US Appeals Court in Baltimore.

David Rowland, chairman, said: "The level of acceptances speaks for itself. Members have made their views toward the reconstruction of Lloyd's abundantly clear."

Mr Rowland acknowledged that many overseas members, particularly in America, may have deferred accepting the offer in the light of the Virginia ruling. He said: "In the circumstances, I believe that the fair and proper course is to exercise flexibility in receiving acceptance forms beyond today's deadline."

Lloyd's council will decide whether to grant a normal extension of the offer when it meets this afternoon. Names who do not accept risk being pursued through the courts for the full extent of their losses.

There is no specified level of support for Lloyd's offer to go unconditional. Lloyd's council must instead satisfy itself that enough litigants of sufficient weight have accepted and that enough money will be forthchanged and every company is hacking vigorously away at its costs. The shambles that was Lloyd's back once under the ancient regime would guarantee commercial failure today. It remains to be seen whether it can modernise quickly enough to stay competitive.

Those remaining in the market are also going to face much closer scrutiny of their activities than they are used to. The private individual who has effectively pledging his house through a bank guarantee has been wiped out. There will be some rich individuals who will take advantage of limited liability but the new Lloyd's will belong to professionals managing institutional funds who will bring to bear the sort of pressure familiar to directors of quoted companies. Still none of these worries are in the same league as the gut-wrenching feeling that the whole thing was on the brink of descent into internecine warfare to the death. Compared with what Mr. Rowland has done since he was asked to write a business plan five years ago kicking Lloyd's into shape and the competition out of it will be a breeze.

31 Aug 96

Daily Telegraph: Philip Morris

Philip Morris which makes Marlboro cigarettes, has received a subpoena from the federal grand jury in Washington demanding testimony by executives and documents as part of a fraud investigation into the tobacco industry. Philip Morris said it is "co-operating fully".

The probe is understood to focus on allegations that the tobacco industry has withheld information from federal agencies about the nature of cigarettes.

2 Sep 96

Daily Telegraph: Lloyd's: the sting in the long tail. In reality both asbestosis and pollution are government problems, not an insurable risk

2 Sep 986

Times: Peace treaty with names offers new life to Lloyd's

6 Sep 96

Daily Telegraph: Lloyd's secures DTI approval for Equitas

Lloyd's of London finally got the formal go-ahead yesterday for the Equitas reinsurance company it has set up to seal off its huge pre-1993 insurance losses.

The government authorisation is the final part of the embattled financial reconstruction of the insurance market to establish its future.

Chairman David Rowland celebrated the completion of the controversial restructure by ringing the Lutine bell.

Traditionally, the bell is rung once for bad news, twice for good - yesterday it was struck three times.

Every member accepting the Lloyd's £3.2 billion restitution package, mitigating the accumulated losses from old policies now has until the end of the month to pay their premiums into Equitas to insure old losses.

Acceptance of the deal came from 91pc of the 33,000 membership by the first close on August 28 with some more trickling in since, so Lloyd's has extended the deadline until next Wednesday.

Members who still refuse to participate after then will be pursued by lawyers on behalf of Lloyd's for any debt arrears on their underwriting.

Lloyd's has said it will take them through the courts if necessary.

The rebel members in turn have already formed a new group, the United Names Organisation, to fight the Lloyd's claims.

Anthony Nelson, junior trade minister, yesterday said the opening solvency margin for Equitas of £780m was well above the required minimum, with another £900m coming from other provisions to meet claims which had not been expected.

The New York State insurance superintendent yesterday approved the transfer of $5+ billion from the Lloyd's American trust fund to Equitas, on condition he continued to be kept informed about the progress of the company.

If the contributions coming in from brokers and agents are less than has been projected by Lloyd's or interest earnings on Equitas capital are too low, the corporation of Lloyd's may have to chip in another £100m in January 2002, Mr Nelson warned.

"I remain of the view that there is a reasonable prospect that Equitas will be able to meet its liabilities in full as they fall due," he added.

City Diary - Pass the arrows

Jolly good to see the government nipping in to take the credit for rescuing Lloyd's of London, now the crisis is over.

As the picture on page 20 shows, at the sight of a photographer trade minister Anthony Nelson elbowed David Rowland aside.

"Sorry David, but you've already won your election," the minister did not say a true politician.

Lloyd's Names who have got the brush-off from appeals to their MP's for help might care to use the pic as a dart-board - if they can afford the darts.

6 Sep 96

Times: Lutine Bell rings in new era

The Lutine Bell rung out at Lloyd's of London yesterday, heralding a new dawn for the world's oldest insurance market. Thousands of brokers and underwriters watched David Rowland, chairman of Lloyd's, perform the historic ceremony , helped by Anthony Nelson, Minister for Trade. The applause was rapturous.

The future of Lloyd's was formally secured hours earlier when Mr Nelson approved Equitas, the reinsurance company created to draw a line under 1992 and prior years.

The Lutine Bell rang three times in sorrow for those who suffered most for the solution and to signal the start of a new. Mr Rowland said: "We came extremely close to disaster, and we are never going to do it again."

Mr Nelson urged his audience to restore Lloyd's to its rightful place saying: "Let's get on with the job." He said Lloyd's faced an to its competitors.

City Diary - Lutine echoes

Anthony Nelson, Minister of State for the Department of Trade and Industry, was sounding off the ringing of the Lutine Bell yesterday in celebration of Lloyd's £3.2 billion rescue plan. Nelson was not slow to tell David Rowland, Lloyd's chairman and chief bellringer, that the last person to ring the bell was John Major as chancellor of the Exchequer in 1990. Major rang the bell twice, the traditional signal for good news to mark the freedom of financial services. Rowland rang it three times, however, to mark the important stage in the insurance house's arduous journey. It shows that you have to be able to count said Nelson, pointing out what happened to the last man to ring the bell.

10 Sep 96

Financial Times: Insurance profits squeezed as claims increase

The deteriorating trading condition faced by insurers were highlighted yesterday by figures showing a steep rise in property claims in the three months to June.

The Association of British Insurers said weather damage claims reached £113m in the second quarter of the year - more than double the level in the same period a year before. Subsidence claims rose to £70m, compared with £30m. Theft claims rose to £202m from £178m.

The figures suggest insurers' profits are being squeezed tightly. Many premium rates have fallen over the past year and have only recently shown signs of rising

Mr Mark Boleat, ABI director-general said the jump came "as a big disappointment". The figures, he said, "add pressure on the industry for rate increases after a long period of largely stable or falling premium levels".

Separately, the ABI warned that sophisticated pricing by insurers - encouraged by the fierce competition - is leading to accusations of "cherry picking".

Computers now allow insurance rates to be set for individual houses and cars. In a briefing note, for the insurance industry, the ABI warns: "The use of more precise underwriting techniques could lead to some risks being considered as uninsurable or alternatively insurable at such a price which for those who want it is unaffordable.

"This could see pressure, however unjustified, for insurers to be obliged to provide cover by compulsion as is the case in some countries overseas".

Meanwhile, the world's marine insurers were warned that over-capacity and a low shipping casualties in 1995 are discouraging realistic rating.

Mr Nigel Jenkins, chairman of the Institute of London Underwriters, said: "It is incredible to realise that all the painful lessons learned the last time the cycle changed have so quickly been forgotten or ignored... Things can happen very quickly and already this year there are indications that the casualty graph is turning sharply upwards."

14 Sep 96

Daily Telegraph: Marlboro man's widow sues

The widow of the actor who for years posed as the Marlboro Man but died last year from lung cancer is suing Philip Morris and other tobacco companies .

Lilo McLean, the widow of David McLean, has filed a suit against Philip Morris, the maker of Marlboro cigarettes, BAT Industries' subsidiary Brown & Williamson, R J Reynolds, the American Tobacco Company and Liggett Group.

Mr. McLean, who appeared for many years as the cowboy roaming Marlboro Country never came close to a an Indian attack or cattle stampedes but succumbed instead to lung cancer in October last year, aged 73.

He assumed the role in the early 1960s shortly before the US Surgeon General's 1964 order that cigarettes be labelled with health warnings. By the time the labels warning that the product "might be dangerous to your health" were printed he had been smoking for more than 30 years.

The lawsuit, which seeks unspecified damages and has been filed in Texas, claims Mr. McLean sometimes smoked five packets of cigarettes while posing for a single advertisement. He suffered from emphysema in the late 1980s and later was stricken with lung cancer, his widow claims.

Michael York. a lawyer at Philip Morris, said: "The company will treat this case just as it has all the rest - aggressively and with the intention of being successful in court."

The Marlboro Man was born in 1955 when the Leo Burnett advertising agency was commissioned by Philip Morris to instil Marlboro cigarettes with an image of rugged individualism and machismo. Until then the cigarette had been targeted at women.

15 Sep 96

Sunday Telegraph: Posgate windfall

Ian Posgate, the former insurance underwriter, drummed out of Lloyd's of London after the 1980's PCW scandal has emerged a big winner under the market's recovery plan, with a £2m-plus tax-free payment in respect of the 1982 year of account of a former syndicate No 700. He is to receive the payment under arrangements for Equitas, the Lloyd's reinsurance company.

15 Sep 96

Sunday Telegraph:

Insurance sector watchers believe A J Archer, the quoted Lloyd's of London agency, could risk some loss of business with the departure of David Lowe, one of its senior underwriters, and his team, to set up a provincial business, with significant backing.

It is also suggested Archer could have some problem over the allocation of profit commission of more than £2m under the Equitas arrangements for syndicate 126, now under Archer's umbrella, but previously owned by Alexander & Alexander, the US insurance broker.

Although the sector has been popular of late, Archer's shares at 68p are unlikely to outperform in the short term.

16 Sep 96

Daily Telegraph: Illinois Names accept Lloyd's rescue plan

Lloyd's of London said yesterday that it had signed an agreement with the State of Illinois representing a final resolution of all claims and disputes relating to the insurance market's Names in that part of America.

Illinois-based Names will thus receive the benefits of the accord reached earlier this year between Lloyd's and the co-ordinating committee of the North American Securities Administrators Association.

Of the 19 American states in which Lloyd's Names are resident, Arizona and Missouri are now the only ones who have not signed agreements with the London insurance market. Utah, Tennessee, Arkansas, West Virginia and New Hampshire signed last week.

More than three-quarters of the Names in the United Sates have now accepted the £3 billion settlement offer produced to end litigation at Lloyd's and thus to enable the insurance market to continue trading.

The deadline for accepting the offer had been extended until last Wednesday and more than 95pc of Names throughout the world have accepted. Those American Names who have signed state agreements with Lloyd's will benefit from additional relief from their debts under the offer.

Peter Lane, managing director of Lloyd's in North America, welcomed the Illinois deal saying: "This agreement marks the culminating of several months of work designed to receive outstanding issues with US securities regulators through negotiation rather than litigation."

"In accepting the settlement offer, a large majority of US Names have also indicated their support for an end to litigation. Both these developments will assist underwriters in the Lloyd's market to draw a line under the problems of recent years and concentrate instead on doing what the market does best - developing profitable business by meeting the insurance needs of clients."

22 Sep 96

Sunday Telegraph: Big bonuses for Lloyd's rescuers. Names angered by Rowland's £400,000 pay-out

A host of senior figures in Lloyd's of London and the heads of the most prominent action groups are set to receive huge bonuses and payments for their rule in rescuing the stricken insurance market. The bonuses, which have not been disclosed by Lloyd's, contrast with the £1-3bn extra payments demanded from the market's members.

David Rowland, chairman of Lloyd's, is to receive a £400,000 bonus from the insurance market's central coffers for driving through the £3-2bn Lloyd's recovery programme. The bonus, which almost doubles Rowland's salary of £450,000, was approved last week by the Council of Lloyd's and the market's senior appointments committee, chaired by Sir Jeremy Morse, a former chairman of Lloyd's Bank.

Rowland's is one of a series of bonuses approved by the council. Ron Sandler, who has been chief executive of Lloyd's for only nine months, will receive £100,000 on top of his £250,000 salary and £65,000 pension contribution, in addition to an earlier £30,000 bonus paid to him in March.

Many Names, still nursing six-figure losses even after the settlement, resent the payment to Rowland, the first chairman of Lloyd's to be paid either a salary or bonus. The Names were not consulted about the decision.

Leaders of Names' action groups which successfully sued their Lloyd's agents for negligence have been granted £75m by Lloyd's to cover their expenses. Michael Deeny, who led the Gooda Walker action group to triumph before joining the council of Lloyd's is understood to be receiving more than £500,000. Other action group leaders, past and present, including Christopher Stockwell, Alan Porter and Tom Benyon, are also being well compensated.

One hard-hit Name on the Gooda Walker syndicates said yesterday: "It is perks for the boys. Who decided this? They should donate the money to bankrupt Names and a lot of people without a penny or a home because of their decisions."

Others were saying most of the rewards were richly deserved. The recipients had successfully steered the insurance market through one of the worst crises in its history.

"Without them, we could have got nothing and Lloyd's could simply be a bad memory", said one Name. The action group leaders forced Lloyd's to compromise and saved many, though not all members from ruin.

Rowland may be the first paid chairman but he has waived any increase in his original salary since he became chairman in 1993, pending a resolution of the crisis. He wrote the Task Force report before he became chairman. That foreshadowed the introduction of corporate capital and laid the foundations of many of today's reforms.

It was Rowland's caressing, cajoling and threatening of Names, underwriters, agents, insurance companies, lawyers and politicians on both sides of the Atlantic that saw the rescue plan through.

The Rowland era has brought new professionalism and payments - into Lime Street. Council members now receive £22,500 a year, plus a few thousand extra if they sit on subsidiary bodies such as the regulatory board.

The bonuses have been awarded three weeks after the Government gave formal approval to Equitas, the £15bn run-off company set up by Lloyd's to handle claims on policies written in 1992 and before. Deeny, an Equitas trustee, is poised to switch roles and go on its board. Lloyd's now reports support of nearly 95 per cent of Names for the plan. Its financial recovery department is pursuing the remaining refuseniks for the amounts still outstanding, which some claim to be as much as £500m, though a Lloyd's spokesman said yesterday the true figure was much lower than that.

Rowland is currently leading a sales drive for Lloyd's in the United States with 44 underwriters.

The Lloyd's team is planning a series of "Meet the Market 1996" road shows at seminars and trade fairs around America, which will involve addressing 2,000 risk managers and brokers in New York, Chicago, and Los Angeles.

24 Sep 96

The Times: Fifty names face £1m writs as Lloyd's gets tough

At least 50 Lloyd's names are to be pursued for more than £1 million a dramatic hardening of attitudes by authorities at Lloyd's of London. The names personalities in the UK and North America, face total financial ruin in the clampdown, which will see bank accounts frozen and lead to the seizure of homes and assets.

The names of the personalities involved are to be disclosed early next month, when the first batch of 200 writs will be lodged at the High Court in London. Lloyd's is seeking £500 million from 1,850 names, most of whom are in the UK, America and Canada. The names are the last of the "die-hards" who refused to accept the £3.2 billion settlement offer aimed at ending litigation and allowing Lloyd' to make a fresh start.

Philip Holden, head of the financial recovery department at Lloyd's, said non-payers would be pursued relentlessly. Mr. Holden, seconded to Lloyd's from Dibb Lupton Broomhead, the law firm, has written to names asking them, asking them how they propose to finance their obligations. For those who do not respond, a seven day final warning will follow on October 1. On the eight day, the first 200 writs will be issued.

Mr. Holden said non-payers had seen their debts rise dramatically because of their refusal to pay. He said: "if they had accepted the settlement offer and received the benefits of the credits to which they were entitled, the overall debt would have been somewhere in the region of £100 million. They've actually given away £400 million of benefits by virtue of their non-acceptance. There are now in excess of 50 people who now have a bill of more than £1 million. That bill members, would have been £100,000 after [in addition to] their funds at Lloyd's. And that bill for £1 million is after their funds at Lloyd's anyway. So, like for like, they've given away some £900,000 worth of credits."

The first test cases are due in the UK courts by Christmas. Those affected include 670 names in the UK (owing £150 million), 655 in America (owing £180 million), and 258 in Canada. The Canadian names pose the greatest potential problem for Lloyd's, owing £100 million - an average of £395,000 each. Mr. Holden said: "The Canadians are simply refusing to come to the table, and unfortunately they're going to lose, and they're going to lose their homes and their houses."

Commercial in its approach. Mr. Holden said: "On an ethical basis, people who've paid expect others to be pursued, Commercially, we need to recover this money. We can't have half a billion pounds worth of debt lying out there without making sure we recover as much as possible as quickly as possible."

Michael Deeny, a prominent Lloyd's campaigner, has hit out at weekend reports that said he was in line for a £500,000 success fee. The money is to be split between at least 20 people, he said.

24 Sep 96

Daily Telegraph: Lloyd's solution undermines trust in the English

The Lloyd's of London R & R scheme is now unconditional. Lloyd's probably feel self-satisfied that they have seemingly left behind a significant portion of their old problems - at least for the time being. But they have lost much on behalf of themselves and the English people.

