Lloyd’s has deposited around $2 billion into its reinsurance trust account, administered by the New York State Insurance Department – 60 percent of its projected reinsurance liabilities, as agreed with the NAIC. The remainder must be deposited by the end of March 2002.(See IJ Website, Oct. 29,26,25 & 24).
It’s unclear from the reports how much Lloyd’s actually deposited in cash, and how much was in the form of letters of credit, which the NAIC had agreed to accept. The deposit forestalls a possible short term liquidity crisis at Lloyd’s, which anticipates net losses from the Sept. 11 attacks to be at least $1.9 billion.
Future payments will probably require Lloyd’s to call on its Central Fund for additional cash, if some syndicates and their investors cannot meet outstanding claims. If the amount paid from the fund exceeds £100 million ($144 million), Lloyd’s could call on a reinsurance policy negotiated in 1999 which covers Central Fund losses. The coverage, which is shared by Swiss Re, Employers Re, The St. Paul, Hannover Re, XL Capital and Chubb Corp., would provide up to £350 million ($ 504 million) in one year and £500 million ($720 million) in total.
Topics Excess Surplus Reinsurance Lloyd's
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