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LONDON-Lloyd's of London's annual general meeting earlier this month could not have differed more from the market's meetings in recent years.

Of course, much has changed in the past 12 months. Since last year's meeting, Lloyd's has ceded its pre-1993 liabilities into reinsurer Equitas Ltd.; ended most of the litigation brought by members alleging negligence or fraud for their losses; re-examined its regulatory and administration structures; and witnessed a shift toward greater limited liability investment in the market.

Many names who once were stuck on open syndicates and exposed to unlimited liability for long-tail claims have wound up their underwriting and have left Lloyd's.

As a result, fewer than 600 members attended the annual general meeting at London's Barbican Centre earlier this month. In contrast, more than 3,000 members were at the Royal Festival Hall last year, ostensibly to hear about and ratify proposals to restructure Lloyd's finances (BI, July 22, 1996).

However, some names remain stuck on open years-54 syndicates still have not been able to close their books, mostly because they have no successor to reinsure their liabilities-and others continue their refusal to pay their Lloyd's bills. Outside the Barbican Centre, some unhappy names carried banners proclaiming that Lloyd's was fraudulent and had stolen money from them.

Inside, however, the meeting generally was calm. The tirades and pleas from names desperate to put an end to their Lloyd's connections, typical of recent years, were replaced with questions posed to Chairman David Rowland, Chief Executive Ron Sandler and the Council of Lloyd's on technical issues. Some disquiet did underpin various questions posed by members-particularly a worry by some individual members with unlimited liability that they are being pushed out of the market in favor of limited liability corporate capital.

Sir David's consistent response to this concern was that a recent move to increase the minimum total assets required for unlimited liability members to underwrite at Lloyd's was made to protect the market's policyholders and to ensure fairness between different types of Lloyd's capital (BI, June 9).

In Sir David's final address to an annual general meeting as Lloyd's chairman-he is retiring at the end of the year-he noted that recent annual meetings have focused on the needs and rights of capacity providers, rather than policyholders.

"Our vision of the future. . .must be rooted. . .in serving our customers, not in nostalgia about our past or our success in dealing with our complex problems," Sir David said. "As we look ahead to Lloyd's future, we must be driven by the changing needs of our customers," a point he set against "rather poor market conditions" facing the insurance market.

That vision of the future has been encapsulated in a nine-point document, "Principles for the Future Development of Lloyd's." Policyholder rights are a strong theme of the document, which was released at the AGM.

"Lloyd's future strategy will continue to be determined by the need to provide clients with a secure, expert and efficient marketplace for risk, aiming to earn good returns for its members," reads the first point.

Policyholders are also championed in the second point: Regulation will provide "reasonable safeguards" for protecting policyholders, it says, as well as protecting members and component businesses, and will aim to introduce external accountability for Lloyd's regulators (BI, May 26).

Lloyd's will maintain its "special features of the diverse. . . marketplace, which make it attractive to its clients and brokers," promises the document. Controls will be in place to curb threats to these "special features," such as "undue dominance."

Costs also will be controlled through "efficient provision of central services," which will be charged on a user-pays basis rather than the current system of levies based on a percentage of the underwriting commitments of members.

In addition, the principles commit Lloyd's to simplifying its reporting processes.

On the capital structure side, the document addresses five issues.

The Central Fund will continue to be used as a fund of last resort backing policies issued by Lloyd's.

Lloyd's capital backing will remain a melting pot of limited and unlimited liability sources. The document assures unlimited liability members their rights will not be withdrawn, forcing them out of the market.

The annual joint venture system, which effectively means that each year-end Lloyd's is dissolved and resurrected for the next trading year, will be continued.

Some market executives have expressed their concern that this form of trading limits their ability to commit underwriting capacity to multi-year policies.

Market forces will be allowed to determine Lloyd's capital structure in the future, though the document says these forces will operate "within a fair and consistent framework."

Moves are already underway to equalize the assets required of unlimited and limited liability members (BI, June 9).

Lloyd's is committed to providing names with a "free and efficient market" for selling and buying syndicate participations, as well as a greater range of options for conversion into limited liability status.

Earlier in the month, Lloyd's regulatory division issued a bulletin asking for views on "bilateral deals." It proposes to allow trades between agents and members, or between members, to exchange syndicate capacity for cash, for a place on different syndicates, or for shares in a corporate member, outside of the auction process.

Sir David signaled the direction he sees the market capital base traveling when he announced to the meeting that he will be converting his underwriting participation in the market to limited liability status when he retires. Currently, he is underwriting through a members agency pooling arrangement, which invests in multiple syndicates, a decision he made because he believed that he should not be seen to favor certain underwriters.

"Now that it is possible to convert to other forms of membership, the Council believes it timely to remind members of the risks associated with unlimited liability trading," Sir David said at the meeting. To this end, he assured members that if their losses were unpaid in the future, the Council "will not hesitate to draw on such guarantees if members' insurance obligations require it."

In fact, the day he made the statement, Lloyd's obtained a bankruptcy order against a name who had refused to pay (British pounds) 62,000 ($101,587) in dues. Brian Rowlands, the owner of three betting shops in the north of England, was forced into bankruptcy because Lloyd's "believed he had the ability to pay his losses but refused to," said a Lloyd's spokesman. "Several more" bankruptcy orders are expected to come through this week, said the spokesman, adding that measures such as this will be taken against "everybody who has a debt to Lloyd's and who has assets to meet all or part of that debt."

From Sir David's point of view, while the risk of a member losing everything in the future is unlikely, it still remains a possibility. "Unlimited personal liability has been shown to mean exactly what it says," he said, "and I no longer believe that the substantial advantages of that method of trading should blind us to the reality of its possible consequences for the individual."