When Lloyd’s Chairman Sax Riley first announced wide ranging plans to reform the 300-year old institution, easing out the remaining individual “Names” was one of the most radical, and controversial, ideas. Now it appears that the combined opposition of the Names has forced the committee working on the reforms to back down on a key proposal to buy out the Names’ security of tenure rights to reinvest in Lloyd’s syndicates.
In a letter to the individual Names, Riley indicated that plans to end their right to assured participation in the syndicates they invest in by setting a price on it needed to be rethought. He didn’t say that the proposal had been abandoned entirely, but suggested that the group working on the reform proposals would seek to come up with an alternative solution.
Under Lloyd’s unique system, each syndicate is wound down at the end of the year and reformed. Accounts are closed on a three year basis. Each Name in the closed syndicate has the right to become part of the new syndicate. Riley’s proposals, made public in January, planned to end this system by purchasing this right, along with ending the system of unlimited liability under which individual Names invest in syndicates.
While recent attention has focused on the losses many names have suffered, mainly from asbestos and environmental claims, as highlighted by the Jaffray case, many wealthy individuals are quite satisfied with their Lloyd’s participation, from which they gain not only a reasonable return on their investment, but also numerous tax advantages. They have adamantly opposed any change in the system, and have succeeded to at least have the buy out proposal reexamined.
If the reforms are to be implemented, the votes of the individual Names and other individual members of Lloyd’s are extremely important, as each of the 12,000 or so members has one vote. Even though corporate capital now backs over 80 percent of Lloyd’s capacity, their combined votes are less than 1000. A vote is expected to be held next fall on all or some of the proposals, once they have been formulated by the group that is considering them.
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