Almost all the names (accepting and non-accepting) I talk to in Australia have lost complete confidence in Lloyd's. Many of these are senior people in the commercial world. The internal and external regulators of Lloyd's have failed to recognise the fiasco, prevent the fiasco, bring the perpetrators to task and failed to make restitution, except under legal duress. This has left most of us doubting the once-proud British political, legal and social system.

Many of us can no longer look an Englishmen in the eye without feeling a complete lack of trust - and yet many of us are born of English stock.

Your readers should understand that like an alcoholic who needs to admit his problem before he can fix it, Lloyd's represents an alcoholic in the English system which will not be cured until your political, legal, and social system brings certain individuals to task.

I wish the refuseniks well in their future fight against Lloyd's. If they win, the cleansing effect will improve the reputation of the City of London and raise the respect of British businessmen in the world market.

24 Sep 96

Daily Telegraph: City Comment: That rare thing, a well earned bonus

Four hundred thousand pounds is, even by today's standards, a decent sum of money. It will buy you 27 people for a year on the national average wage, a family house in a reasonable part of town, or the left leg of a run-of-the-mill premiership footballer.

It is also the sum that David Rowland will collect as a bonus for staying on deck at Lloyd's of London through the hurricane which threatened to sink the ship with all hands. Quite a few of the crew have perished financially in the storm and thousands have suffered serious losses. For the chairman to collect £400,000 on top of his £450,000 salary in such circumstances seems to add insult to injury. Yet if anyone deserves a performance-related bonus, it is surely Mr. Rowland. He did not much want the job three years ago. At 60 he could have retired from the chair at Sedgwick after a satisfactory career. Instead, the Governor of the Bank of England cajoled him into becoming chairman of Lloyd's, an institution with a glittering past and quite possibly no future.

Whatever resentments there may remain among those who have lost money at Lloyd's, it now does have a future. It has avoided becoming impaled on the rocks of endless litigation and it still has a good name in the marketplace, an asset beyond price in the insurance business. If it can now tackle the more workaday problems of cutting costs, Lloyd's could be "worth" several billion pounds in a few years' time.

Not all of this is because Mr. Rowland but some of it surely is. On top of everything else, his chief executive quit abruptly for an easier, better-aid job shortly before the rescue scheme was put to the vote. Mr. Rowland's rewards are comparable to those paid to senior executives of privatised utilities but compared with running Lloyd's for three years, those jobs look about as difficult as

25 Sep 96

Daily Telegraph: Rebel Names on mission to end City fraud

A group of disaffected Lloyd's of London Names is to launch a new foundation in London tomorrow aimed at ending City fraud.

At tomorrow's inaugural meeting, the United Names Organisation, will set up a "Foundation for the Rights of Man."

Sir William Jaffray, a committee member said: "The foundation is looking to raise many hundreds of millions of pounds to stamp out this fraud culture for good."

Catherine Mackenzie Smith, joint chairman, said: "Lloyd's is not the flagship of our country. It's a disgrace. It symbolises the corruption people see in the City of London."

The organisation's self-styled "refuseniks" are aiming to recruit from the 1,850 Lloyd's members, who have turned down the insurance market's £3.2 billion settlement offer and to secure full restitution for members.

Full members will initially pay £1,500 a year, though some are expected to contribute more. "Some Names are very rich and very generous," Mrs Mackenzie Smith said. She added that the organisation intended to seek members from around 5,000 Names she said had accepted their Lloyd's settlement "conditionally".

However, Philip Holden of Lloyd's, who is responsible for collecting debts from Names, said: "There are no conditional acceptances."

He said "the market would seek to enforce payment of £500m from Names who have rejected the offer, by issuing High Court writs against them in two weeks. Names have until Monday to show how they propose to pay.

He said: "We're not doing this to be vindictive or make people's lives miserable. There are two reasons for it - the first is ethical people have paid and they expect others to pay. Secondly, we have bridging finance, and the less we draw down, the lower the cost of finance."

The organisation aims to contest any such action vigorously, and to take part in legal action against Lloyd's.

"If heads roll, we don't mind," Mrs Mackenzie Smith said.

25 Sep 96

Daily Telegraph: City Comment - Lloyd's offer losers can well refuse

The losers of Lloyd's of London had a limited choice. They could accept Lloyd's offer, pay up and look unhappy. They could hide themselves and their assets and invite Lloyd's to come and get them. Optimists and masochists could take their chances in the courts. Now Mrs Catherine Mackenzie Smith has thought of something else. She wants them to finance a Foundation for the Rights of Man.

It would stamp out corruption and fraud, as she will explain today when the United Names Organisation, (joint chairman: Catherine Mackenzie Smith) holds its first meeting. Her plan to raise hundreds of millions of pounds for the Foundation will be part of the agenda, along with UNO's £1,500 minimum subscription. If she is really unlucky, someone will embezzle it.

Few people wanting to raise that sort of money for a cause, however good, would tap Lloyd's losers first. They have, after all, lost their money, or most of it, or if they have not might prefer to keep quiet. Already the debt collectors are moving into action, if only to demonstrate that Lloyd's offer, unlike the previous final offer, was final.

The proposed foundation has been nicknamed Dagenham - two stops short of Barking. That is unkind, but it represents an offer that the losers can still afford to refuse.

26 Sep 96

Evening Standard: New test for Lloyd's as Names stay on warpath

After the party the hangover. Just when Lloyd's thought it had put the battles with its investors behind it, a new campaign is launched.

A new action group starts work in London today. Called the United Names Organisation it seeks to represent the 2,000 Names who did not accept the terms of Lloyd's £3.2 billion rescue deal for its insurance market.

Some 32,000 other Names decided that the terms were good enough and agreed to abandon legal action. The new body intends to unite action groups world-wide. It also wants the active support of the 4,000 or so Names who accepted Lloyd's terms after insisting that the authorities met their own conditions.

The new body's main aim is to prove that fraud contributed to the £8 billion losses in the late Eighties and early Nineties. That being the case, the Names policies giving rise to the losses should be cancelled and treated as if they were never placed in the market.

They hope that Lloyd's will have to write off the entire £8 billion of debts and dismantle a rescue company that has absorbed nearly £15 billion of Names assets to meet future liabilities.

The campaign is designed to remove any trace of the losses that threatened to topple the market and leave Lloyd's with a virtually unbroken line of profitability. What should happen to the premiums that have been paid for policies, some of which were taken out in the last century, is not stated by the new organisation. But in such a scheme, clearly the premiums should be returned t policyholders.

All this is yet another distraction for the market's authorities as they try to rebuild the business. Market managers are dismissive of the latest initiative, arguing that it is unlikely to gain sufficient support to combat Lloyd's legal firepower.

Lloyd's executives are drawing up a business plan, but that is not easy. In the past three years or so, two major business plans have been drawn up. The first in 1993, was prepared by a task force led by current chairman David Rowland and tried to develop a grand view of the commercial opportunities in the market.

Heavily influenced by management consultants, the objectives had to be revised quickly as it became clear that they could not be achieved unless some deal could be struck with the militant Names, who were threatening to sink the institution.

Lloyd's thinking became entirely dominated by the rescue plan and its outcome. That achieved, new work is underway to repair the business.

The difficulty with managing the Lloyd's insurance market is that there is a big gulf between the market and its business units, the insurance syndicates managed by agencies, which are the real trading arm. Bridging that gulf poses enormous problems.

Lloyd's top management is powerless to take decisions that may effect the well being of the individual firms that operate on its bourse. Management has to be conducted through persuasion and an appeal to the loyalty of those that operate there to support policy decisions framed at the top. That culture is becoming harder to maintain as more powerful companies take an investment interest in the Lloyd's market. By next year companies could be providing more than 40% of the market's financial support.

Having only joined the market in the last two and a half years, these companies with shareholders' interests to protect, do not come with the same idealistic baggage and sentimentality that the authorities might otherwise have relied upon.

With the continuing war dance being carried on by a significant number of Names and the new hard-nosed business approach of corporate investors, Lloyd's faces the greatest-ever test of its management skills.

28 Sep 96

Daily Telegraph: Cancer victims sue tobacco companies. Lawyers seek millions in no win, no fee deal on behalf of smokers

The two leading British tobacco manufacturers are to fight a High Court claim for compensation brought by lung cancer victims who say their health was damaged by smoking.

Lawyers acting for 40 people, most aged from their mid-50s to mid-70s and many of them seriously ill, have agreed to handle the case on a "no win no fee" basis

Claims are expected to average £50,000 for each litigant and would, if successful, leave the two firms, Gallahers and Imperial Tobacco, liable to a total bill of £2 million plus legal costs.

By the time the present case reaches court, however, at least 150 other cancer sufferers are expected to have come forward to add their names to the list of plaintiffs.

But the implications for the industry are far greater still, since any award would inevitably lead to a flood of similar claims. About 30,000 people develop lung cancer in Britain each year, and doctors say a clear majority of cases are caused by smoking.

According to one lawyer involved in the case, the tobacco companies have let it be known that they are determined to "contest these claims up hill and down dale."

Gallahers, the British marker leader, with brands including Benson and Hedges and Silk Cut, said it never commented on litigation whether current or pending.

But d is believed to share the view of Imperial, which makes Lambert and Butler Superkings, Embassy, Regal and John Player bands, that it has "strong defences against such cases and will defend them vigorously".

At the centre of the case against the companies is the allegation that they knowingly failed to cut the tar content of cigarettes when the dangers of smoking became clear in the 1950s.

"Tobacco remains the one product that, when used as the manufacturer intends, kills," said Karen Williams, head of public affairs for the anti-smoking pressure group, Action on Smoking and Health (ASH). She welcomed the decision of the legal team to act for cancer victims on the basis that they would receive professional fees only if the cases succeeded.

Martyn Day, a senior partner in Leigh, Day & Co., which is acting for the litigants, estimated that solicitors and barristers involved in the case stood to lose fees totalling £3 million if the action failed.

The legal team also includes Dan Brennan QC president of the Personal Injury Bar Association, and Prof. Mark Mildred of Nottingham Law School, an expert in group actions.

The tobacco industry has never accepted that a "causal link" has been established between smoking and cancer. Health warnings appear on cigarette packets but are attributed to European Union directives.

The case against Gallahers and Imperial is the first of its kind in Britain.

Paul Sadler, spokesman for Imperial, which sells 30 billion cigarettes a year in the UK, said that although hundreds of cases had been brought against manufacturers elsewhere in the world, none had so far led to the payment of any damages.

One award in America was later overturned by a higher court while a second is the subject of an appeal

Mr. Sadler said: "We are confident that we will win any such speculative case brought against us."

Leigh, Day & Co. decided to pursue the case on the cancer victims' behalf after their bid for legal aid was turned down in July. Mr. Day said: "Following the decision by the Legal Aid Board it was clear that the only way for tobacco victims to gain access to justice in the British courts was for lawyers to take on the cases through the "no win, no fee' scheme."

One sufferer, Anthony Bywater, 57, a former Birmingham car worker who had a lung removed six years ago, said: "It is a risk for all of us in taking on the tobacco companies, but I am confident we will end up victorious."

Father's remark led to a 35-year habit

For his first taste of tobacco, Ernest Jones helped himself to one of his father's Woodbine's as a 13-year-old. The experience left him feeling sick and earned him a thrashing.

"That was for stealing not for smoking, his father told him. "You can smoke as much as you want. It will help you grow."

So began a 53-year habit that ended in 1986, a few months before Mr. Jones was diagnosed as having lung cancer. Initially given a year to live he was saved by experimental, high risk surgery and has survived to join the group of ex-smokers involved in legal action against Gallahers and Imperial.

Though he is now clear of cancer, Mr. Jones is far from healthy. His lungs, or what remains of them, are in a poor state, he suffers from severe breathlessness and he is unusually vulnerable to infections.

Although his daily intake rarely exceeded 20 untipped cigarettes and occasional pipe tobacco, Mr. Jones said neither he nor his doctors have ever doubted that his ill-health was caused by smoking.

At 75, I don't suppose I will live to see good come out of this campaign," he said at his home in Croydon, south London.

"I suppose I am doing it on principle and for the sake of young people. The companies should be doing a lot more to restrict sales to the young so that children don't get started."

Twice a day, Mr. Jones goes to school to lecture on the dangers of tobacco. He takes as a prop a milk bottle filled with the tar from a year's smoking at his previous rate of consumption.

When Mr. Jones started smoking in the 1930s, cigarettes were a firm fixture of popular culture. Film stars smoked on and off the street, cigarette packaging seemed neat and attractive and, to a teenager growing up in the industrial North, the notion of lighting up was "romantic and big".

Money earned as an errand boy enabled him to buy tins of 50 cigarettes. But the habit took a real hold after he went to sea in the Merchant Navy and, when war broke out, joined the Coldstream Guards.

During the war he found smoking a comfort. "We were scared stiff a lot of the time," he said. "A fag used to lift your spirits, make you feel a bit better."

He later became a medical representative and remembers reading in 1950s specialist journals of research linking smoking and lung cancer.

"It didn't worry me at the time," he said. "I thought it would never happen to me."

"Even when I did start thinking about it a bit more in the 1970s, the urge to smoke was just far too strong. After cancer was diagnosed, I tried to pretend that it wasn't caused by smoking but by a piece shrapnel in the war.

Mr. Jones said he was entitled to some compensation, though he found it difficult to suggest a suitable sum. "Others have been affected far worse, but 32 visits to the operating theatre is quite bad enough," he said. "A trip around the world in a slow steamer to the places I didn't have chance to look at when I was at sea and in the Army, would suit me."

Lawyer who loves to fight for the ‘little man'

Martyn Day makes no secret of the excitement he derives from taking on cases other solicitors might dismiss as lost causes.

"our whole rationale is that we operate at the cutting edge of the law," he said yesterday after announcing the "no win no fee" basis on which his firm, Leigh, Day & Co., is acting for the 40 lung cancer victims.

"We enjoy taking on cases others shy away from, we enjoy dealing with cases that are complex and we feel we are very good at it."

A Yorkshireman with a background in environmental law, he heads with Sarah Leigh, a specialist in medical negligence cases, a practice with bases in London and Manchester and 38 fee-earnings including 10 partners.

The case load has ranged from an unsuccessful attempt to blame child leukaemia on the Sellafield nuclear reprocessing plant to an ongoing battle by prisoners-of-war seeking compensation from Japan. Mr. Day, 39, also acted for the owner of a polluted beach who won substantial damages from South West Water.

"Of course we have lost some, but we have had a number of decent victories, too." He dislikes the term "ambulance-chaser" and points out that it was the Government that Americanised domestic law by introducing the no-win no-fee principle.

He said: "What drives me, is that 1 feel bound to the little man, the desire to use my energy to represent ordinary people of society who have been damaged."

29 Sep 96

Mail on Sunday: Lloyd's may call for more money

Lloyd's of London is preparing to raise more money from investors in case individuals fail to contribute enough to its £3.2 billion rescue plan

The investors, known as Names, are due to provide up to £900 million this weekend.

The 4,800 still resisting the level of Lloyd's help have debts of around £500 million and writs against them are to be issued in December.

To cover any shortfall for the rescue, Lloyd's chairman David Rowland has already negotiated a syndicated loan of £300 million which has a charge against Lloyd's premium income of more than £80 million. But he warned last week that the charge could be increased by nearly £15 million if there was a delay in collecting the money.

He also indicated that annual subscriptions would rise by up to £20 million next year.

29 Sep 96

Sunday Telegraph: Wartime ship workers sought for asbestos cash

Thousands of Second World War shipyard workers who may have contracted asbestosis after working on infected American ships could qualify for substantial pay-outs - if only lawyers could find them.

In a case almost unprecedented in Britain, the asbestos manufacturer, the US firm Manville, has come to an out-of-court settlement and agreed to pay compensation to every worker affected. But no British victim has come forward.

Now lawyers are appealing for the "substantial numbers" of victims they believe must exist around the country to get in touch.

"There are thousands of pounds to be claimed," said Hilary Meredith, a member of the Manchester solicitors Donns, which is handling the case here. "We are tying every possible avenue to hand out the money, but absolutely nobody has contacted us."

Manville was the leading American manufacturer of asbestos for making equipment before entering bankruptcy in the 1980s. Many Americans who suffered asbestosis have already received money from the company.

British workers are entitled to claim because thousands of them worked during the war refitting American ships at ports around Britain and Ireland.

The ships concerned were supplied to Britain under the Lend-Lease programme from 1941 onwards. Some were merchant ships which had to be converted to military use, while others needed modification to fit British conditions before being put into service.

At the programme's peak, hundreds of ships were worked on by civilian and military personnel across Britain.

Mrs Meredith said that, according to American information, some of the material used on the ships was the deadly blue asbestos, now banned. It was so toxic that contact with an infected air supply was often enough to cause illness, she said.

The issue has been further confused by the fact that many of the Lend-Lease ships had their American names removed when they came to Britain.

