Lloyd's Log: As Lloyd's enters a new and challenging era the chairman of Lloyd's, Sir Peter Green, sets out the role of the Log as a means of keeping the membership advised

This is the first issue of Lloyd's Log in a new format. It comes at an historic moment for Lloyd's and publication of this edition has been delayed so as to be able to include information which I am sure you will wish to have about the new Council, the meeting which took place at Leeds Castle in December, and the very important decisions taken at the first Council meeting held on January 5.

Already over 80% of the membership of Lloyd's receives the Log each month, in addition to a substantial number of copies which are requested by individuals and organisations all over the world by whom the Log is highly valued as giving an insight into the work of the Market and the personalities therein. As a result of initiatives by the Information Policy Board, supported by Members and managing agents, I very much hope within a short time that Lloyd's Log will reach every member and serve as one, but a very important, means of informing everyone involved on salient events on Lloyd's.

The layout has been constructed so as to ensure that there will be regular reports on the work of the Council and Committee, reviews of the work carried out by the Task Groups set up as a result of the Fisher Working Party Report, all in addition to the material the Log has traditionally published.

In no way, of course, could the Log provide an adequate substitute for the close relationship between Member and Agent. Nevertheless, the Log is an effective method of communication and can ensure that much complex documentation reaches Names on a regular basis at considerable financial saving to both Agents and Names.

The Editor will ensure that the material is presented in as readable a form as possible and the Council and Committee are equally dedicated to the belief that a monthly review of this type can be of great value not only to the Names but to the many others who work in the market and to influential bodies at home and overseas for whom up-to-date knowledge of affairs at Lloyd's is of major importance to our business success.

Finally, this gives me the opportunity to welcome on behalf of you all Mr. Ian Davison, who joins Lloyd's on February 1 next as a Deputy Chairman and Chief Executive. A biography of Mr. Davison appears elsewhere in this issue, together with photographs and brief biographical details of all the members of the Council for 1983.

Times: First meeting for new Lloyd's council

High on the agenda at today's meeting will be the establishment of an appeals and disciplinary tribunal to eliminate the antiquated mechanism of an extraordinary meeting of all members and speed up consideration of any alleged misdemeanours by members.

Appointment of a chief executive will also rank high in the list of priorities for consideration. A list of about half a dozen senior civil servants who are considered suitable for this arduous task will be whittled down to two or three names, a with a final choice expected before the end of this month.

To improve the image of Lloyd's in the light of last year's wave of scandal and controversy a sub-committee will be set up to consider improving public relations. Greater disclosure in the accounts of Lloyd's syndicates, bringing them into line with the requirements placed on a public company by the Companies Acts, is also certain to be endorsed by the council.

Today's meeting takes place against a background of a preliminary meeting last month at Leeds Castle in Kent when the eight council members chosen by the 16,000 non-working members on Lloyd's proved to the committee of Lloyd's that they were not the "yes-men" which critics had been quick to label them.

It came as something of a shock to both Sir Peter Green, chairman of Lloyd's, and the rest of the committee, to learn of the dissatisfaction and frustration felt by external members, and to realise that the eight would not be the silent minority the committee had apparently hoped for.

For three centuries Lloyd's has held onto its guiding principle of self-regulation, but the extent to which reinsurance arrangements had been abused by certain sections of the market brought numerous calls for sweeping curbs to that principle during the past year.

There is little doubt that last year was the most damaging in the history of Lloyd's but the signal that widespread changes are on the way should mark today's meeting as an historic milestone on the road back to effective self-regulation.

6 Jan 83

Kenneth Grob in evidence to the DTI appointed Inspectors investigating the affairs of Alexander Howden, "And so we decided that we would do what we always did when we had a problem, that is to say, use the reinsurance route. We had been solving our own and other people's problems for years with reinsurance".

