Calls for Increase of Lloyd’s
CA - December 15, 2003
American Names Association
ANAHEIM, CA - Jeffrey C. Peterson, Executive Director of Rancho Santa Fe, CA-based American Names Association (www.truthaboutlloyds.com), made the following comments on December 6, 2003 to the Reinsurance Task Force at the NAIC Annual Meeting .
"Jack Shettle, Sr., Chairman of the ANA is not here today due to weather delays that affected his airline flight from the East coast. He has asked me to make the following comments on his behalf.
The recent heightened attention being paid to difficulties in collecting US judgements in Europe and other jurisdictions is not a new issue, and it is many years from resolution. A similar situation applies to the issue of standardizing financial reporting.
The ANA is here today to express its grave concern over two additional matters that are being largely overlooked.
These far more urgent and very serious matters are:
Data obtained by the ANA indicates that Lloyd’s Reinsurance Trust Fund, at it's present level, does not appear to comply with the current requirement that it contain 100% of outstanding liabilities.
If our computation of liabilities is correct, instead of considering a reduction in collateral requirements for Lloyd’s, we recommend that their estimated liabilities and collateral be reviewed to consider whether or not the collateral level needs to be increased.
When I spoke at an American Bar Association Sub-Committee seminar in May 2002 and to this Task Force at the Philadelphia quarterly meeting in June 2002, I called public attention to the detrimental effect the latest "Reincarnation" of Lloyd's would have on U.S. policyholders.
I emphasized that the most startling result of Lloyd’s new "Franchise" structure was that it totally removed any obligation on the part of the continuing Members or Central Fund of Lloyd’s to stand behind obligations to Policyholders and Claimants for Lloyd's branded policies issued AFTER the Equitas era and up to January 1, 2005.
I stated that Lloyd’s switch from a "market" to a "franchise" structure represents a planned abandonment of outstanding obligations for policy years from January 1, 1993 to January 1, 2005 by relegating policyholders from that era to a limited amount of funds, and allowing the new "Capital at Lloyd's" to trade forward without any requirement to make good on old-year policies.
Lloyd's should not be permitted to reorganize without taking the steps necessary to protect Policyholders in this period.
In other words, this Task Force should determine for themselves and receive written confirmation from Lloyd’s whether or not the new Capital and Central Fund in the Lloyd’s Franchise era will stand behind policies issued in the Lloyd’s Market era?
It should be noted that neither Lloyd’s nor the FSA ("U.K. Financial Services Authority") has made any attempt to address these two important matters. The question needs to be asked, "what is the FSA’s position on these vital issues?"
These are the issues we believe need to be addressed on an urgent basis. If not, it will be too late to fix these deficiencies before the 2005 policy year renewal season.
The ANA recommends that this Task Force adopt the two issues I have raised here today as a charge for its 2004 year agenda. I’d like this recommendation to be reflected in the minutes of today’s meeting.
Thank you for your usual courtesy."
Contact: Jeffrey C. Peterson (858) 759-2288