To assist the research, Donns contacted service welfare organisations such as the Royal British Legion and the Soldiers, Sailors and Airmen's Families Association, who in turn, approached the Sunday Telegraph.

Anyone who can prove that they worked on the American ships, and subsequently suffered from an asbestos-related disease, is invited to get in touch with Donns. The standard compensation on offer is thought to be about £4,000.

But some naval historians said that the reason nobody had come foreword could be that there was not a major problem. "Many of these ships did not require enormous modification," said John Bullen, a curator at the Imperial War Museum. "There was no reason to tear the ship apart and expose the asbestos."

30 Sep 96

Daily Mail: Friend of the Royals who was a soviet spy, womaniser and fraud

So comprehensively is Hammer's reputation being taken apart that it may also raise unresolved questions about the 1988 Piper Alpha tragedy which claimed 167 lives.

Hammer's oil company, Occidental, ran the doomed North Sea oil platform, and it has been said that after he made a £1m donation to the disaster fund from his personal wealth, he was fortunate to escape a charge of corporate manslaughter.

0 Oct 96

One Lime Street: Action on Names' debts

2 Oct 96

The Times: Rescue cash dents Lloyd Thompson

The Lloyd's of London rescue plan, plus other one-off expenses, have caused a £15 million drop in pre-tax profits of Lloyd Thompson, the international insurance broker.

Full-year profits fell to £5.3 million after Ken Carter, chief executive, decided to pay the company's £4 million contribution towards the rescue plan in total this year, rather than over five years.

Even after other exceptional charges, including a £4.6 million litigation settlement and provision of £7.6 million for costs of a surplus office block in the City, Lloyd Thompson has £45 million of spare cash.

In spite of the profit fall, the City liked the results, and the shares rose 12+p, to 182p.

Mr. Carter said he would consider an acquisition that "made sense", but said the insurance market was likely to deteriorate in the next year. "Too many people are chasing a finite amount of insurance business," he said. "Rates have been cut by 20 per cent across the board."

Other brokers have different views of industry prospects. Willis Corroon says it sees no shareholder value in take-overs at present, and Sedgwick feels there is too little business for the current number of players.

A 7p final dividend is proposed to make 11p, up 2p. Fully diluted earnings before exceptional items rose 3 per cent to 16.8p a share.

2 Oct 96

Daily Telegraph: Expansion plans at Lloyd Thompson

Ken Carter, chief executive of Lloyd Thompson, said yesterday that the insurance and reinsurance broker is looking at potential acquisitions.

The company has £45m in cash. To date, it has run its international business from its London base but now wants to expand in the Far East, Latin America and Middle East. Yesterday, it reported a 6pc rise in underlying pre-tax profits, to £21.6m, against the background of continuing softness in insurance rates.

However, after taking three exceptional charges totalling £16m, pre-tax profits for the year to June 30 slumped from £20-4m to £5-3m. It is contributing £4m to the Lloyd's of London rescue plan.

It has also followed industry practice in writing off its liability to pay rent on the City property it vacated six years ago. It has written off £7.6m, representing the rent remaining on its lease, which expires in 2010.

It has taken a further £4.6m after settling a legal dispute over American claims with unidentified English insurers.

The settlement was welcomed by market-makers, who marked the shares 12 + higher to 182p. They feared that the dispute could cost £10m, and risked sparking further claims.

A final of 7p, making 10p, up 11pc, for the year, will be paid November 15.

2 Oct 96

Daily Telegraph: Questor: Exceptional dog Lloyd Thompson

As an insurance broker dealing with Lloyd's of London, Lloyd Thompson knows a bit about disasters, but it added a few of its own last year.

A welter of exceptional charges swept through the profit and loss account, knocking pre-tax profits from £20.4m to £5.3m.

Apart from an inevitable £4m charge as the group's contribution to the Lloyd's of London rescue, there was a £7.6m hit from a property liability.

Lloyd Thompson also had the misfortune to move to its spanking new premises shortly before the developer went into receivership, leaving it paying the rent until 2010.

Then there was the claim from an (unidentified) insurer. That cost £4.6m including legal fees.

It was a shame because the underlying performance was decent. Without the one-offs (all three of them), annual profits would have been 6pc higher at £21.6m.

The group lifted brokerage 7pc to £48.4m. Within insurance broking - which grew 8pc to £36.6m - property, casualty and ship-owners' protection all grew strongly, while hull and energy declined against a background of "extreme market conditions."

Overseas business helped reinsurance brokerage, up 5pc to £11.8m, despite rate cuts of u to 30pc in the traditional London market.

Investment income rose 19pc, up £7.4m, due to more funds and higher interest rates.

Unfortunately, that investment performance is unlikely to be repeated while the industry consensus on rates is bleak.

Chief executive, Ken Carter's response is to look to the markets of Latin America and those in the Far East.

Unfortunately, this puts the company's expense ratio - which at 71pc is well below its rivals - under pressure.

Brokers expect pre-tax profits of £22m, putting the shares, up 12+ to 182p, on 11-times expected earnings and a premium to the sector.

The yield is 5+pc but the trading outlook is poor. Avoid for now.

2 Oct 96

The Times: Two jailed over deposits fraud

SWIFT action by the Bank of England's enforcement team led to the conviction yesterday of three men on charges of inducing the public to hand over nearly £40,000 in deposits and using forged documents.

The successful prosecution of the three is part of the Bank's campaign to warn people of the dangers of parting with their money to unauthorised firms and dealers.

Peter Lennon, 54, from Bournemouth, and Roger Charlesworth, 50 from Southampton were sentenced to 2; months and 18 months in prison respectively, after pleading guilty to various charges under the Banking Act relating to unauthorised deposit-taking and other offences under the Forgery and Counterfeiting Act;

A third man, Paul Hyans. 33, also from Southampton, was sentenced to 200 hours community service.

Passing sentence on the three men at the Inner London Crown Court, Judge Quentin Campbell said: "This was a tragedy in the making for potential investors from which the public needs to be protected."

At the time of the . offences Charlesworth and Hyans were directors of a company called Homesafe (Insurance Consultants), which also traded as Charlesworth Hyans Associates. Lennon joined the firms to advise on marketing the financial services side of the business.

The three men became involved in a proposed property deal in Florida but having failed to raise the money through conventional means they attempted to pull in the funding through newspaper advertisements. They advertised a special heritage Bond offering guaranteed returns. More than 300 people made inquiries and six deposits totalling £39,000 were handed over.

The Bank of England, however, received a tip-off and raided-the offices within days of the advertisement. As a result of the prompt action the deposits were recovered and eventually returned.

4 Oct 96

Daily Telegraph: Anti-fraud crusaders target Lloyd's

Sally Noel, a Lloyd's name who is refusing to pay the £297,000 the market says she owes, yesterday launched a fund-raising foundation with the aim of stamping out City fraud for good.

Together with her fellow chairman and Lloyd's "refuseniks", Sir William Jaffrey, she aims to raise £1 billion from top financiers and captains of industry to combat fraud.

The International Foundation for the Rights of Man has no members as yet, but its chairman said they have received pledges of millions of pounds already.

Sir William explained: "To be credible one has got to be a substantial fighting force - one's not taking on the corner shop. That's not where the abuses of power are."

While the foundation aims to combat all types of serious fraud, its immediate priority is to pursue Lloyd's. Sir William believes the foundation has collected "enough hard evidence to make the [fraud] charges stick".

Sir William also wrote to Philip Holden, Lloyd's debt collector, requiring "a magnificent bequest from Lloyd's," a week ago, but has yet to receive a response.

Both Sir William and Mrs Noel are refusing to pay their Lloyd's bill as a matter of principle.

Lloyd's told Mrs Noel that she could end her involvement in the market, from which she resigned in 1986, with a payment of £63,000 rather than the £297,000 it says she owes.

Mrs Noel, 52, admits that she could pay the £297,000, without selling her family's Grade 1-Listed manor house in Yeovil, Somerset.

Mrs Noel inherited shares in Pittards, a tanning business that has been in her family for six generations, and lets flats in London's fashionable Knightsbridge and Chelsea.

She says of her inheritance: "I worked very hard to preserve it. I felt that I was a caretaker and should pass on what I inherited."

But she adds: "As I am the main breadwinner in our household, it would seriously compromise our lifestyle."

Mrs Noel is so furious at the conservatives, whom she once represented as a council candidate.

Lloyd's have collaborated with the Conservative Government in the biggest cover-up in the history of our country," she claims.

8 Oct 96

The Times: The enemy within the Council of Lloyd's

From Mr Robert Hiscox

Sir, The fuss about the bonus paid to the chairman of Lloyd's completely misses the target.

The only repellent, disgusting and odious feature of the bonus is that a member of the Council of Lloyd's yet again leaked the information and broke his or her allegiance to the council and breached their agreed condition of serving on the council - total confidentiality.

The bonus of £100,000 per annum for four years for succeeding in the most difficult job in the City, thereby saving the country, countless policyholders, thousands of workers and names from financial disaster, is arguably far too small.

It is definitely too small when you consider that he had to work throughout with the enemy within, with some members of his closest council acting with a total lack of honour and integrity.

10 Oct 96

Daily Telegraph: First writs go out to Lloyd's Names who refused to pay

Lloyd's of London is expected to issue 248 writs today as the first batch of its campaign of debt-recovery actions against 1,800 members who refused to accept its £3 2 billion settlement package .

The first wave of litigation is to be against UK members with the largest debts. Further batches of writs are expected to be issued over the coming weeks.

The first writs were originally planned to be issued on Tuesday, but among the hold-ups have been administrative complexities, such as whether they should be delivered to the court as bundles or in ring binders. The actions are all against UK members who could have paid their underwriting losses but have refused. Bankrupts are not being pursued.

There are 670 British dissidents owing about £150m who refused the Lloyd's offer, one condition of which was the dropping of all litigation .

Legal action against overseas members will not be started for at least another week.

The litigation will not be dropped unless the members pay their debts in full. Although Lloyd's saved £400m on its settlement costs, it has had to fund the reinsurance into Equitas which seals off all pre-1993 losses for the insurance organisation.

Tables produced yesterday by Chatset show that the members who are still underwriting are doing rather better than had been expected. Forecast profits for Lloyd's as a whole have been revised upwards and the 1994 year is now projected to produce £106 billion profit, with another £900m coming in 1995.

This year looks less promising, with lower premiums but so far the claims in most areas have not been high.

The best performing syndicate is likely to be 1176 which insures nuclear power stations and is producing a 44pc return for 1994. Syndicate 561 in the excess of loss business (which caused such catastrophic deficits a few years back) is making a 35pc return, and marine syndicate 744 is expected to manage a 26+pc profit.

Life syndicates by contrast are suffering, with 332 producing a 17pc loss as a result of problems in America. Charles Sturge of Chatset also pointed to the declining profits of motor syndicates, though he thought the premium levels were now bottoming.

15 Oct 86

The Times: Lloyd's to issue more writs. Sixty names seek talks over demands

Lloyd's of London is preparing to issue a second batch of writs in its effort to recover £500 million in outstanding debts.

Names in Canada are likely to feature in the latest demands for payment, expected within the next ten days.

Tony Gooda, the former Lloyd's underwriter and Robin Kingsley, chairman of the Lime Street Agency, are among Lloyd's personalities to feature in the first batch of 240 writs issued last week. They are being pursued for £1.67 million and £1.26 million respectively. Names have reacted angrily to the demands, questioning the validity of the figures.

At least 60 names have approached Lloyd's requesting talks. Rupert Gallers-Pratt, who featured in the initial charges said he was willing to pay once the being established. Mr Gallers-Pratt, an Old Etonian said: "I've had three different estimates of amounts owing. Tell me which one it is and I'll send them a cheque." The writ cites a figure of £50,000.

Sally Noel, who faces a demand for nearly £300,000 said she would continue to resist calls for payment. She said: " no other business would be allowed She publicly cut up her 34-page writ at the weekend.

The first action against names in America is expected in early November. Lloyd's hopes top have the first test case in court by Christmas.

15 Oct 96

Daily Telegraph: Chartwell bid values Archer at £35m

ARCHER, the Lloyd's managing agency that revealed it was in take-over talks with American Chartwell Re, yesterday unveiled the terms of the bid valuing Archer at £35m.

The 92+p-a-share cash bid 4 is at a 50 p.c. premium to the share price before the talks were first disclosed 11 days, ago. Chartwell has 5.4 p.c. of Archer, and has-received acceptances from a further 22.4 p.c. controlled by Archer directors.

Archer had been seeking corporate capital, and Chartwell yesterday confirmed that it would be putting money into Archer's syndicates.

However, Archer chairman Bryan Kellett said: "It is equally committed to the agency side of the business and will continue to welcome support from other capital providers." He emphasised that "natural" Names - those individuals who have traditionally supported the market - would still be welcome.

Archer has lost a few of its senior underwriters recently, but Mr Kellett said: "Everyone is very much on board." Mr Kellett will remain head of Archer and is expected to join Chartwell's main board.

Stephen Bensinger, president of Chartwell,' said: "If you look at the track record of Chartwell over the past few years, you will see a company that has not failed to recapitalise on opportunities in the market. We expect to continue to be active."

  • Ceska Pojistovna, the largest Czech insurer, became the first Czech insurer to open a representative office in London yesterday.

15 Oct 96

The Times: Chartwell bid values Archer at £35m

Chartwell Group, the American insurance and reinsurance group, has made a cash offer of 92.5p per share to Archer Group Holdings, the quoted Lloyd's agency, valuing it at £35 million.

The offer price represents a hefty premium of 50.4 per cent to 61.5p, the closing price on October 3, the last dealing day before the cash offer discussion was announced.

So far Chartwell has secured 52.3 per cent of Archer's issued share capital, including its own holding and in irrevocable commitments. It estimated that Archer's pre-tax profits for the year ended September 30 would not be less than £3 million.

Bryan Kellett, Archer's chairman said Chartwell would provide capital for its syndicates, enabling Archer to plan for long-term development with confidence.

Richard Cole, chairman and chief executive of Chartwell, described the move as a logical and natural extension of its existing activities in the London market.

"Archer would provide geographic diversification and direct access to Lloyd's marketplace for future growth," Mr Cole said.

Archer, with 4 per cent of Lloyd's underwriting capacity for 1996, operates 11 Lloyd's syndicates with capacity of £420 million for the 1996 year of account.

The company bounced back to profit last year after two years of losses and reported a pre-tax profit of £599,000.

15 Oct 96

Daily Telegraph : Lloyd's agencies link to limit Names Liability

FOUR of Lloyd's leading managing agencies were predicting yesterday that they . would be able to raise up to £75m in capital through their "Scottish Limited Partner-. ship" limited-liability vehicle.

The new Lloyd's investment vehicle will allow Names - those Individuals who have traditionally underwritten with unlimited liability - to limit their exposure. The agencies - Murray Lawrence, Roberts & Hiscox Kiln Cotesworth and Stewart, who between them manage £1.4 billion in capacity - are confident of its success. now that they have achieved regulatory approval.

The Securities & Investment Board and the Investment Management Regulatory Organisation have approved the scheme in London, while in America New York state has given the go-ahead.

Many Lloyd's agencies have been coming up with ways to limit liability after the disastrous five years to 1992 in which the market lost £8 billion but this is the only one available for the 1997 underwriting year. .

The new vehicle uses Scots law—which requires that the agencies use a Scottish adviser, in this case Noble & Co., which specialises in insurance - and retains many of the benefits of being a Name. The main advantage is that the partnership is the only scheme that allows Names to retain sole trader status for tax purposes.

The agencies have also just confirmed the scheme's exemption from inheritance tax. Traditional membership of the market could not be, bequeathed. Under the partnership, Names are limited to a 2-to-1 gearing - that is; the capacity underwritten cannot exceed twice their funds at Lloyd's - compared

with up to 4-to-l gearing for some categories of Names at present. However, the partners are confident that with gearing rules likely to be tightened, this limit will become less of an issue.

0 Nov 96

One Lime Street: Regulatory update - Syndicate review process undertaken by Lloyd's

In depth reviews of 57 syndicates and visits to all active underwriting agents will have been carried out by Lloyd's underwriting agents department (UAD by the end of 1996. Over the last two years UAD's review approach has focused on assessing the underwriting control environment present at each syndicate. An important part of this is achieved by examining the quality of syndicates' records. During on-site visits, monitoring teams carry out detailed work on four areas: realistic disaster scenarios (RDSs), slips, cover notes and reinsurance to close (RITC).

RDS

All syndicates provide the regulatory division with details of their RDSs. These set out a syndicate's exposure to a number of standard prescribed catastrophic events e.g. a Californian earthquake. During inspection visits, monitoring teams carry out checks to ensure that RDS figures can be traced back to information extracted from risk recording and aggregate exposure monitoring systems. A number of weaknesses in this area were identified during visits, for example:

  • a US $10m understatement was discovered in one syndicate's California earthquake RDS due to failure to input all risks into the aggregate monitoring system;
  • four syndicates omitted to include exposures arising from business written under binding authorities in Florida and the surrounding areas in their US windstorm RDS;
  • one syndicate failed to document assumptions lying behind a 25 per cent probable maximum loss factor for household and commercial property risks when it was clear that other syndicates in the peer group used a 40 per cent factor- this syndicate subsequently upgraded its PML estimates; and
  • one marine syndicate failed to recognise, in a North Sea oil rig disaster scenario, that separate oil rigs could be affected from the same explosion due to the linked structure of platforms in some of the large North Sea complexes.

