Dear Mr Presser

As you know, the key part of the "finality" that Names agreed to in the Reconstruction & Renewal package was the Joint American Trust Fund. That Fund underpinned the creation of Equitas and ensured that when proportional insolvency clauses were triggered, the on-going market would be there to protect American policyholders and, in turn, protect Names from American policyholders.

Over the last few weeks, it has become very clear that the Integrated Lloyd's Vehicles (ILVs) are set on taking over the capacity at Lloyd's and removing Names. They have made no secret of the fact that their objectives include the removal of the annual venture, the transfer to annual accounting, and the removal of mutualisation and the Central Fund. At a recent presentation I attended by Sir Laurie Magnus of D L J Phoenix (one of the prime capital raisers for the ILVs), he made it clear that he envisaged the abolition of the Society of Lloyd's within 3-4 years, and that at that point, all mutualisation would have gone and the business of Lloyd's would be in the hands of 20 or fewer ILVs. He was quite clear that the Names were "dinosaurs" and doomed.

A number of the corporate capital backers coming into Lloyd's at present are large American insurance companies with their own licensing arrangements. St Pauls, for example, has licences to trade everywhere Lloyd's has except Israel. They therefore have no fear of losing Lloyd's licences. That would not be true of all ILVs currently operating, but it is probably true of the larger ones likely to dominate the "20" ultimate winners.

It occurs to me that you may have some views on the prospect of the Joint American Trust Fund disappearing by virtue of the corporates taking over the business and dismembering Lloyd's Central Fund structure. When R&R was sold to you, as it was to the Names, I doubt if you were particularly concerned about the prospect of Lloyd's disappearing. It was sold to us all as a survival package. It is, however, clear that the intention of the majority of the current capital providers is to dismember the mutual structure and the guarantees provided for Equitas. If that happened, what would be the implications for Equitas so far as the New York Insurance Commissioners were concerned? Is there any way in which you can intervene in the current internal debate at Lloyd's to ensure that ILVs cannot so easily dump the Joint American Trust Fund? For example, could you make it a condition of Lloyd's trading in 1999 that all ILVs subscribe to the Lloyd's Central Fund with their participation guaranteed by a bank guarantee for a ten-year period?

There are many who are sceptical about the future for Lloyd's if it goes corporate. The American bourses do not offer comforting precedents. Those who currently use Lloyd's value its diversity of capital base and its entrepreneurial abilities in niche markets as much as any ability to supply commodity style reinsurance. The greed of a few well-heeled corporates seems likely to throw out a great deal of that which is of value to the world's insurance industry along with the Names. This is not just a question of "market forces". Such forces operate within a regulatory regime and that regime can be tailored to influence the direction of the forces. Do you have any views you can share? Are you coming to London in the near future when we could discuss things? If not, would you and your colleagues meet with some of us in New York?

Yours sincerely

Christopher Stockwell

Chairman

Signed by E Paciepnik, Christopher Stockwell's Secretary