Lloyd’s Nears Approval on Rescue
Lloyd’s of London on Friday declared its nearly $5-billion settlement offer to investors unconditional as to acceptances, taking the insurance market one step closer to sealing its recovery plan.
Lloyd’s said that by late Thursday, 31,246 members, or 91% of total membership worldwide, had accepted the offer. It said the acceptance deadline had been extended to Sept. 11.
The statement was the strongest indication yet from the 300-year-old insurance market that its recovery plan would be successful. Other conditions, including British government approval, still need to be met before the entire package can go ahead.
The British government is likely to decide next week whether to approve the recovery plan and the solvency of Lloyd’s. The success of the settlement offer is crucial to this decision.
“We’re not quite at the destination yet. . . . The key step is now possible to take, but there are two other steps to be taken,” Lloyd’s Chairman David Rowland told a news conference.
Under its recovery proposals, Lloyd’s aims to reinsure billions of dollars in liabilities into a new company named Equitas.
The settlement offer, which had been raised to $4.8 billion from nearly $4.4 billion three months ago, is designed to soften the cost to its investors, known as “Names,” of setting up the reinsurance vehicle and ending litigation.
Equitas has to look at the financial package and say whether or not it finds it acceptable, which it is expected to do shortly.
Britain’s Department of Trade & Industry also has to approve the recovery plan.
“The timing of that is not in our hands,” said Rowland, who added that he hopes the official moves will come as early as next week.
Rowland gave a detailed breakdown of the acceptances for the offer, saying that there was 69.2% acceptance in the United States and 94.7% acceptance among British Names.
“Clearly, the general pattern is a very high level of acceptance,” he said.
Lloyd’s sent a letter Friday from Chief Executive Ron Sandler to Names who have not yet accepted the offer, encouraging them to do so and reminding them of the consequences if the recovery plan fails.
Lloyd’s expects the acceptance level to rise to the mid- to high-90% level once the Sept. 11 deadline expires.
However, there was still disgruntlement among some Names over the privations suffered as a result of the insurance market racking up billions in losses since the 1980s.
A group of U.S. investors who had sued in U.S. court to halt the recovery plan filed an appeal to a federal court decision allowing Lloyd’s to resume its recovery plan.
The emergency motion on behalf of 93 U.S. investors seeks a rehearing from the U.S. 4th Circuit Court of Appeals in Baltimore.