Slip tests

Checks are carried out on a sample of slips to assess the accuracy of data held on syndicates' risk recording systems. Typical tests include checks on details in respect of premium income, aggregate exposures, policy limits, periods of cover and risk codes. Monitoring teams have found the accuracy of risk information to be poor, with some basic controls associated with data entry missing. Problems include:

  • data entry error rates in excess of 50 per cent for certain syndicates;
  • nearly 80 per cent of slips for one class of business coded to the wrong Lloyd's code;
  • gross underwriting lines written in excess of disclosed maximum line limits; and
  • no independent review of slips underwritten each day;

Improvements in data accuracy are required; if the base information is wrong, control decisions made on the basis of it are also likely to be wrong.

Cover notes

Many syndicates purchase significant quantities of reinsurance to protect their accounts. As part of monitoring teams' review of the security of reinsurers, tests are performed on a sample of cover notes. These tests are designed to establish to what extent reinsurance procedures explained to monitoring teams during inspections actually work in practice. Weaknesses identified in this area include.

  • unauthorised use of reinsurance security;
  • over reliance on use of certain reinsurers; and
  • failure to check cover note details.

Given the importance syndicates attach to having in place an effective reinsurance programme which may have to respond to a major loss in the future, improvements are needed in this area.

RITC

The premium for the RITC is often the most material figure on the face of a syndicate's accounts. The major findings in this area have been the absence of a clear audit trail showing how the RITC has been calculated and a lack of documentation substantiating how the underwriter has arrived at estimates for the ‘incurred but not reported' element of the calculation.

Without such information being available it is difficult for managing agents to demonstrate to monitoring teams that they have fulfilled their duty to ensure that in approving the RITC premium, equity between Names has been preserved.

Findings

It is clear, therefore, that there is a continuing need for monitoring teams to be concerned about the standard of underwriting controls and accuracy of risk recording systems. There is also a need to alert managing agents not to rely solely on information provided to them by their managed syndicates but to instigate their own verification procedures.

0 Nov 96

One Lime Street: Regulatory update - E&O cover considered

Plans to consider proposals to reinstate some form of errors and omissions (E&O)) insurance for underwriting agents were included in Lloyd's 1996 Regulatory Plan.

Research has been carried out, in conjunction with Lloyd's Underwriting Agents' Association and three firms of specialist brokers, to establish the viability of reinstating an insured form of cover that would be available to all agents at a reasonable price. It found that, although insurers in Lloyd's and the company market are unwilling to underwrite E&O cover of the scope that was previously available, they are prepared to provide a form of clerical errors cover.

This cover would be a modest start and a platform from which to develop more comprehensive cover. Lloyd's Regulatory Board (LRB) believes that introducing this level of cover is a pre-requisite to the availability of further cover.

A consultative document outlining the cower available is shortly to be published. Comments will be invited in particular on:

  • whether a requirement for agents and Lloyd's advisers to have clerical errors cover from a date to be decided in 1997 should be introduced; or
  • whether agents and Lloyd's advisers should be expected to obtain such cover as a mater of best practice, in anticipation that broader coverage will be available in the near future.

The document is being issued to all agents Lloyd's advisers and market associations. Copies are available from Melissa McVeigh, Communications Officer, Regulatory Division at Lloyd's: telephone: (0171) 327 5741.

1 Nov 96

The Times: Lloyd's starts timely review

Lloyd's of London has officially begun a regulatory review before an expected wide-ranging shake-up of City regulations next year.

The review group will be led by Sir Alan Hardcastle, chairman of the Lloyd's Regulatory Board. The Board which acts as an external regulator, will put forward proposals for change in the market so that Lloyd's has significant input into any regulatory amendments drawn up after the general election.

Lloyd's is regulated under a private Act of Parliament, Lloyd's Act 1982, and is largely exempt from the provisions of the Financial Services Act 1986.

Sir Alan said: "The Lloyd's market … is very different from the market of the past and it will continue to change. This review … will recommend how our regulatory arrangement should be developed. It's imperative to ensure that the sharp lessons of the past have been properly learnt."

The review group is inviting written submissions and plans to report to the Council of Lloyd's before the middle of 1997.

1 Nov 96

Daily Telegraph: Complacency is new danger at Lloyd's

The common theme running through two decades of problems at Lloyd's of London is its regulation - or lack of it - so it seems strangely inappropriate for the insurance market to include so many of its own on the committee established to review its regulation.

It is not a question of who is on the committee - merely where they come from. It is unlikely that a committee stuffed with underwriting agents, syndicates, trusts and brokers is at this point going to rip up history and hand over regulation to outsiders. Even the smattering of outsiders invited on to the committee are largely from other City organisations which have an equally strong belief in self-regulation. This is not a formula for rocking boats.

Now that Lloyd's has won the battle to force through its reconstruction, the danger is complacency. This is the point when the need for change seems least and when the old boys believe that they can drop their guard. But the status quo at Lloyd's cannot be assumed simply because a past parliament chose to pass an Act which allows it to look after its own regulation.

With hindsight, the MPs either knew too little about the insurance market's workings, or too much - but when the Treasury Committee of MPs reviewed their colleagues decision last year it concluded that regulation was too important to be left to Lime Street and should be handed over to the Department of Trade.

If the Lloyd's committee could bring itself to admit the fact, it would acknowledge that the best regulator it has had was the Department's Jonathan Spencer, the civil servant whose efforts ensured that Lloyd's passed its annual solvency test when so many insurance insiders had undermined its finances.

2 Nov 96

Financial Times: Names warned to reduce risks on underwriting

Lloyd's Names should be reducing the risks they are willing to underwrite next year, a leading members' group has warned.

The Association of Lloyd's Members, which represents about 9,000 of the Names whose private wealth is used to support the Lloyd's insurance market, warns in its latest newsletter that premium rates are falling fast and the profits outlook for 1997 is poor.

Profits in 1993, the last year to report under Lloyd's three-year rolling accounts system, reached £1-08bn before expenses, and profits for 1994 and 1995 are also expected to be good.

But the association warns that members should not be blinded by these results and the completion of Lloyd's financial reconstruction.

"Trading conditions are still deteriorating and there is little sign that the market may be about to turn. It follows that Lloyd's may not do much better than break-even in 1997, assuming an absence of serious catastrophes," the association says.

Lloyd's Names have until the end of November to negotiate with their members' agents how much premium income they are willing to accept next year.

They have to deposit funds amounting to 30 per cent of this "capacity" with Lloyd's to cover any insurance losses, although they can continue to earn income on these funds.

The warning about trading conditions on the Lloyd's market is echoed by Standard & Poor's, the credit ratings agency.

Mr Andrew Campbell Hart, managing director o insurance ratings for S&P London, said he expects profits after expenses and special levies to top £1bn for 1994 and reach almost £900m for 1995.

"Clearly, however, the underwriting cycle is turning in 1996 and syndicate underwriters' reports are increasingly warning of softening reports and irresponsible competition within the international markets for the types of business Lloyd's specialises in," he said.

Lloyd's completed its comeback from the brink of insolvency in September when the DTI approved the creation of Equitas, a reinsurance company into which Lloyd's is transferring about £12bn of mainly US liabilities outstanding on policies sold before 1993.

2 Nov 96

Daily Telegraph: Names upset by lack of voice on review body

THE Association of Lloyd's Members, the mainstream body for Names, yesterday hit out at the insurance market, claiming that Names are under-represented on the regulatory review body unveiled on Thursday.

Lloyd's is undertaking a six-month review of regulation ahead of the expected introduction of external regulation after the general election. There is only one Name, Sir Adam Ridley, the association's deputy chairman, among the review group's 13 full members.

Sir David Berriman, chairman of the 9,000-member association, said: "I welcome this initiative, but I am amazed that Lloyd's appears to put such small value on the wishes and interests of the main body of capital providers. The review group is overweight with the representatives of the market who so signally failed the membership before."

A spokesman for Lloyd's said: "The review group is not reviewing regulatory failure, it's not looking at what went wrong. It's looking at structure. It's asking: "Could it be done better?"

He added: "If any Name wishes to make their views known, the group will be open to their suggestions."

Sir David said that the association will be pressing for greater representation by Names. David Gittings Lloyd's head of regulations said: "Obviously, if that's their reaction, we'll have to seriously consider their viewpoint."

But he added: " I think there has to be a limit to the number of parties on the review panel."

The association had a separate dispute with members' agents yesterday. Sedgwick Oakwood complained to it of a front-page article in the association's latest newsletter advising Names to "gear down" in 1997.

"An earthquake causing $50 billion of insured losses would cost Lloyd's perhaps 10pc of its capacity. It follows that members have the prospect of making a very modest positive return, if they are lucky, and a significant loss in the event of a major catastrophe," the newsletter warned.

Sedgwick Oakwood's chairman Michael Payne said: "I don't think there's anything in history that would amount to $50 billion in today's money - with the possible exception of the 1906 San Francisco earthquake."

Mr Payne said that with reinsurance rates weak, syndicates can lay off their losses, inexpensively outside Lloyd's.

He added: "As a result of lessons learned before, syndicates monitor very carefully their exposure to any disaster in any one zone prone to natural disasters."

2 Nov 96

Daily Telegraph: Lloyd's man gets instant beatification - it's a game of two halves

IT IS NICE to know that someone made £170 million out of Lloyd's of London, if that is what the late Matthew Harding did. He has gone on to instant beatification for investing some of it in Chelsea Football Club.

Mr Harding was a Lloyd' s broker who specialised in reinsurance, the device by which insurers pass on to other insurers the risks they do not want to run themselves.

Brokers live by the commission they can earn, and there was certainly commission to be had when the same risks were going round and round in Lloyd's like dirty socks in a washing machine. This process was described by Carlos R Miro, giving evidence in Washington to Congressional committee while on leave from the jail where he was doing time for fraud.

He had found Lloyd's an eye-opening experience, he said: "How expert the Lloyd's brokers were at raking off a commission as the retail or direct broker, then again by reinsuring the policy-issuing insurance company, and then again by arranging the reinsurer's own reinsurance, and so on - pyramiding these layers of commission to as much as 25 per cent of the gross premiums, if not more."

Mr Miro thought this a neat trick and started to do it himself. It worked well with underwriters - golden geese, he called them - who thought that insuring excesses of loss would be profitable and with members of Lloyd's who hurried to join in.

So the business spiralled up, and then down. This was one way in which Lloyd's members came to lose £11 billion. The newspapers which gave Mr Harding such a rousing send-off took their figure for his wealth on trust, or from one another, and all I would add that the big money nowadays is being made in football clubs. If a successful investor in a football club were looking for people who needed his money, Lloyd's could point him in the right direction.

3 Nov 96

Mail On Sunday: Names face rescue delay

Thousands of Lloyd's investors - the so-called Names - face a delay to their multi-billion rescue package.

About 12,000 members of the London insurance market have been warned that payment of £559 million as part of a financial salvage operation has been held up.

The fresh blow for the investors has come because of cash-flow problems caused by the complexity of Lloyd's £3.2 billion package of aid - designed to help them with huge losses they suffered.

Further delays have been caused by the New York insurance department which is insisting that Names finances are scrutinised in a fresh audit. It also wants to establish that Lloyd's has enough money to do business in the US.

If it is not satisfied, it may force Lloyd's to stop payment to Names who expected to receive money from the settlement, and curb the market's operation in the US.

One adviser looking after Names' affairs said: "Relief that they were to receive something is giving way to impatience."

Ron Sandler, Lloyd's chief executive, has told Names' advisers: "In an exercise of this scale and complexity, delays of this nature are inevitable."

"Please reassure your members that every effort is being made to expedite the payment of the surpluses."

Attempts are being made to pay the money in instalments. Later this month 4,000 Names may receive a cheque in part payment. Names who have been told about the delay this weekend were expecting the payment in October.

The insurance market regrouped the 34,000 Names' funds into a new rescue company, Equitas, designed to meet potential liabilities of £15 billion. Those with more than enough money in the market to meet claims were to receive the surplus.

However, more than 1,000 decided not to accept the rescue terms, which would have led to millions of pounds of their debts being written off, and held out for better terms. Lloyd's is suing them for their full debts of £500 million.

Lloyd's is also waiting for other Names who accepted the rescue offer to pay their share of £860 million needed to boost reserves.

3 Nov 96

Sunday Telegraph: Names facing further delays

Thousands of Lloyd's of London Names entitled to £570m of insurance profits made in 1993 will have to wait until Christmas or the New Year to receive the bulk of what is owed them. A Lloyd's spokesman said yesterday that cheques would start to go out this week to only 1,000 of the 4,000 Names waiting to be paid after months of delay in allocating the sums, and even they will only be paid only a part of the surplus.

Payment of nearly £200m of the total to any of the 4,000 was "subject to further delay" because of problems raised by US regulators over distributing the money. Lloyd's syndicates made a profit of almost £1-1bn for 1993, which would normally have been distributed by mid-year under the market's three-year accounting rule.

But this year's payout has been delayed by the business of devising a £3-2bn rescue package for the market, a £1-3bn settlement of Names' negligence suits and the creation of Equitas, a £15bn market company set up to handle claims under old Lloyd's policies. The rescue sums have left some 4,000 Names, a third of the present total, with £570m coming to them out of 1993's profits.

Names who have been waiting for some reward after bearing previous Lloyd's losses of £11bn had been hoping to be paid weeks ago, following September's acceptance of the rescue package. They and their agents are increasingly concerned at the further delays.

The American delay has been caused by the insistence of some US regulators, notably the New York insurance commissioner, that dollar demonstrated profits on US business be specifically distributed to each Name, rather than through syndicates and agents, to avoid any cross subsidies. Ron Sandler, Lloyd's chief executive, has written to Names explaining that local delays have been caused by the need to work out individual Names' positions under the settlement and the different terms of any stop-loss insurance they had.

4 Nov 96

The Times: Lloyd's syndicates to face crippling taxes

Lloyd's of London syndicates face crippling Inland Revenue bills as they start to make profits after years of heavy losses, it has been claimed. Corporate members of syndicates are required to pay corporate tax on profits they distribute to investors. Colin Czapiewski, a partner with Lane Clarke and Peacock, the consulting actuary's, said that as profits improve, syndicates will come under pressure from the Revenue to pass on more of the profits, rather than keeping them in reserves, in case of future losses. He claims that as a consequence they will also have to pay more tax.

Mr Czapiewski said: "Hundreds of syndicates could be affected and the Revenue could net millions of pounds, depending on how good a year it has been for Lloyd's. They will be encouraged to run down the reserves to satisfy the Revenue. I do not believe it is fair for syndicates to be penalised for holding back profits in case of unforeseen losses in the future. That is a piece of good business practice." A spokesman for the Inland Revenue said: "We cannot speculate on the ‘level' of corporation tax syndicates will be liable for in coming years."

7 Nov 96

Times: Recovered sums offset against loss

Napier and Ettrick (Lord) and Another v R F Kershaw Ltd and Others

Society of Lloyd's v Woodard and Another

Before Lord Justice Nourse, Lord Justice Hobhouse and Lord Justice Pill

[Judgment October 24]

Sums recovered by names, members of the Society of Lloyd's, from successful litigation against their agents for negligent underwriting fell within the terms of the premiums trust deed to which every name was required to be a party. The recovered sums were thus available to be applied in discharging any outstanding indebtedness in respect of the underwriting losses of the names to Lloyd's.

However, amendments to the trust deed sought to be made by the Council of Lloyd's so as to make all litigation recoveries by names a component of the trust fund were invalid. Such amendments were not within the contemplation of the parties when entering into the deed, its primary purpose having been compliance with section 83 of the Insurance Companies Act 1982.

The Court of Appeal so held in reserved judgments when:

  1. granting an extension of time for bringing an appeal and allowing the appeal by the Society of Lloyd's from Mr Justice Saville who on May 14, 1992, had given judgment for the plaintiffs, Lord Napier and Ettrick, representing members of the Outhwaite 1982 Names' Association and Richards Butler, their solicitors who held the sums paid, and
  2. allowing in part an appeal by Lloyd's from the judgment of Sir Richard Scott, Vice-Chancellor (The Times May 24, 1996) that had been in favour of the defendants, Mr David L. Woodard and Mr Anthony F. J. Wilson, names acting in a representative capacity. The Vice-Chancellor's decision in that appeal refusing to declare provisions amending the trust deed valid was upheld, Lord Justice Hobhouse dissenting on that issue.

