Britain Approves Lloyd'S Rescue Package

The British government yesterday approved the Lloyd's of London insurance market's £3.2 billion ($5 billion) recovery plan which will allow investors finally to walk free of past liabilities.

The plan was declared unconditional last week in terms of its overwhelming acceptance by Lloyd's investors, known as Names, and government approval is the final hurdle to securing the market's future.

Lloyd's is now able to to complete its reconstruction and renewal programme, the department of trade and industry said.

Lloyd's said that the market's chairman David Rowland would ring the Lutine bell, the symbol of Lloyd's which hangs on a rostrum at the centre of the market's ultramodern underwriting Room, later yesterday to mark the completion of its reconstruction and renewal programme.

 

British trade minister Anthony Nelson will attend the ceremony after approving the plan which authorises the setting up of a reinsurance company called Equitas to resolve past claims and losses.

The Lutine bell, named after an 18th century French frigate from which it was salvaged, was traditionally rung once for bad news "" such as the loss of a ship at sea "" and twice for good news.

I think you will find Rowland will ring the bell three times, a Lloyd's spokesman said.

Under the recovery proposals, Lloyd's will reinsure billions of pounds in liabilities into a new company, Equitas.

The plan is intended to end years of uncertainty over the scale of massive losses suffered by some investors as a result of unlimited liability to past claims, including those relating to U.S. environmental and asbestosis insurance.

The fulfilment of Lloyd's reconstruction plan will enhance the security, capacity and competitiveness not only of the British insurance and reinsurance industry, but also of wider capital markets in the UK, said Anthony Nelson, minister of state for trade and industry, in a statement.

He said he would require Lloyd's to provide up to an extra 100 million pounds to mitigate the effects on Equitas' reserves of lower-than-projected interest rates or a shortfall in the contributions due from agents or brokers, if so requested by Equitas in January 2002.

Nelson said new regulations would be introduced in Parliament shortly to put Lloyd's return to solvency on a statutory basis. These regulations would also contain provisions to clarify the position of Names who wish to leave Lloyd's, but were unable to do so until they had reinsured their liabilities with Equitas.