Lloyd's Names face extinction

By REUTERS
Updated:

 

LLOYD'S of London insurance market has unveiled plans for one of the most radical overhauls in its 300-year history, which could squeeze out its individual investors known as Names.

The proposed changes, designed to help Lloyd's hold its own against more nimble insurance centres, pit the Names against Lloyd's heavy-hitting corporate members who want fundamental change.

They say Lloyd's is losing out because it is costly and complicated for companies to do business there. As a result, Lloyd's governing council is now proposing to ditch its unusual three-year accounting regime for the annual accounting system used by big international companies.

Lloyd's also wants to scrap unlimited liability, by which some 2,500 Names pledge their entire wealth to back insurance risks at Lloyd's, by January 2005.

'This package of measures...will help to reshape Lloyd's of London into a business that will remain a force in international insurance markets throughout the 21st century,' said Chairman Sax Riley, who led the strategy review, which began last year.

But the plans could be vetoed by the Names, who outnumber companies under Lloyd's voting system.

The plans, open for consultation, would also stop Names from dipping in and out of the market every year - the so-called annual venture, which enables them to limit their exposures to any one year.

But Names would be able to invest in Lloyd's in the same way as now up to 2005, and would receive a cash payment.

Lloyd's also wants to simplify its management structure with a single franchise board, which would act in a similar way to a corporate executive board.

'It does look more and more that the Names will be squeezed out, and Lloyd's will just become an exchange where a number of companies are operating,' said Charles Sturge, a Lloyd's analyst and former Name.

Anthony Young, Chief Executive of the Association of Lloyd's Members said: 'We strongly disagree with the proposal to abolish the annual venture and three-year accounting.'

Lloyd's is likely to invite its 12,000 members to vote on the plans at an extraordinary general meeting this year. They could be rejected under a one-member, one-vote system.

Companies have only one vote each, but there are about 8,600 Names who no longer invest in the market but retain voting rights.

However, it is the 700 corporate members and 200 limited liability Names that provide about 80% of Lloyd's capital.

Lloyd's has already gone through major changes after a series of natural disasters and massive asbestos claims nearly bankrupted it in the 1980s.

Those reforms included introducing corporate capital into the market, which previously relied on the Names to put up the cash and accept unlimited liability.

There were 34,000 Names in the early 1990s, but numbers have fallen dramatically, so just 2,490 are now active.

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