Daily Telegraph: Hay Davison accepts lead role at Lloyd's

IAN HAY DAVISON, chairman of the accounting standards committee and senior partner of accountancy firm Arthur Andersen, has been appointed to the controversial new post of Chief executive of Lloyd's. This was one of the first decisions at yesterday's inaugural meeting of the new ruling council of Lloyd's.

Mr Davison, 51, who is already in charge of the revision of the outmoded accounting requirements at Lloyd's, takes over on Feb. 1 when he will also be a deputy chairman and a member of the council.

Sir Peter Green, chairman of Lloyd's, said the appointment had been discussed with both the Department of Trade and Lord Richardson, retiring Governor of the Bank of England. But it was Lord Richardson who had first approached Mr Davison on Dec 23 because "the Governor might be more effective in obtaining his services." And after further talks Mr Davison accepted yesterday.

It was not the Governor but the council which had appointed him, and it was to Lloyd's and the council that he was responsible, Mr Davison said. He was convinced he would be given all the power and freedom to carry out the work needed to be done.

Details of Mr Davison's contract have still to be worked out. It is not yet even clear how he will rank in comparison with the two existing deputy chairmen. But dismissing earlier Lloyd's comments that he would be "a" chief executive, Mr Davison said "It has been made quite clear to me that the council is most anxious I be given the full authority which is necessary for the job." "Some far reaching changes are needed at Lloyd's," he added, and he would be recruiting extra staff to cope with the broader regulatory and disciplinary functions. Having attended yesterday's council meeting Mr Davison found "great enthusiasm for clearing up" the problem areas.

Although he travels to the United States this morning to discuss inflation accounting standards with the American accountancy bodies, Mr Davison will be back in time to present his proposals next Wednesday on improved accounting rules. Top priority for auditing the 1982 accounts will be disclosure of outside interests and of reinsurance arrangements.

After disclosure had been achieved, it was up to Lloyd's to decide whether "certain conflicts should be forbidden". He had no plan or set of priorities for his new job and the council did not limit it either. It would have been a mistake, Mr Davison said, to plan the job in detail prior to installing someone.

He has resigned from almost all his other activities, reduced the accounting standards work to 25 p.c. of his time, will have no source of income other than Lloyd's and will not become an underwriting member of Lloyd's, he said.

Mr Davison's appointment was approved by the Bank of England and widely welcomed in the City. He also impressed the council at yesterday's meeting.

The council started at 10.30 a.m. and went on meeting until late into the evening. Apart from Mr Davison's appointment it approved a long list of new bye laws, including the setting-up of an investigation procedure and the ability to impose "administrative suspension " on a member. It also set up the disciplinary committee and the appeals tribunal.

It is to hold fortnightly meetings, but until the end of April most of the responsibility for administration and decisions has been delegated to the committee of working members which has run Lloyd's up to now. This is to give the newly elected members a chance to find their feet.

Daily Mail: Lloyd's find a man to make them A1 again

They have chosen the chief executive who must restore their fortunes. They have moved fast, they have dug deep in their pockets. Cometh the hour, cometh the man: Ian Hay Davison

He comes across from accountants Arthur Anderson where he is senior partner, and Lloyd's will pay him £120,000 a year.

So Lloyd's respond to the call, made in this page six weeks ago: Lloyd's must go out and hire Mr. Clean. A strong and independent chief executive, as we were the first to argue, was Lloyd's brightest chance to run their own affairs and might be their last.

More precisely, the man picked by Lloyd's head-hunters, who happen to be the Governor and Company of the Bank of England. The Governor, dismayed by successful scandals and by what they imply for the City's ability to run its own affairs, has taken Lloyd's in hand.

Mr. Davison was chosen, say Lloyd's, following discussions between the Governor and their chairman Sir Peter Green, and after an initial approach had been made to Mr., Davison by the Governor.

Did Lloyd's consider any candidate, other than the one whom the Governor suggested? No, says Sir Peter.

