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To the editor: I believe the Oct. 19 Update, "Provision Would Protect Names from Lloyd's Judgments Abroad," is misleading and inaccurate.

The proposed legislation would have no impact on policyholders. The English court judgments are for monies that would go to Lloyd's, not Equitas or any policyholder. You also should have realized that nothing in the proposed legislation would have prevented U.S. policyholders from suing a U.S. name to cover a valid insurance claim.

The proposed legislation was a reasonable response to the English courts preventing names from making a fraud defense in response to Lloyd's efforts to reap the rewards of its fraud. In other words, the U.S. names were prevented from claiming: "Lloyd's, we don't owe you $90 million because you defrauded us."

Under the proposed legislation, U.S. names would still have the burden of establishing that the English Court judgments resulted from a transaction that previously violated U.S. securities fraud statutes.

The U.S. insurance industry should recognize a real, serious threat to U.S. policyholder security: a series of bylaw changes recently proposed by Lloyd's ruling Council.

These bylaw changes would modify the composition of the Lloyd's Council according to the proposals of the "Pen Kent Committee." The new bylaws would clear the way for Lloyd's to become entirely backed by limited liability capital. This metamorphosis of Lloyd's capital structure would allow the Council to eliminate Lloyd's Central Fund and Joint American Trust Fund, which currently safeguard U.S. policyholders in the event Equitas ever runs out of money.

When Equitas was authorized by the New York Insurance Department in late 1996, the ongoing Lloyd's market was required to indemnify Equitas with the Central Fund and the JATF. This indemnification will be moot if Lloyd's is permitted to restructure its ruling Council and capital base.

Jack Shettle


American Names Assn.

Rancho Santa Fe, Calif.

Editor's note: The Lloyd's provision was stripped from the final budget bill.