Report Indicates Lloyd’s Will Pass NAIC Audit

February 15, 2002

Lloyd’s is apparently set to receive a clean bill of financial health from the auditors who’ve been examining its accounts, and evaluating its reserves, as part of last November’s agreement with the National Association of Insurance Commissioners, to give Lloyd’s additional time to raise the cash necessary to fund its reinsurance trust, following the Sept. 11 attacks.

A report by Reuters News Agency quoted Georgia’s Insurance Commissioner John Oxendine, head of the NAIC’s reinsurance committee, which is in charge of overseeing the audit, as stating, “If we had seen any major problems, you probably would have heard about it by now.”

The audit, by accountants from Arthur Andersen, has been completed, and is being reviewed by the NAIC and Lloyd’s. Its conclusions are expected to be made public soon, but Oxendine’s comment is a preliminary indication that no serious deficiencies have been found.

Lloyd’s has estimated that it will have total claims from Sept. 11 of $2.7 billion, much of it from reinsurance, and under applicable rules was required to deposit sufficient funds in the reinsurance trust account, administered by the New York State Insurance Department, to cover the total claims. The NAIC agreed to accept 60 percent of that amount, with the remainder to be deposited by the end of March, conditioned upon Lloyd’s agreeing to the audit.

Oxendine indicated that the two cash calls Lloyd’s has now made to its members, which total close to $2 billion, would be sufficient to cover the required deposits.

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