Lloyd’s announced on Friday that 79.88 percent of those eligible to vote at an Extraordinary General Meeting on Thursday had backed the reform proposals prepared and endorsed by Lloyd’s management.
The vote authorizes potentially the biggest changes in Lloyd’s operations in its 300 year history – doing away with the annual reformation of syndicates, the three year accounting system and the current regulatory system in favor of a Franchise Board that will oversee members qualifications, solvency margins and underwriting activities.
The votes of the 16,000 members were weighted by the amount of capacity that they have invested. Lloyd’s spokesman Adrian Beeby explained that “Each member is entitled to one vote for every half a million pounds [approximately $780,000] or portion of that amount, of capital invested at Lloyd’s.” Capacity from prior years, which is still at risk, was included with those presently active as underwriters. Most votes were cast by proxy rather than in person.
Lloyd’s Chairman Sax Riley told the 350 members who actually attended Thursday’s meeting that the reforms would enable Lloyd’s “to maximise the wealth of its capital providers over the coming decade.” It will create, “A Lloyd’s that will be in the best possible form to ride out poor market conditions when the global insurance market inevitably deteriorates…a Lloyd’s able to provide a sustainable, attractive business platform for major investors who – let’s not forget – have a choice where they put their money. These are international businesses whose ongoing involvement is vital to our future,” he continued.
Riley conclude that “Above all, it will be a Lloyd’s that has demonstrated once again that it is prepared to change, to embrace the new and the radical, so as to improve returns for capital providers.”
The weighted vote gave those corporate capital providers – mainly large insurance companies and brokers – an overwhelming majority of votes cast, as they now provide over 80 percent of Lloyd’s capacity, and have for the past three years. They are heavily in favor of the proposals, as they would, among other things, align Lloyd’s arcane accounting system with more standard corporate accounting methods, and give greater transparency to their financial statements.
Although no timetable has been given to implement the reform proposals, now that they’ve been approved it’s unlikely that Lloyd’s will hesitate to make the changes its corporate members have mandated. The only remaining hurdle is the opposition of a majority of the individual Names. Although Lloyd’s dropped proposals to force them out of the market entirely, it is still planning on doing away with unlimited liability in its present form.
The Names have indicated they may challenge the results, or seek to have the changes adopted through revisions in the 1982 Lloyd’s Act that currently governs its organization. That would require approval by 75 percent of all the members on a one member-one vote basis and parliamentary approval. Lloyd’s has stated that, while it will recommend that the statutes be reviewed, no amendments are necessary to implement the proposed reforms. (See IJ Website Sept.9)
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