Lloyd's of London underwriting syndicates that are unable to close their accounts for some years because of outstanding claims may soon be able to buy reinsurance cover against this exposure from a new company to be set up by Lloyd's.
Individual members of Lloyd's also would be able to take advantage of this facility, according to David Coleridge, chairman of Sturge Holdings PLC who takes over as chairman of Lloyd's next month.The Council of Lloyd's is expected to discuss the proposal at its next meeting on Dec. 5, and Mr. Coleridge said Monday he hopes the new company will be ready for business early next year.
Between them, Lloyd's syndicates probably have around 90 "open years", for which the accounts cannot be finalized while the size of claims remain unsettled. Many of these claims are related to business written in the United States, and Mr. Coleridge estimates that up to half the Lloyd's membership is exposed to at least one open year.
Lloyd's is now planning to set up a new company, to be backed by Lloyd's central fund of around 400 million, that would write reinsurance cover for at least some of these open positions and free syndicates and members from any continuing commitment. The central fund is to be increased to 1 billion by 1995.
Describing the concept as "revolutionary" for Lloyd's, Mr. Coleridge said that ideally the new company would break even. Premiums would be properly constructed to avoid the risk of underwriting losses. Only a small staff would be required, he added, as managing agents would continue to be responsible for the run off of the open years.
The initiative is designed to restore members' confidence in Lloyd's. Some of the 2,000 names thought to be planning to resign their membership next year are leaving because of the fear of being caught with an open year.