The world’s oldest underwriter, Lloyd’s of London, announced its intention to unveil final details of a plan to modernize the world’s oldest insurance market. According to Reuters, however, those plans will first be revised to appease the market’s wealthy controlling members.
After racking up nearly $3.13 billion of losses from the World Trade Center attacks, Lloyd’s initiated reforms intended to combat increasing competition from insurance centers such as Bermuda. Facing fierce opposition from the “Names” – the anonymous wealthy individuals who pledge huge sums to back insurance risks-the London market has apparently scrapped proposals to force them out.
Currently, although they represent a minority of Lloyd’s capital base, the Names outnumber corporate members of the market. Lloyd’s corporate members provide 80 percent of its capital, but hold only a fraction of the vote. Many of the Names exited the market after suffering major losses. According to Reuters, only 2,500 of the 13,000 Names are still active in the market.
Changes that remain on the docket include a plan to end unlimited liability for new members and measures to encourage existing Names to convert to limited liability. Although the practice of unlimited liability offers big tax benefits it carries the risk of unlimited losses, as well. The market is also lobbying for changes in U.K. tax laws to allow the Names to continue carrying forward tax losses from previous years.
Lloyd’s also wants to make a change its traditional three-year accounting regime in favor of internationally used yearly accounts. Such a transition would require a change in a private act of parliament that governs Lloyds.
Concerned about underwriting losses, the market also wants to set up a franchise board to raise underwriting standards.
The reform plans are expected to be voted on at a special meeting Sept. 12.
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