Lloyd’s to Undergo Audit for Reinsurance Plans

Lloyd’s of London faces an audit by U.S. regulators amid concern that some syndicates in the largest insurance market may be unable to pay billions of dollars in claims after the Sept. 11 terrorist attacks.

The National Assn. of Insurance Commissioners hired accounting firm Andersen to begin a probe into Lloyd’s reinsurance arrangements, said Adrian Beeby, a spokesman for Lloyd’s.

Lloyd’s faces a bill from the disaster of $7.8 billion before reinsurance, and is being audited after it was granted a reprieve from paying all the money for claims into a U.S. trust fund by Nov. 15. The NAIC wants to ensure Lloyd’s will be able to pay the claims with reinsurance. “As part of the deal that the NAIC made, they want to check we have the proper reinsurance in place,” Beeby said.

The NAIC and the New York Insurance Department agreed in October to allow Lloyd’s to pay 60% of its claims bill into a U.S. trust this month and the remainder in March 2002. If Lloyd’s is reimbursed by its reinsurers, it will be left with a bill of close to $2 billion of claims from the assault.

The most expensive disaster in history is estimated to cost insurers $70 billion. Lloyd’s, which sells about 5% of the world’s reinsurance, insured New York’s destroyed World Trade Center, as well as AMR Corp. and UAL Corp., owners of the hijacked airplanes.

Lloyd’s is regulated in the U.S. by the International Insurers Division of the National Assn. of Insurance Commissioners, which includes members from California, Texas, Louisiana, Alaska, Illinois, New York, Alabama and New Mexico.