Mr Jules Sher, QC, Mr John Child and Miss Joanne Wicks for Lloyd's; Mr Nicholas Warren, QC and Mr Paul Newman for Lord Napier and Ettrick, Richards Butler and Mr David Woodard; Mr Richard Slowe, solicitor, for Mr Anthony Wilson.

LORD JUSTICE NOURSE said that the main question was whether the pre-1995 form of premiums trust deed which every name had to enter into pursuant to section 83(2) of the Insurance Companies Act 1982 embraced, in addition to premiums and other receipts of his underwriting business, sums recovered in litigation against his agents for negligent underwriting.

After Mr Justice Saville gave his decision in 1992 Lloyd's had decided, so as to avoid further confrontation with names, not to appeal. But that decision was made at a time when the magnitude of the problems which had come to confront Lloyd's by 1996 were not appreciated.

The failure by so many names to meet their liabilities had thrown a totally unexpected burden on the central fund, threatening Lloyd's future solvency.

Early in 1995 the plans for reconstructing and renewing Lloyd's were well advanced: the names litigation recoveries had become critical to its completion. Thus Lloyd's applied for an extension of time and the court on July 26, 1996 had made the order and had proceeded with the hearing of the appeal.

Litigation recoveries in respect of negligent underwriting

The question was whether the recoveries fell within clause 2(a)(i) of the trust deed as being within the definition "All premiums and other moneys whatsoever ... becoming payable to the name in connection with the underwriting business…"

A premium was a receipt of the business. So too were recoveries in respect of reinsurance, salvage and the like. It was obvious that receipts of the business were sums payable to a name in connection with it.

But that was not as far as the clause 2 provision was intended to go. It must have been intended to have some wider application.

A litigation recovery in respect of negligent underwriting was a sum paid to the name in order to restore him to the position he would have been in if his managing agents had acted competently.

In the obvious example it was a sum which replaced the lost excess of premiums over claims: likewise with an omission to reinsure or to make recoveries in respect of reinsurance or salvage, where it was the lost reinsurance or salvage moneys which were replaced.

There seemed to be no a priori reason for treating the replacement differently from that which it replaced. It was not just a case where the payment had something to do with the business. It was one where there was a real and substantial connection between the two. Clearly the recoveries fell within clause 2(a)(i) of the deed.

Moreover, the court was not constrained by authority to hold to the contrary: neither in Society of Lloyd's v Morris ([1993] 2 Re LR 217) nor in Deeny v Gooda Walker Ltd (No 2) ([1995] 1 WLR 426)) had the application of clause 2(a)(i) to litigation recoveries been considered .

Other litigation recoveries

The Woodard appeal, but not that of Lord Napier, also concerned other categories of recovery, including those against members' agents m respect of omissions to effect or advise in regard to stop loss insurance or negligence in selecting syndicates on which names were placed.

It appeared that Society of Lloyd's v Morris practically concluded the question in respect of some of the categories in favour of the names and as present advised it should be so held. But if after consideration of the judgments a decision was still needed and agreement could not be reached, further argument would be necessary.

Clause 22 amendments

By clause 22 of the trust deed ". . . the Council may from time to time revoke and determine the trusts hereby constituted ... vary or amend all or any of them . . . in such manner as the Council think fit".

The essence of the amendments sought by Lloyd's was the introduction of a clause to make all litigation recoveries a component of the trust fund.

In Hole v Garnsey ([1930] AC 472, 500) Lord Tomlin had said that a power to amend had to be construed as being "confined to such amendments as can reasonably be considered to have been within the contemplation of the parties when the contract was made. . ."

The proposed amendments could not reasonably be considered to have been within the contemplation of the parties when the trust deed was entered into.

Its primary purpose having been to comply with section 83(2) of the 1982 Act, it could not have been intended to be capable of embracing assets personal to the name, even those which might be said to "have something to do with" his underwriting activities.

The deed was not intended, even to that limited extent, to be a means of attaching his personal assets as a fund for meeting the losses. Section 83(2) contained no requirement that personal asset should be carried to the trust fund. The amendments were invalid.

LORD JUSTICE HOBHOUSE concurred that the litigation recoveries fell within the terms of the trust deed but dissented on the clause 22 amendments.

He said that the Council of Lloyd's had acted within the scope of the decided cases. The amendments did not lead to unacceptable conclusions. They did not conflict with the essential nature of the transaction or the relationship between the relevant parties.

The amendments were designed to further the fundamental purpose of the deed to assure and assist the discharge of the names' liabilities to those they had undertaken to insure. The Challenge to the validity of the amendments should fail.

Lord Justice Pill gave a judgment concurring with Lord Justice Nourse.

Solicitors: Simmons & Simmons: Richards Butler: S. J. Berwin & Co.

9 Nov 96

Daily Telegraph: T&N nears deal on cover against asbestos claims

AUTOMOTIVE group T&N is in the final stages of negotiating insurance against future litigation stemming from its history as Britain's largest asbestos company.

T&N said two months ago that it was looking at such insurance but the City has remained sceptical that a deal can be reached.

However, it is understood that T&N's insurance broker, Sedgwick, has made good progress and news on a policy could come this month.

Insurance would cap T&N's exposure to asbestos claims by covering additional liabilities after claims had reached a certain level.

The key issue is understood to be the size of the premiums.

T&N chairman Sir Colin Hope is known to be concerned that the company does not overpay.

T&N has already paid £350m in asbestos claims and sets aside £50m a year for future claims.

This is expected to fall particularly if the Georgine settlement - which caps T&N's exposure to US asbestos claims to $250m (£160m) over the next 10 years - is upheld by the US Supreme Court next year.

Without Georgine, analyst Adam Collins of Merrill l.ynch estimates that T&N would face future asbestos claims of between £300m and £600m.

He says the company, valued by the stock market at £667m, is trading at a £1 billion discount to its true worth. because of uncertainty about asbestos.

T&N's shares fell by 4p to 1 25p this week after the company issued a gloomy statement on the automotive market.

It said demand was patchy, the market for diesel products was disappointing and the after-market was still suffering from de-stocking.

One observer said: "An insurance policy would act as an additional comfort blanket for the City."

"If T& is to continue being one of the market leaders in most of its products, it needs to start giving assurances about the asbestos liabilities."

T&N is also expected to announce a development in its attempt to take a 49pc stake worth £120m in German pistons producer Kolbenschmidt.

T&N is likely to place with institutions its option to take the stake until an appeal to the German cartel office which has blocked the deal, is heard in February.

9 Nov 96

Daily Telegraph: Hard to pin Lloyd's down over pay day for Names

LLOYD'S of London has not exactly held the moral high ground throughout its long battle for survival. But in persuading Names to sign up to its £3.2 billion settlement plan, it did claim where they would be allowed to draw the line under their losses to the ill-fated market. Unfortunately, it seems unable to say exactly when.

Lloyd's is keen to assure everyone that it is on target for the payment dates, yet there is nothing as vulgar as a date for posting the cheques. Ron Sandler, Lloyd's astute chief executive, invites those whose finances are dependent on the cash to look at page 66 of their settlement document, which said that the £570m due to 11,600 Names should be paid within three months of the offer becoming unconditional. The clock started ticking on September 4.

Unfortunately, substantial problems remain. The Americans are insisting on audit certificates assuring them that each Name is able to meet potential liabilities before releasing any funds. Lloyd's yesterday admitted that it has not yet issued any of those certificates.

The impact this delay is having on the timetable is unfortunate; Lloyd's technology can tell members' agents the exact status of each Name's account, but cannot say when each will be paid.

Lloyd's is currently issuing writs to secure the £500m it is owed by "refuseniks". It seems rather lop-sided for its management to unleash Philip "Rottweiler" Holden, its debt-collector, while being unable to offer dated settlement of its own debts.

9 Nov 96

Daily Telegraph: Title fight

THE phantasmal sword which I see hovering over David Rowland's shoulder vexes some of Lloyd's of London's losers. They still think that their chairman should get it in the neck instead. If anyone is to be knighted for saving Lloyd's, they tell me, it should be the people who paid up. They look forward to a mass ceremony, but the problem is to find a hall big enough to take 30,000 people .

The alternative, I suppose would be to knight Lloyd's itself, on the lines of the George Cross awarded to Malta— -Sir Lloyd's de London, or perhaps Lloyd's, KBE (Hon.).

I am less sure what the Queen would make of an entitled Lloyd's. Having for most of her reign had no tax to shelter and having more to lose from unlimited liability than most of us, she very wisely never joined.

Christopher Fildes's City and Suburban column is taken from this week's issue of The Spectator.

9 Nov 96

Times: Lloyd's chief makes pledge to names

RON SANDLER, chief executive of Lloyd's of London, hit back after continuing complaints over the payment of insurance profits yesterday with a pledge to settle the "overwhelming majority" of cases by the end of the month.

Payment of the £570 million 1993 profit, the last reported year under the Lloyd's accounting system, has been held up by the market's £3.2 billion rescue deal and US regulatory issues. Some of the 11,600 names entitled to payment have criticised Lloyd's over the payments, which are usually distributed mid-year. Mr Sandler insisted that most would receive their surpluses within the timetable laid out in the Settlement Offer Document, which allows three months from when the offer went unconditional on September 4. He suggested that few of those who were anxious about payment understood the complexity of the process and few "have read the documentation to the adequate level of detail".

Lloyd's is writing to members and agents this weekend to spell out its payment plans. It said 4,000 cheques have been sent out in the past week these are likely to be in partial settlement. The problem has centred on the fact that a proportion of most names' profits come from US dollar accounts, which are subject to regulatory approval by the New York Insurance Department. Ernst & Young is auditing names' accounts and expects to finish in two weeks. At the point, according to Lloyd's the NYID will release the funds.

Settlement of sterling accounts has already begun. However, some payments will be delayed by separate problems in the insurance market such as the collapse of the Personal Stop Loss underwriters.

9 Nov 96

Times: Maxwell pension debts settled

THE final settlement in the five-year battle to reclaim the £400 million of assets removed from the Maxwell pension funds took place yesterday when £9 million of shares in Euris, a French investment trust were handed back to the pensioners (Jason Nisse writes).

However, the main beneficiary of the deal is set to be the Government, which is able to cut back its liability to fund a guaranteed minimum pension to former employees of the late Robert Maxwell's empire.

Banque Nationale de Paris, the state-owned French bank, took the Euris shares as collateral for a loan made shortly before Robert Maxwell's death November 1991.

The shares were owned by the pension fund, but BNP said that it took them in good faith as they had been transferred to Headington Investments, a Maxwell company.

15 Nov 96

Times: Shake-up at Lloyd's threatens to put hundreds of jobs at risk

15 Nov 96

Daily Telegraph: Lloyd's shake-up aims to create more accountability

LLOYD'S of London yesterday unveiled a restructuring of its central functions - which cost the insurance market £80m last year - and a move towards a "user pays" system in a bid to make the market more competitive.

Ron Sandler, chief executive said he anticipated job cuts among the corporation's 2,400 staff but declined to be drawn on numbers, nor to give targets for cost reduction. He said: "This restructuring is not about the creation of job losses. It is about the creation of transparency and accountability."

Lloyd's has restructured its central services into five divisions - members' services, insurance services, facilities management, business development and North America. Each of these will, from the beginning of next year report to a user board.

Mr Sandler said: "I anticipate that there will be a strong movement in terms of user pays billing in the middle of next year."

Lloyd's is not changing its regulatory function until its review board reports in the middle of next year.

It expects that some services will be "natural monopolies," where it makes sense that Lloyd's remains the sole provider. Mr Sandler said: "The maintenance of regulatory relationships is a natural monopoly," but added: "There is no reason why the users of the market place should be constrained to purchase marketing consultancy from the corporation.

Bronek Masojada, managing director of the Hiscox members' agency, who has been a critic of Lloyd's costs in the past, welcomed the move.

"I think it is a step in the right direction," he said. "Best of all, they recognise the importance of user pays."

"Once we have user pays we will be able to compare Lloyd's costs with those of other processing bureaux in the London market and switch as appropriate.

"Greater transparency leads to lower costs."

16 Nov 96

Daily Telegraph: Law firm's £20m fees from Lloyd's

FRESHFIELDS a leading firm of City lawyers, made £20m fees from its work for Lloyd's of London insurance market in the run-up to August's £3.2 billion settlement plan.

Freshfields' advice was seen to be essential in ensuring the passage of the rescue plan, right up to the 11th hour success in defeating American Names who sought to block the plan.

The firm had up to nine partners and up to 50 lawyers working full-time on Lloyd's business at any one time.

The revelation has incensed leaders of Names' action groups.

Tony Welford, chairman of the Paying Names Action Group, which tried to have the scheme declared unlawful, said "It just seems an awful lot of money."

"1t would have been so much more equitable had Lloyd's negotiated with us and saved all these legal fees.

David Rowland, Lloyd's chairman, declined to discuss the exact amount of fees paid to Freshfields, except to admit: "Clearly, it was a very large fee."

He said that Freshfields "contributed hugely to the success of "reconstruction & renewal" because they were thoroughly professional and very, very competent."

Mr Rowland denied that Freshfields had muscled out other lawyers: "We used a lot of other people."

Barry O'Brien, the Freshfields partner who worked so closely with Mr Rowland that he occupied an office opposite his on Lloyd's executive floor, would not confirm the £20m figure but said: "1t isn't a staggering figure. Fees never were an issue. It is the largest job that we as a firm have ever done."

17 Nov 96

Mail on Sunday: Jobs axe looms for fresh-start Lloyd's

AT LEAST 600 Jobs are surely be axed in a management shake-up at Lloyd's. And more will he lost after expected reforms in the regulatory system of Lloyd's insurance market.

Ron Sandler, the market's chief executive, spoke of job losses as he unveiled a new structure to cut costs and make the market more efficient in the wake of its financial crisis.

Sandler declined to say how many jobs would go, but the staff establishment climbed sharply in the past few years as the market battled to save itself from collapse.

There are 2,423 employees working in Lloyd's support and administrative services.

This includes 415 contracted workers and consultants who have been consigned to the now completed rescue programme for the market's investors, the names, who faced huge losses. More are working on plans for Lloyd's future. Last year the wage bill climbed from £63 million to £75 million.

Now it is expected that Lloyd's will try to cut its staff numbers to around 1,800, the level before the Names crisis.

But they are growing fears among employees that the job cuts will accelerate at the centre as businesses in the market evoke into conventional insurance companies with their own systems, which will make them less dependent on Lloyd's services.

A further 150 jobs are at risk in the market's regulatory division. Many officials at Lloyds hope that the regulatory activities will be transferred to an outside Government agency in the future. This move alone could reduce annual costs by £10 million.

Last month Lloyd's set up a review of its system of regulation, led by Sir Alan Hardcastle. Among the issues it will consider are whether outside organisations should undertake or supervise any regulatory activities, and the division's staffing levels.

Changes

The Treasury and Civil Service Select Committee have already recommended that Lloyd's is regulated by an outside body, but the Government has promised its own review once changes in the market become clear.

The Labour Party that self-regulation in the City does not work and it is keen to reform the present structure.

Stuart Bell, shadow Minister for Corporate and Consumer Affairs said yesterday: "We would like Lloyd's financial strength to continue to be regulated by the Department of trade and Industry, but its investment activity to be regulated by a strengthened Securities and Investments Board."

17 Nov 96

Sunday Telegraph: Blacklist Names reprieved by bungle

Blacklisted Lloyd's of London professionals have won an unexpected reprieve from unlimited losses thanks to an internal bungle in the insurance market.

As many as 100 of the blacklisted Names, who were excluded from the market's £3-2bn settlement because they were thought to have brought Lloyd's into disrepute, will now be paid enough to clear their personal debts to underwriting syndicates and draw a final line under their Lloyd's involvement.

This could mean relief of hundreds of thousands of pounds each to insiders blamed for causing many of the market's recent problems, though Lloyd's would not comment on individual cases. Under the settlement, about 130 of the market's most notorious underwriters and agency directors, whose activities caused hundreds of millions of pounds in losses, including Stephen Merrett, Anthony Gooda and Derek Walker, were put on the blacklist.

This was supposed to disqualify them from payments, estimated to total more than £20m.

The blacklist was drawn up to reassure insurance syndicate Names nursing £11bn of losses and public opinion that Lloyd's would not use the settlement to reward the wrong people. But, said Lloyd's, the committee compiling the blacklist did not liaise with another committee which worked out how to give Names a "final" exit from the market by clearing their underwriting losses.

Hence, blacklisted Names will have their debts met. In one case, a blacklisted professional's £1.2m loss has become a £300,000 payment under the settlement. Lloyd's said: "Some of these people are bust three times over." But one former action group leader said it was "outrageous."

17 Nov 96

Sunday Times: Honour at Lloyd's

17 Nov 96

Sunday Times: Insurers face computer claims meltdown over the millennium

THE insurance and computer industries are facing huge claims, and possible business collapses, over the inability of computer systems to deal with the changeover to the new millennium.

Experts say law suits against computer software companies will result in huge claims being passed on to product-liability insurers and that computer consultants will also make big claims on grounds of professional indemnity. According to one estimate, the world-wide cost of altering systems to cope with the changeover is £70 billion.

The problem arises because computers have been designed to read only the last two years of a date. When the first two digits change from 19 to 20 at the end of the decade, computers will read the date as 1900. The resulting confusion could lead to enormous disruption for businesses ranging from supermarkets to airlines, all of which depend of computers.

Paul Taylor, senior partner of Berrymans, the law firm specialising in insurance work, said existing software programmes had not been designed with the millennium in mind, on the assumption that most businesses would change their systems before the end of the century and buy new software.

He quoted the example of a supermarket chain where the computers read a year 2000 sell-by date on a tin of corned beef as being 1900, and consequently condemned the whole stock as being nearly 100 years out of date and unfit for consumption.

"We are seeing increasing signs of a problem that has not been taken seriously and will hit us badly in a few years' time. If we do not act on it now, a lot of people will lose a lot of money," he said.

The problem could also lead to a flurry of legal wrangles between consultants and insurers over professional indemnity. If insurers can claim that consultants were aware of the problem some years ago they may contest claims. There could be similar rows between manufacturers and insurers over product-liability claims.

Some consultants are trying to protect themselves by making their product "2000 compliant", but most are still vulnerable. It has been calculated that up to 1% of businesses world-wide could collapse under the strain of the millennium changeover.

Taskforce 2000, a computer industry organisation set up to co-ordinate responses to the problem, is convinced it has been underestimated. "Unlike other problems, this one cannot be solved by moving the deadline," Taskforce said.

The industry fears that money spent on solving the 2000 problem will drain investment from other areas of technology, not least the need to change systems to cope with the introduction of a European single currency.

17 Nov 96

Sunday Times: Baker counts cost of Barings crash

IT TOOK 24 hours for Ron Baker to appreciate the extent of his victory over the Securities and Futures Authority, the City watchdog, last week. Cleared of four of five charges the SFA had brought against him over the collapse of Barings, he received only a minor reprimand instead of a three-year ban from the City, and had costs awarded against him of only £7,500, compared with a possible £200,000.

Baker says: "We didn't celebrate at all on the day. My first reaction was I was annoyed I hadn't won on all counts. It was only when I saw how the press covered it the next day, and got City feedback, that I treated myself and my wife to a glass of champagne."

Since Barings collapsed in February 1995, Baker, 44, has carried the tag "Nick Leeson's boss", with the implicit charge that he had been responsible for the rogue trader's reckless Singapore market gambles that brought down the country's oldest merchant bank. Many in the City were ready to cast him, an Australian outsider with a reputation for blunt talking, as their preferred scapegoat for the disaster.

The SFA verdict has not yet been confirmed by the chairman of its tribunal, Colin Kolbert, a former judge, so Baker has to remain tight-lipped on detail of the proceedings. But there is no doubt he feels vindicated by the tribunal's decision. "When I first decided to fight the SFA, everybody told me I'd lose, and I started to believe that myself. But I was still determined to go down telling the truth."

Baker gives credit to his legal team, Fox Williams, the solicitor, and Charles Hollander and Simon Salzedo, two barristers, for swinging the case his way against opposition led by Presiley Baxendale. But be still feels the action was flawed from the outset.

"The Bank of England and Singapore reports on Barings set the tone for the SPA investigation. Neither could get to the bottom of the fraud, partly because they didn't co-operate. They investigated profits and bonuses, rather than client cash-flows and margin calls, which was where the damage was done that caused the collapse," he says.

"Leeson's ability to get his hands 9n client money and pose as a bogus client himself through the agency business was the key, but the two reports neglected it by concentrating on the bona fide house trading business. That was the area where I had responsibility. I had nothing to do with agency client business until a. few weeks before the collapse,"

He thinks the SFA changed tack during its investigation. At one stage, Baker pressed it to state whether it was charging him with causing or contributing to the collapse. No, came the response. He was being prosecuted for being a bad manager, not for bringing down Barings.

In its final ruling, the SFA tribunal rejected charges that he had failed to understand Leeson's trading in Singapore, and that he had lost control of the management chain and compliance procedures within Barings' Financial Products Group, which he headed. It also decided he had behaved in a "fit and proper" way as a director of Barings. It found against him only with regard to monitoring one part of Barings' Singapore proprietary trading.

"The SPA and the tribunal deserve credit for addressing those questions in detail, when two other investigations had not," he says. "They were the first people to have listened to my point of view, and were big enough to agree with me. Their attitude was in stark contrast with the Bank report, which was a bit of cronyism." Baker believes the "cronyism" extended to some Baring executives who pointed the finger at him while denying responsibility for the collapse. "There were powerful commercial interests in play which were determined to ensure the rescue of Barings should not be jeopardised. It was in their interests to discredit somebody they thought could be easily blamed," he says.

Not everyone shares Baker's view that the verdict show the SPA in a good light. Some believe the SFA is now in a difficult position over the three outstanding Barings cases.

Certainly those charged - Mary Walz, who worked for Baker, Ian Hopkins, head of risk, and James Bax, who ran Singapore - will take heart from Baker's verdict.

Hopkins says: "It is a devastating reversal for the SFA. It is two years since I recommended changes at Barings which would have uncovered Leeson's fraud earlier and saved millions. The SFA should accept defeat honourably, withdraw charges against me immediately, and start to repair the damage it has inflicted on me and my family."

But there is no precedent for the SPA unilaterally dropping a case. At the moment, it is still intended to proceed with these cases," a spokesman says. Hearings are arranged for next month and early next year, when the House of Commons select committee will have published its verdict,

Baker, meanwhile, will hunt for a new City job. He reckons the Barings episode has cost him £1-5m in lost earnings and legal costs, and he has little hope of recovering that through legal action. His only suit is a libel action against the Financial Times, over which he quotes Sir James Goldsmith: "He said you need time, money and inclination. Well, I've certainly got the inclination."

But, after the past two years, he does not want to spend much time in court. "I was a guy who had nothing ever go wrong. Until Barings, l had a phenomenally successful and enjoyable career. Then this bomb went off, and I was standing next to it. After this, I'm looking forward to the next 20 years."

His perfect job? "I'd like to get involved again in emerging markets, but based in London. I'd go back to ING/Barings if they'd have me," he says, with only the slightest trace of irony.

21 Nov 96

Obituary - Sir Havelock Hudson

24 Nov 96

Financial Times: Heat is on after Tunnel inferno

A French court is demanding to know the full cost of last week's Channel tunnel fire.

The Tribunal de Commerce, overseeing Eurotunnel's £8.8 billion debt restructuring talks, wants a financial report within two weeks. The court, which has the power to put Eurotunnel into receivership is worried about the fire's implications for the talks.

The company's negotiations with its 225 banks are delicately poised. A deal has been reached with the main banks but must still be approved by the rest.

It is trying to estimate the damage, but the bill for insurers is likely to be at least £200 million. The problem is that it may be months before the full cost is known.

It will be a drop in the ocean against Eurotunnel's huge debts, but may be the excuse some banks need to delay a deal.

The refinancing must be approved by all 225 banks but some small ones, thought to be Japanese, are said to oppose the terms, which involve them taking 45.5% of the equity.

But one of Eurotunnel's four agent banks thinks the fire may actually help secure agreement. It says: "Anyone wavering will now be encouraged to take the offer while they can."

The lead tunnel insurers are UAP of France and Chubb of the US, but hundreds of other groups including Lloyd's of London shared the risk.

Policyholders with large risk usually must meet some of the costs before policies pay out. Eurotunnel would not say how much it would have to bear

24 Nov 96

Mail on Sunday: Lloyd's: We won't plug £31m gap

More than 80 action groups have triggered a new Lloyd's row over claims totalling £106 million for legal costs and expenses arising from their campaigns for 13,000 Names facing ruin.

Lloyd's had planned to pay £50 million for legal costs and £25 million expenses as part of its £3.2 billion rescue.

The groups say they spent £31 million more, but Lloyd's manager Sarah Wilson told their leaders last week that Lloyd's will pay only half the legal costs claimed and the balance of the £75 million "when appropriate to do so".

An angry action group chairman says: "It's a bloody shambles".

Meanwhile, Lloyd's activist Christopher Stockwell has warned that the market is facing cash-flow problems in the wake of the rescue.

He has told action group leaders that Lloyd's may recover up to £1 billion less than it was expecting from Names who still refuse to pay their losses or have opposed the rescue package.

A week tomorrow, Lloyd's plans to start paying £570 million to Names due refunds under the deal.

25 Nov 96

Times: Lloyd's piles on pressure in fight with non-payers

Lloyd's of London will this week launch its toughest offensive yet, in the drive to recoup up to £500 million from recalcitrant names.

Bankruptcy orders and charges over property are among weapons at he disposal of Lloyd's, which is intent on sending a clear signal to non-payers. The first cases are due in court by mid-December.

A stream of names have approached Lloyd's for discussions since the first writs were lodged at the High court in October. Tony Gooda, the controversial underwriter, and Robin Kingsley, chairman of the Lime Street Agency, were among more than 50 names facing claims for more than £1 million each. Some 874 writs, relating to more than £200 million, have been issued, covering names in the UK, Canada and the US.

Lloyd's said that at least 130 names have come forward asking for talks. They include Sally Noel, an outspoken critic of Lloyd's, who defiantly cut up her writ, only to succumb to the conciliatory spirit of Lloyd's.

Philip Holden, the head of Lloyd's financial recovery department, said that the number of writs issued was declining rapidly as names came forward. Lloyd's was originally seeking £500 million from 1,850 names, but the numbers have come down to about 1,300. This is in part because some of the names concerned are bankrupt or dead.

Mr. Holden said: "A number of individuals are now breaking ranks from the various action groups and trying to settle late. They recognise that the fight is over."

Names who accept the settlement offer stand to pay considerably less. Non-payers facing demands for £1 million would stand to pay as little as £100,000 under the settlement, thanks to the cushioning effect of debt credits. Mr. Holden emphasised that the door remained open to late-comers.

Mr. Holden has extended his term at Lloyd's for another six months to allow him to see the process through. He has been seconded from the law firm of Dibb Lupton Alsop for the past two years.

The first payments are expected soon under the income and housing support scheme, which provides financial assistance to names who accepted the settlement offer. Some 830 names have applied to join the scheme, which is designed to help them keep their homes and pay the bills. A single person stands to receive £11,600 a year, and married applicants could receive £17,600. The scheme was ratified by the Lloyd's Council earlier this month.

27 Nov 96

Times: Letter to the Editor - Will Lloyd's take lead or follow?

28 Nov 96

Financial Times: Eurotunnel says fire costs may reach £230m

Eurotunnel yesterday estimated that the total costs of the fire which forced the closure of the Channel tunnel rail link 10 days ago could run to more than FFr2bn (£230m) and said full repairs were likely to take five months.

However, the operator of the tunnel said it was covered by its insurance policies for all but the first FFr50m-FFr55m of the costs. Shares rose 9.3 per cent to FFr7-05 in France and 7-3 per cent to 81p in the UK.

The company also predicted that, subject to approval by the safety authorities, a partial Eurostar passenger rail service was likely to resume as early as the start of next week.

This was criticised by Mr Mike Fordham, the assistant general secretary of the UK's Fire Brigade Union, who said re-opening passenger services next week would represent an "unacceptable risk" to the public. He called additional safety measures a "PR exercise" likely to have little practical effect.

Mr Patrick Ponsolle, Eurotunnel's chairman, said at a press conference in Paris that last week's events showed the company's safety system - which placed the top priority on the preservation of human life - had worked. None of the 34 people in the burning train was killed or seriously injured. "I have no doubt that the tunnel is at least as, and perhaps more, safe than all other forms of cross-Channel transport." he said.

He estimated that the costs of repairing the tunnel were likely to be FFr300m-FFr400m and that of the damaged train FFr50m-FFr100m.

There could be a further "several dozens of millions" of francs for compensation for lorries and other material destroyed in the fire. In addition, he said there could be up to FFr200m a month lost operating revenues for the next half year.

However, he stressed that Eurotunnel was covered by insurance up to a ceiling of FFr4-5bn - more than twice the size of the likely total claim.

However, he stressed that Eurotunnel was covered by insurance up to a ceiling of FFr4-5bn - more than twice the size of the likely total claim.

He added that the group had treasury reserves of more than FFr800m, which meant there would be no cash crisis caused by initial costs and the loss of revenue as a result of the fire. In addition, he said the unaffected northern rail tunnel and two-thirds of the southern tunnel could be rapidly brought back into use, bringing total capacity - and turnover - to two-thirds of previous levels well before the fire damage was entirely repaired.

Even without the remaining third of the southern tunnel in action, trains could operate at a frequency of six an hour in each direction, close to the average of seven an hour running before the fire.

Mr. Georges-Christian Chazot, managing director, said additional safety measures would include stationing fire and ambulance trucks in the service tunnel that runs between the two rail tunnels and an empty Eurostar train at each terminal to help provide rapid evacuation in the event of future fires.

However, Mr Fordham expressed doubts about the measures. "If the fire engines are nowhere near the fire when it breaks out, their presence in the central service tunnel could actually delay rescue operations, not help them," he said. He said the use of emergency trains to aid evacuation could increase congestion.

28 Nov 96

Financial Times: T&N scheme to cap asbestos claims

T&N, the UK engineering group, yesterday announced an innovative insurance scheme aimed at making it the world's first former asbestos company to cap all future liabilities.

The company, which has paid out more than £350m in compensation in the past decade, said it had secured over in excess of £1bn against asbestos-related claims - most f them arising in the US.

The move follows several months of talks with three leading reinsurers - Centre Re, Munich Re and Swiss Re which have agreed to provide up to £500m of cover, while the company has vowed to meet claims of up to £690m from internal resources.

News of the deal pushed T&N shares up by more than 22 per cent from 144+p to 176+p - lifting the group's market value by £170m to more than £900m. Sir Colin Hope, chairman, said the scheme would signal the end to T&N's asbestos legacy.

The company, formerly called Turner & Newall, produced asbestos for more than 100 years and only withdrew from the industry this year by selling its last asbestos mines in Zambia and Zimbabwe.

"These proposals are intended to bring an end to the uncertainty surrounding the asbestos issue that has overshadowed the group for so many years," said Sir Colin.

The deal was welcomed by some of T&N's largest institutional shareholders. Others suggested that resolving the asbestos issue could prompt a bid for the company, but added they were unlikely to sell their stakes in the medium term.

Rivals, such as GKN of the UK, Siemens of Germany and North American companies including Tenneco and Eaton Corporation, have all been touted as possible predators. But they have been deterred in the past by the asbestos issue.

T&N claimed it was able to draw a line under its asbestos legacy following test cases in the US courts, where judges have begun to accept actuarial assessments of the liabilities faced by asbestos companies.

That has enabled the group, advised by insurance brokers Sedgwick, to draw up a scheme setting an upper limit to its future asbestos exposure.

Sir Colin yesterday said T&N would set up a special balance sheet fund of almost £323m - taken as a provision against this year's profits - to meet its foreseeable liabilities. That asbestos fund, the first of its kind for a UK company, will be invested in fixed interest securities and equities to generate a return of at least 7 per cent thereby lifting T&N's "internal cover" to £550m.

It has also set aside a further £50m to meet possible claims associated with the Georgine Settlement, the US personal injury class action due to be heard by the Supreme Court next year.

As part of the scheme, T&N shareholders will be asked to approve a re-capitalisation cutting the nominal value of the company's shares from 100p to 40p, which will offset the impact of asbestos provisions on the group's reserves.

28 Nov 96

Financial Times: T&N finds route through maze of liability

T&N yesterday followed in the footsteps of Lloyd's of London and Cigna of the US by reinsuring much of its liability for asbestosis claims.

Where Lloyd's and Cigna, themselves insurers, set up separate reinsurance companies to run off their asbestos and environmental liability claims, T&N took £500m of cover with three of the world's leading reinsurers: Centre Re, part of the Zurich group, Munich Re and Swiss Re.

The arrangement resembles a normal insurance policy with a very large excess to be paid by the policyholder. T&N will itself bear claims up to a total of £690m, the pessimistic estimate of likely liabilities produced by its actuaries. It will set aside £323m in advance, which covers £550m of claims spread over time - the central estimate produced by the actuaries. The three reinsurers will then cover the next £500m of claims in exchange for a premium of £92m, though T&N remains exposed if claims run beyond £1.19bn.

The policy even carries a form of no-claims bonus: T&N will share in the profits if no claim is made. Such policies usually return about 80 per cent of the premium, according to reinsurance market experts.

But structuring a policy to cover liabilities that will certainly arise, even if they cannot be precisely quantified, has been no easy task. "I think our view would be that It couldn't have been done a year ago," said Mr Mike Hammond of Sedgwick Group, the insurance broker that put the deal together for T&N.

Experience in the US has now made it easier for actuaries to test their models of the likely extent of asbestosis against actual results, and refine their estimates.

"There's a certain robustness about the calculations," Mr Hammond said.

That allows the reinsurers to put together a programme which blends the financing of a known risk with the underwriting of an unknown risk.

Even so, persuading reinsurance companies that have already paid out hundreds of millions of dollars on their own asbestos claims to expose themselves further was not easy.

"The toughest thing was getting the underwriter's to work with us on something that has been a burden for them. It's obviously not something they have targeted as a new business segment," Mr Hammond said.

Reinsurers and underwriters acknowledged yesterday that it would probably have been impossible to obtain open-ended cover.

Some reinsurers said the premium seemed high.

More favourable market conditions have meant leading reinsurers actually have capacity to take on new business.

But Sir Colin Hope, T&N's chairman, said that although it had taken some time to agree on pricing, the ultimate premium was "right in our target range."

28 Nov 96

Financial Times: Take-over threat enters asbestos-free zone

Sir Colin Hope, the veteran chairman of T&N could not stop smiling yesterday.

After more than a decade the helm of the automotive components and engineering group, he claimed the end was in sight for T&N's legacy as one of the world's largest asbestos producers. "I believe that for all practical purposes we are now asbestos-free," he said.

Sir Colin was speaking after unveiling a widely trailed insurance scheme to cap the group's asbestosis liabilities, which have cost the company more than £500m in compensation payments over the past decade.

Under the insurance deal, the group expects to wipe out its annual £50m asbestosis charge by setting aside a once-and-for-all £373m provision against future liabilities, while using £500m of insurance cover to meet any claims above a threshold of £690m.

In the short term, the costs will be high. including the £92m one-off premium to pay for the insurance cover, T&N will have to take £465m of provisions against this year's figures. That could leave the group facing pre-tax losses of more than £300m.

But according to Sir Colin, it is a price worth paying. He admits the scheme will blow a large hole in the 1996 accounts and push gearing into the stratosphere. But from next year, he says, the company will be a "clean engineer". Profits earned from products such as pistons, friction products and engine rings will no longer be undermined by asbestos charges.

Under his stewardship, T&N has become one of the world's leading suppliers of such components through a series of bolt-on acquisitions, including UK car parts group AE, JPI of the US and the German piston rings manufacturer Goetze.

Sustained investment in new technology and tight financial management has given the group some of the highest margins in the sector, up to l6 per cent in some product areas. In spite of some signs of softening demand, Mr David Harding - the finance director credited with masterminding yesterday's insurance deal - has helped maintain those margins by greatly improving working capital controls.

That record has won over industry analysts. "They have made good progress, particularly on the drive for cash and by clearing out non-core businesses," according to Mr Sandy Morris at ABN Amro Hoare Govett.

Mr Robert Speed, at Henderson Crosthwaite, added: "T&N has been a world leading business clouded by asbestos. Now it looks as though that cloud is gone."

By successfully removing the asbestos handicap, however, the management may have saddled itself with another difficulty - the prospect of a hostile take-over.

The underlying business at T&N looks cheap, even after yesterday's share price rise, giving a market value of about £930m and an adjusted forward multiple of about 13. This looks undemanding for an international components business with more than £2bn of annual sales and double digit margins.

Some analysts believe that T&N's shares could return to the heady heights of about 200p. It is understood the T&N board would not consider an offer below about 250p - valuing the group at £1-34bn. Any bidder would also have to assume roughly £400m of debt.

Although that would be a large bite for almost all of T&N's UK competitors, several are thought to have run the rule over the company, as have some North American and European rivals.

But Sir Colin is unruffled. Having laid the asbestos ghost to rest, he believes he can continue developing the group's position in its chosen engineering products and remains confident of seeing off any unwelcome approaches. "The best defence against a take-over is a well managed company."

28 Nov 96

Times: T&N puts £1bn ring-fence around asbestos liabilities

28 Nov 96

Times: T&N's insulation package

28 Nov 96

Daily Telegraph: T&N hails deal to cap claims on asbestos

28 Nov 96

Financial Times: Take-over threat enters asbestos-free zone - Tim Burt finds T&N's chairman nonplussed by its new-found attractiveness to predators

30 Nov 96

Daily Telegraph: Coopers' writs for Barings directors

BARINGS' former auditors, Coopers & Lybrand, yesterday issued writs against nine directors and staff of the collapsed bank, including former deputy chairman Andrew Tuckey. The firm wants the former employees joined in a legal action already taken against it by the bank's administrators.

Coopers faces a claim from the administrators for the £830m lost in Barings' collapse last year, but it believes that any cost should be passed on to the former managers - even though a modest settlement could bankrupt them.

A spokesman for the auditors said: "Despite the fact that we are not responsible for the collapse of Barings, we face a substantial claim. We are perceived to have deep pockets which are available to those who have lost money - while those who were really responsible for the collapse escape.

"We are not prepared to incur a liability which is rightfully that of the Barings management."

The Coopers action reflects a growing annoyance by accountants that they are sued when companies fail.

Besides Mr Tuckey, action is being taken against Peter Norris, Ron Baker, Mary Walz, Ian Hopkins, Anthony Gamby, Geoffrey Broadhurst, James Bax and Simon Jones. Others may be added later.

Mr Baker headed Barings' derivatives trading and this month was reprimanded by the Securities & Futures Authority regulator for failing to monitor trading. The regulator has also barred Mr Norris, the former chief executive, finance head Mr Broadhurst and Mr Gamby from working in the City. Mr Hopkins, the head of risk faces disciplinary action too.

Last year's Bank of England report on Barings said Miss Walz did not properly check the trading of Nick Leeson, whose rogue dealings caused the collapse. Mr Bax and Mr Jones, who worked with Mr Leeson in Singapore, were told in the summer that they will not face criminal charges there.

Coopers will use the reports by the Bank, the regulator and the Singapore authorities to claim that Barings collapsed because of management failures involving circumventing controls and disregarding information.

"We are confident that our work was properly carried out," said the auditors' spokesman.

0 Dec 96

ALM: Lloyd's: Self-defence or self-destruct

0 Dec 96

ALM: Help for hardship Names

1 Dec 96

Sunday Telegraph: Lloyd's £560m pay-out starts

LLOYD'S of London will this week at last start paying out £560m to 11,500 impatient insurance market Names who are entitled to the cash under the £3 2bn Lloyd's settlement, agreed in the autumn.

A Lloyd's spokesman said cheques would be sent out at the rate of 1,000 a day, but there is anger among some Names that £100m-plus has been deducted in profits commissions for market professionals before that figure was established.

Analysts estimate managing agents could receive as much as £140m in profits commissions. This compares with the £150m the agents were reluctantly persuaded to contribute collectively to the settlement of Names' law suits earlier this year.

The commissions are going to syndicate managing agents such as Wellington, Bankside and Ockham as a percentage of profits earned on invested insurance premiums.

At least one agent, concerned with one of the Chester Syndicate run-offs, is understood to have received £4m under the settlement calculations of credits and liabilities. Ian Posgate was paid £2m for one of his old syndicates .

Lloyd's said yesterday the payments were being made "in the normal way".

For those on syndicates that have hit trouble since 1992 and are therefore not covered by the settlement, the Octavian agency has won £50m backing from the Bermuda-based Terra Nova insurance group to take over the run-off of the underwriting years that still have to be kept open.

1 Dec 96

Sunday Telegraph: T&N can breath again

For more than a decade, T&N has been a pariah. As thousands of its former employees and customers fell sick and died from asbestos poisoning and the liabilities claims mounted to hundreds of millions of pounds, it became the company no one wanted to know.

Finally, after years of uncertainty, the group last week drew a line under its history as one of the world's leading asbestos producers. An innovative insurance deal has given it more than £1bn of cover against future claims and means it can move forward with its world-class automotive business without the shadow of asbestosis threatening to drive it to the wall.

T&N, or Turner & Newall as it was known until a decade ago, was always an asbestos company. It was formed in 1922 when Turner Asbestos merged with Newall Insulation. It became one of Britain's leading industrial companies with mining, insulation and building material interests around the world.

Until the 1960s, asbestos was regarded as one of the most wondrous substances in the natural world. Asbestos is a rock which can be split into long fibres. Its great properties are its flexibility, allowing it to be used in a vast range of products from roof tiles to wall boards, and its total fire-resistance.

In its natural state it is entirely harmless. It is only when the fibres are pulverised into sizes small enough to be inhaled that it becomes potentially lethal. If the fibres lodge in the lungs they can cause asbestosis, which scars the lungs, slowly choking its victims to death, and mesothelioma, a fatal cancer of the lungs.

The real dangers of asbestos were released in the 1930s when it began to be used in asbestos blankets and in a spray form to produce a fire-resistant coatings. But it was not until the 1960s that it was identified as the cause of an industrial epidemic.

It was a discovery that was to turn the group inside out. From a peak in the 1960s the business began to deteriorate. Debts rose steadily and the company was stricken by industrial unrest. T&N was further hampered by the fact that many of its businesses were in former colonies and it was being forced to disinvest or having its assets frozen. Meanwhile, demand for asbestos was falling as the true dangers became known.

"T&N's asbestos problems were the final nail in the coffin. The management was always good in a traditional sense but perhaps was not financially very sharp or far: sighted," says Sir Colin Hope, the chairman.

Matters came to a head in 1983 after the long recession. The Bank of England had been protecting the group by ensuring its bankers continued to lend, but finally they demanded a change of management. They asked Sir Francis, later Lord Tombs to rescue the business. He had acquired a reputation as a company doctor following his time at Weir Group.

When Tombs arrived the threat of asbestosis claims hardly featured in his plans. Far more pressing was the issue of the group's crippling debt. Tombs responded by selling the company's finest asset, Hunt Chemical.

Tombs recruited Hope from Dunlop as his chief executive and together they began planning the future for T&N. At the time it was a dreadful ragbag of businesses. It still had asbestos mines in Africa and a clutch of unappealing building materials operations. It also had the Ferodo brake lining business and the Coopers Payen gasket manufacturer. These were to form the base of T&N's auto business.

Tombs and Hope hatched a plan: they sold the other operations and paid off the debt. They then decided to buy auto related businesses with good technology. "We were looking for modest acquisitions," says Hope.

The one they decided on was far from modest: Associated Engineering, one of the leaders of the British car industry, and as big as T&N itself. "Francis used to admire their technology but not the management," says Hope.

The ensuing bid was one of the most hostile ever seen. At the first closing date, T&N lost by just 1 per cent, but AE's advisers had run a share support operation. The Take-over Panel allowed T&N to re-bid, this time competing against Robert Maxwell's Hollis group, and it won.

After the bid, Turner & Newall formally changed its name to T&N. The acquisition of AE laid the foundation for the business today with its pistons, sealing systems and bearings businesses. All told, T&N accounted for many of the vital components in the modern car engine.

As the years progressed, Hope realised he had to keep expanding T&N aggressively or it would be engulfed by asbestosis claims. The AE deal was followed by dozens of others that expanded the group world-wide. Since much of the excess cash was draining away in legal and damages costs, the only place he could raise more was the City and four rights issues followed in five years.

It is a tribute to Hope's aggressive management that T&N is still in business. Many other asbestos makers such as Johns Manville have been forced into Chapter 11 bankruptcy to protect themselves from claims. Even the vast Owens Corning in the US has found the damages a heavy burden.

The cost of asbestosis ballooned. In 1991 it was £16m while T&N continued to insist it was containable. By 1994 that had soared to £140m thanks to a major one-off settlement. Last year the cost was still £51m, forcing a dividend cut.

To date, T&N has compensated about 140,000 asbestos sufferers or their relatives. A further 33,000 cases are pending. The cost of the settlements vary but the Centre for Claims Resolution, the body set up by the asbestos industry, has an average of about $20,000.

In all, asbestosis claims have cost T&N more than £350m, but the real scandal is that more than 60 per cent of this cash has been spent in legal and advisory fees. There exists the proposal for a class settlement, The Georgine Settlement, which would speed up claims and reduce the legal work. But this is being challenged in the US court.

In the past year Hope has used all his efforts to lift the shadow of asbestos from the group. The greatest threat to the group was the massive claims in the US from property owners who have had to spend hundreds of millions stripping out asbestos.

The issue reached a head in a court case between Chase and T&N a year ago. Chase lost the case and today, out of the vast damages that T&N was threatened with, it has paid out just $40m in small settlements on cases it decided not to fight.

Then in March T&N severed its final link with asbestos when it sold its mines in Zimbabwe for £39m.

Finally, Hope decided it was time to cap the group's asbestos liability. Until now he has always refused to set aside a fixed sum for claims because there was so much uncertainty about the eventual scale of them. "Now a whole industry has grown up to assess what our liability will be," he says. "The data are more reliable."

The deal is not simple or cheap. T&N is making a £373m provision for claims, which with interest should give it £690m to pay out over time. It has also bought a £92m insurance policy to pay the next £500m in claims. If claims top £1-2bn, it will start paying out again.

In balance sheet terms, the deal savages T&N's finances, cutting its net assets by more than half to £281m. But the City has already marked the group's shares up by a quarter, since it can now appreciate the quality of its engineering business rather than fretting over asbestosis claims.

Hope promises some disposals to pay for the insurance and the provision. One almost certain to go is the loss-making structural bearings business, while the spring manufacturer may also be sold soon. T&N's rivals are eyeing up larger parts of the business and even considering a full bid. Ferodo would attract a good price, since the market in brake pads has been consolidating fast. BBA would be interested at the right price, as would Allied Signal in the US.

Hope says he is not worried by the threat of a bid. It is, after all, a novelty for him.

However, he needs cash for his business, just as Tombs did 12 years ago. Not only does he need to set aside funds for claims, but he is trying to buy Kolbenschmidt, a German pistons manufacturer

Under these pressures T&N is almost certain to continue shuffling its assets. But for Hope, an appropriate name for a man whose optimism and belief has carried T&N through a seemingly hopeless period, these must be almost pleasurable problems of running an ordinary modern company.

12 Dec 96

We boldly go into next generation

12 Dec 96

Veering off straight and narrow

12 Dec 96

Money men as Lloyd's face challenge as assets shrink

17 Dec 96

Daily Telegraph: Lloyd Thompson agrees £300m merger with JIB

THE consolidation of the insurance broking sector continued yesterday when Lloyd Thompson the specialist London market broker, unveiled an agreed £300m merger with JIB which is 60pc-owned by Jardine Matheson, the Hong Kong trading conglomerate.

The deal, which comes after Aon's recent acquisition of Bain Hogg and, last week, Alexander & Alexander, raises questions over Sedgwick and Willis Corroon's continued independence.

Ken Carter, chief executive of Lloyd Thompson, retains that role in the enlarged group. He said there would be cost savings. JIB's margins are lower than Lloyd Thompson's, and the merger raises questions about the size of JIB's 1,500-strong UK retail staff.

However, Mr Carter said: "The driver to the merger is not cost savings, it's entirely the business enhancements we can get out of the two groups."

JIB shareholders will receive four shares in the new group - Jardine Lloyd Thompson - for every five held, and will own 57pc of the new group. JIB shares, which were trading as high as 2215+p three years ago, jumped 21 to end at 130p. Lloyd Thompson shares closed 1+p higher at 174p.

Lloyd Thompson had approval for a share buy-back, but has instead promised to pay a 6p special dividend if the merger is completed. It will also pay a 6. 25p interim dividend for the six months to the end of December.

Shareholders speaking for 66pc of J IB shares have accepted the terms. It has promised a 5p second interim dividend. John Barton, chief executive of JIB, becomes chairman.

17 Dec 96

Daily Telegraph: Insurance merger looks a good bet

INSURANCE brokers have been desperately trying to cut costs or increase revenues for the past four years and, at last, it looks as if they have spotted the missing piece - mergers and acquisitions. There are simply too many brokers chasing clients increasingly prepared to insure their own risks.

Ken Carter, chief executive of Lloyd Thompson, was reluctant to forecast specific cost savings from a merger with JIB. However, he can now see a way of growing revenues.

Lloyd Thompson, if it was to be serious about the Far East, simply had to have some offices in the region. JIB, 60pc-owned by the Hong Kong-based trading conglomerate Jardine Matheson, brings a real business in Asia-Pacific, where the Jardine name carries weight.

Lloyd Thompson should also benefit from JIB's book of UK retail business. Lloyd Thompson's strength has been in designing innovative contracts for shipping, oil and insurance clients.

But rates have been especially soft in these areas, with little sign of hardening. JIB's margins are lower than Lloyd Thompson's and some trimming of costs will surely follow, even if Mr Carter will not spell out the details.

He has good reason not to. The biggest risk with mergers and acquisitions is that disaffected employees will leave. Mr Carter diplomatically argued that he has found the same aggressive competitiveness in jab's operations as that for which his staff are renowned.

Analysts expect pre-tax profits of £55m, up from £52m, for 1998, the first year for which combined accounts will be produced. That puts Lloyd Thompson's shares, up 2 to 174p, on 8+ times expected earnings. With a near-10pc yield in support, they look comfortable for now.

20 Dec 96

Times: GKN faces $400m suit over US subsidiary

GKN, the engineering and defence group, faces a damages bill of about $400 million after a US exhaust subsidiary lost a class action suit.

The 1996 accounts will be hit by an appropriate provision pending further clarification of the complicated judgment, the group said. It called the judgment a setback in its financial position but emphasised that the agreed dividend for 1996 will not change.

A GKN statement said: "We are extremely surprised at the outcome which we believe to be wholly unreasonable and will appeal following delivery of the judgment."

"The judgment in the case will not be issued until post-verdict issues and procedures have been resolved and this could take some weeks. The issues still to be determined could result in a substantial modification of the award."

At face value the aggregate amount awarded by a North Carolina court is $398 million. It is possible that damages could be reduced on judgment or increased to a maximum of $554 million. Some parts of the claim are covered by the North Carolina Unfair Trade Practices Act which allows for trebling of penalties.

The case concerns alleged breaches of contract and other claims about advertising activities brought by franchisees of the Meineke Discount Muffler Shops.

The action was also brought against New Horizons, Meineke's subsidiary; GKN Parts Industries, its immediate parent company; GKN, its ultimate parent; and three US resident offices of Meineke.

GKN shares fell sharply after the company's announcement, closing at £10.09+, down from £10.45.

20 Dec 96

Times: MG investors await compensation news

MORE than 90,000 investors in Morgan Grenfell's troubled European unit trusts are today expected to hear details of how their compensation will be calculated.

The exercise is likely to cost Morgan Grenfell, owned by Deutsche Bank of Germany, more than £200 million. Investors should receive their cheques before Easter, next year. The compensation is in addition to the £180 million already handed over by Deutsche to cover the more illiquid stocks held in two funds run by Peter Young who was dismissed for "gross misconduct" and who is the subject of a Serious Fraud Office investigation.

Imro, the watchdog for fund managers, is looking at the use of investors' money to buy shares in the illiquid unquoted stocks in breach of City rules. Morgan Grenfell faces a hefty fine, which could top the previous record of £750,000 levied on Invesco over the Maxwell affair. Certain senior executives in charge of Mr Young also face fines and possible bans from working in the City for a period.

20 Dec 96

Times: Delay on payout to Lloyd's names

LLOYD'S of London has admitted that it has run into serious delays in paying out funds under its ambitious recovery plan.

It has also admitted that about 4,000 names will have to pay more to settle their dues at Lloyd's, because of adverse movements on the currency exchanges. It denied that the delays threaten a knock-on effect in the insurance market.

Ron Sandler, chief executive, has written to names to apologise for setbacks to the payment timetable, and saying that "no effort is being spared" to bring the process back on track. In his letter, Mr Sandler admits that it had not been possible to settle with members by mid-December as intended.

Mr Sandler does not give a reason for the delay, other than referring in general terms to the complex nature of the accounting programmes involved. He adds: "1 feel sure that you will understand our concern to ensure that these processes are followed diligently and, with the benefit of hindsight, perhaps our timetable was over optimistic".

Mr Sandler says the delays are not linked to attempts to collect funds from refusenik names. Lloyd's set out to recover nearly £500 million from 1,850 names in the UK, US and Canada, but the amount has fallen as members have requested talks. A test case involving debt recoveries continues in London today.

The admissions are an embarrassment to Lloyd's, which has been quick to emphasise the importance of timetables when seeking money from members. It insists, however, that the Reconstruction and Renewal (R&R) plan remains on course. Some 8,200 out of 12,000 names eligible to receive a rebate from Lloyd's under the settlement offer have now been paid. Lloyd's has paid about £260 million out of an expected distributable surplus of more than £400 million.

Lloyd's would not comment yesterday on reports of widespread computer problems linked to R&R payments. Some names are reported to have received £10,000 more than they were owed, while others have received £10,000 less.

Lloyd's conceded that the rise in value of the pound against the dollar would result in increased finality payments for names on syndicates that have written business in dollar terms. About 4,000 names out of 34,000 world-wide are thought to be affected. It will not affect accepting names who have already paid.

Lloyd's would not elaborate on whether steps had been taken to hedge against the risk of currency movements. It said the potential for increased payments had been spelt out in the settlement offer document. A spokesman confirmed that a number of names who had accepted and owe money to Lloyd's had yet to settle their dues. They had been granted time to settle their affairs. According to some reports, as many as 1,700 names are involved.

It seems inevitable that the delays will spill over into the new year. There are fears in some quarters that this threatens a knock-on effect for large insurance brokers, who could face a situation where their tax liabilities exceed their net assets. The tax implications would be pursued directly with members' agents, increasing uncertainty in the market.

Mr Sandler wrote to names early last month, flagging "slight delays" in the R&R timetable. The intention was to complete the distribution process "as far as possible" by the end of the year.

21 Dec 96

Daily Telegraph: Name sues Lloyd's for payment of £33,000

LLOYD'S of London is being sued by a Name who accepted its settlement offer and is due a £33,000 surplus payment, while at the same time it is suing in the High Court three Names who have refused the offer.

Edmund Grower a partner in the City law firm Epstein, Grower & Michael Freeman which represents many disaffected Names, yesterday had a writ served for the £33,000 payment on Lloyd's solicitors Freshfields.

Michael Freeman, who is acting for his partner against Lloyd's, said: "On the one hand Freshfields, acting for Lloyd's, are battling for amounts they see as due to them, but on the other they seem singularly reluctant to pay out the amounts which are due to those Names who accepted their settlement offer and are entitled to a surplus under those terms."

Mr Freeman said: "We represent 260 Names who acceptedreconstruction and renewal' very reluctantly mainly because they were going to get a cheque and give it straight to their bank to pay for the Lloyd's drawdown."

Lloyd's said in its settlement offer document that 12,600 Names due a surplus would receive their money within three months of the offer becoming unconditional, which occurred on September 4.

But yesterday a spokesman for the insurance market admitted that only 8,400 Names had received any money so far, and he could not say if they had been paid in full. Lloyd's has paid £269m out of a total of £570m due to the Names in surplus.

The spokesman said: "It is a complex operation, and has severely tested the computer model applied to it."

Lloyd's also admitted that some of those who have been paid late will suffer an exchange loss due to the weakening of the US dollar against the pound. Lloyd's finality statements were based on $1.51 to the pound. Yesterday a pound could buy $1.67.

Lloyd's said it had warned Names of the currency risk in the offer document. A spokesman said: "We couldn't hedge because it is not in our power. The money is in individual trust funds."

Lloyd's case against non-paying Names, in which Freshfields are up against Mr Freeman for the "refuseniks", has been adjourned until the new year.

21 Dec 96

Daily Telegraph: Morgan investors to share £200m

MORE than 90,000 investor s will share in a record £200m compensation package announced yesterday by regulatory authorities investigating the Morgan Grenfell unit trusts scandal.

Tax-free payments worth an average £2,200 each will be made before the end of April as part of the largest compensation order made by the Investment Management Regulatory Organisation (IMRO).

Morgan Grenfell - which sacked fund manager Peter Young, four directors and a senior executive for their roles in the affair - went further than Imro demanded by pledging to reinstate all affected unitholders to the value of their original investment, even if they have subsequently sold their units.

No announcement was made about how much Morgan Grenfell will be fined, although - given the damage to the credibility of the unit trust industry - there is speculation this will exceed the record £750,000 penalty imposed on Invesco three years ago.

An Imro spokesman said: "Discipline can wait until after Christmas; the priority was to get this sorted out and put investors right."

Three Morgan Grenfell funds, valued at a total of £1. 4 billion, were temporarily suspended from trading in September when "potential irregularities in the valuation of unquoted securities" were discovered. This made an accurate valuation impossible for units in Morgan Grenfell European Growth, Morgan Grenfell Europa and Morgan Grenfell European Capital Growth.

Imro and the fund manager said yesterday that all investors who held units in these funds at any time between August 1,1995 and September 5, 1996 will be considered for compensation. The first date is when the suspect investments began and the second is when the funds' suspension was lifted.

An Imro spokesman said: "Investors will be compensated for the difference between the investment return from their Morgan Grenfell fund and the investment return provided by a specially-compiled index of comparable funds drawn from independent statisticians Micropal.

"This index covers authorised unit trusts investing in Europe but excluding those funds which are not eligible for personal equity plans and also stripping out funds which were not available during the period in question."

The spokesman added that it was Morgan Grenfell's suggestion to go further than the regulator demanded by pledging that, if the compensation calculation leaves any investor with less than they originally invested, then Morgan Grenfell will compensate them up to the value of their original investment..

Interest will be paid on compensation in line with deposit rates at 6pc tax-free for sterling or dollar denominated investors and 4pc for Deutschmark investors.

Letters were sent to 90,000 investors yesterday, describing the compensation procedure. Next month letters will set out individual compensation offers, including the option of receiving cash or units in Morgan Grenfell funds. Imro said both would be tax-free and units could be incorporated within Peps without complications because they represented compensation for financial loss previously suffered.

Investors retain their right to sue but independent financial advisers welcomed the compensation offer as "generous" yesterday. The Serious Fraud Office and Imro investigations continue.

21 Dec 96

Daily Telegraph: The unanswered questions of the Morgan disaster

THE holders of Morgan Grenfell unit trusts have reason to be grateful for being part of a big, well-capitalised group. Were Morgans not merely the UK arm of Deutsche Bank, but still an independent investment business, there would be serious doubts about whether the management could afford to be so generous with their shareholders' money.

An independent Morgan Grenfell would probably have been able to find £200m in compensation (on top of the forced investment of £180m to prop up the trusts plus what will surely be the first seven-figure fine from Imro) but its capital base would have been seriously, perhaps fatally, weakened.

The thought that it would not be able to survive another disaster, however remote the possibility, would have been enough to discourage the buyers of its unit trusts, and no unit trust group can produce good performance if it is always having to sell holdings to meet redemptions.

In fact, Deutsche's deep pockets have allowed it to go further than Imro demanded, and give unitholders the benefit of the doubt. This will accelerate the process of restoring confidence, not only to Morgan Grenfell, but to the whole industry. In the aftermath of the scandal, there is plenty of evidence to suggest that buyers were put of the whole idea of unit trusts. It has taken many months, and a continuing bull market, to bring people back again to what remains one of the simplest and most sensible ways of investing in shares for the long term.

Deutsche deserves credit too, for the speed with which it acted. Uniquely in the recent history of compensation sagas, the proposals have come out when the bank said they would. This raises confidence that the money will also be paid out as promised. Quite a bit of it could be sensibly invested in Morgan Grenfell's unit trusts, as they will be squeaky-clean from now on, although the smart money should stick to the big general trusts.

The question of how things could go so disastrously wrong remains unanswered. As readers of these pages were taken through the labyrinthine dealings of Peter Young last autumn they must have wondered how one man could have evaded the scrutiny of his colleagues with such huge sums of money for so long, in an environment where regulation rules. It is a question the Department of trade might invite its inspectors to answer.

21 Dec 21

Daily Telegraph: US bank controls eased

COMMERCIAL hanks in America were yesterday granted extended powers to compete in the securities industry in a move by the Federal Reserve which analysts said could lead to a wave of take-overs in the securities industry.

Governors of the US central bank voted to raise the ceiling on the amount commercial banks' investment banking subsidiaries can earn from underwriting and dealing in securities to 25pc from the present 10pc.

The move is a significant breakthrough in the long-running campaign by US hanks to end the strict controls on their business imposed by the 1933 Glass Steagall Act, which separates commercial and investment banking.

Raphael Soifer, banking analyst at Brown Brothers Harriman, said: "It makes it much easier for commercial banks to buy securities firms, primarily some of the smaller regional firms. The big Wall Street firms are too large and expensive."

The Fed's action follows a move by the Comptroller of the Currency, Eugene Ludwig, to allow nationally chartered bank affiliates to engage in non-banking activities such as insurance.

29 Dec 96

Mail on Sunday: The £400m computer snag

Faults in a Lloyd's agency's computer system contributed to a syndicate's £400 million losses, a report has revealed.

The 232-page report by Jeremy Casson, a partner in accountant Deloitte & Touche, details the events that led to the huge loss by 6,000 Names in insurance syndicate 210.

The syndicate was managed by the Sturge agency, headed at the time by former Lloyd's chairman David Coleridge. It lost heavily on asbestos, pollution damage and health hazard claims from the US.

The Casson report, which was ordered by Lloyd's chiefs, pinpoints weaknesses in the Sturge computer systems being set up by Peter Rawlins, then the managing director.

It covers the period between 1989 and 1990 when syndicate 210 suffered its worst losses.

Rawlence was managing director until 1989. He later became chief executive of the Stock Exchange, but resigned in 1993 after the £75 million failure of the Taurus computerised settlements system.

Interviewed by Casson, Coleridge said Rawlins "really was knowledgeable about systems."

Rawlins brought in accountants Arthur Andersen to help install Sturge's new computer.

But the timetable was not met, and a member of syndicate's 210's underwriting team told Casson that for nine months the syndicate was accepting insurance business "blind" because of the delays.

He added: "Just when the underwriting climate was deteriorating rapidly, syndicate 210, the leading non-marine syndicate, was not able to take remedial action.

Such was the confidence, presumably of Peter Rawlins, that Arthur Andersen could deliver on time that the proposals were steam-rollered through and the old information system abandoned.

But Rawlins told the inquiry team: "This is rubbish."

At the end of 1991 Sturge abandoned the project and wrote off £10. 2 million.

John Rew, head of an action group fighting for ruined Names, may sue US brokers who produced the loss-making business.

But no legal action can be taken against Sturge, because Names waived their rights when they accepted the £3. 3 billion rescue plan assembled by Lloyd's.

29 Dec 96

Mail on Sunday: Lloyd's

29 Dec 96

Sunday Express: Nutting's firm quits Lloyd's market

29 Dec 96

Sunday Express: -running

One of the most significant City happenings of the year was the salvation of Lloyd's of London after endless years of grief and strife. Although there are many names still justifiably embittered by the losses they suffered at the hands of the incompetent and unscrupulous who brought the market low in the 1980s, the overall outcome is undoubtedly to the advantage of the majority.

It is also a great relief for those determined to copper-fasten the status of London as Europe's leading financial centre. Lloyd's when it works well, can still play a pivotal role in keeping London at the centre of the international insurance market, especially with the increasing competition from offshore locations in the Caribbean.

The resolution was also very much a personal triumph for Lloyd's chairman, David Rowland, who stuck to his task with infinite patience, diplomacy and grit - especially through the darkest hours when it looked like the whole settlement could unravel.

He certainly deserves a knighthood, although given Lloyd's tarnished reputation and its lack of friends in the commons, he may not get one.

In any event, when he retires next year, he should have no shortage of job offers. I can think of any number of institutions and companies which could benefit from the skills of a man who succeeded in sorting out the mess that was Lloyd's.

30 Dec 96

Daily Telegraph: Broker prepares to pull out of Lloyd's

FMW International, an insurance brokerage chaired by Peter Nutting who has just been elected to the ruling council of Lloyd's of London, is quitting the insurance organisation saying it is too expensive.

Mr Nutting said FMW can save £200,000 a year in professional indemnity insurance cover by opting for the more reasonable level demanded by the brokers' registration council. It can also save three or four jobs by not having to comply with the Lloyd's regime.

Leaving also means the broker will not have to contribute to the Lloyd's financial reorganisation, which Mr Nutting reckons could have cost his company £300,000 over the next five years. But he added that nearly all the commercial and housing association policies his firm now handles are placed with insurance companies because they charge lower premiums.

Anything he still needs to insure at Lloyd's can be placed through one of the service company intermediaries. The broker would have to place £10m of premiums at Lloyd's before it is economic to be a Lloyd's broker, Mr Nutting estimated.

"I don't know why Lloyd's wants to regulate brokers at all. Managing agents should now be grown up enough to deal with whoever they like."

In addition, the broker is currently suing some Lloyd's underwriters over their refusal to pay claims from South African policies.

30 Dec 96

Times: Limited liability at Lloyd's

THE concept of limited liability is today being introduced to names at Lloyd's of London, who have lost millions of pounds in unlimited insurance deals.

The new system, developed by Hardy Underwriting will allow Lloyd's names to keep their funds in the insurance market without the risk of bankruptcy. Other similar schemes are likely to follow. Rules allowing the formation of a limited-liability company were passed by Lloyd's last summer.

Peter Hardy, who runs Syndicate 382, has created a separate insurance company, whose shares begin trading on the Alternative Investment Market today. Hardy Underwriting Group was priced at 145p per share, giving it a market capitalisation of £10.65 million. Syndicate 382 is primarily insuring marine and aviation ventures. The syndicate has created average annual profits of 29 per cent since its inception in 1975.

Mr Hardy said: "Syndicate 382 has been one of the more consistently profitable syndicates at Lloyd's with an underwriting team that has worked together for many years."

Names at Syndicate 382 can switch their Lloyd's funds into AIM stock. They will receive dividends and profit from rises in the share price and, most importantly, be safe from bankruptcy.


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