So much for self-serving talk in the Lloyd's bureaucracy that the chief executive would be some harmless placeman or amenable mandarin, his appointment a mere exercise in face-saving,

John Stonehouse knows better, and so do the survivors of the Grays Building Society - they met Mr. Davison as a Department of Trade inspector.

Auditors around Lloyd's know better - for the last six weeks Mr. Davison has been setting them new and overdue standards for their work.

More will be done in the daylight: "My priorities are the disclosure of the interests of all working members.... As chief executive, I must serve the interests of the members of Lloyd's, and also the public interest".

The two go together. What is at stake is the future of a national asset, the world's leader in its business. Britain's most successful exporter of services, and an insurance market; which in all its time and turmoils has never endangered a penny of its customers' money.

On 22 December 1982, the Secretary General of the Corporation of Lloyd's wrote to Peter Green, in his capacity as Chairman of Janson Green Ltd., referring to a suggestion that "funds had been transferred abroad and benefits accrued to members of Janson Green Ltd". The letter (to the terms of which reference will be made as necessary) requested the disclosure of various items of information. responded on

By letter dated 10 January 1983 (to which reference will also be made as necessary), the Defendant wrote in reply to the above letter.

The Defendant's letter of 10 January 1983 was incomplete and/or inaccurate and/or misleading and/or provided inadequate disclosure in the following respects, as the Defendant either knew or ought to have known:

1. The Defendant did not disclose that his brother, Mr. John Green who was a co-director of Janson Green Ltd., had also been a shareholder in Imperial Nassau and Imperial Cayman at the material times.
2. The Defendant did not disclose that Mr. Peter Valentine, who was also a director of Janson Green Ltd., had also been a shareholder in Imperial Cayman at the material times.
3. The letter stated:

4. In relation to the Stop Loss policy, the letter stated: "A deposit premium to cover brokerage and expenses was paid at inception." In fact, the deposit premium, net of brokerage, would have substantially exceeded any expenses incurred by Imperial Nassau and Imperial Cayman in relation to the policy.

Daily Telegraph: Accounting at Lloyd's ‘not satisfactory'

The urgent need for much tougher accounting regulations at Lloyd's is highlighted by a study of their current practice, which shows such huge differences between the methods that the figures are impossible to interpret and could hide major problems.

Ian Hay Davison, the newly nominated chief executive of Lloyd's, is today putting before a steering group the final draft of new rules, prior to submitting them to the Committee of Lloyd's on Wednesday. The main points of the tougher requirements are to be disclosure of personal interests and of reinsurance arrangements.

But a study of 276 Lloyd's brokers show that this is likely to be quite insufficient. The accounting treatments of many important aspects of the companies are widely different.

For instance, a crucial calculation, like credit of brokerage fees, is treated in dozens of varying ways, with the same auditing firm permitting six or eight different treatments in the companies it deals with.

The study found that 28 of the companies did not disclose the treatment of this item at all, and this included all six clients of accountants Morrison Stoneham.

The report comments that accounting policy is "not satisfactory" for analysts, insurers or reinsurers.

As a result of treatments often used there is a "likely overstatement of revenue reserves." The report concludes that "prudent accounting for earned brokerage is not followed" because it would highlight "already strained balance sheets and solvency tests by an increase in insurance liabilities."

Brokers are supposed to be appraising the security of their reinsurers yet their own accounts are vulnerable problems. "Perhaps insurers and reinsurers should be appraising their broking "security," says the report.

Mr. Davison has said that this week's rules are an interim measure for auditing the 1982 accounts. For the 1983 figures extra regulations will be brought in.

The report makes clear Lloyd's has a very long way to go.

(A press release agreed at a meeting of the Asbestos Claims Council referred to 20,000 claims pending and tens of thousands more expected over 30 years. The press release added that the ultimate cost in insurance payments will be in billions of dollars and, if past experience is repeated, half the insurance payments will be spent on legal fees and related defence costs).

To co-ordinate processing the mounting number of asbestos related claims and then speed their disposition, 11 major asbestos insurers and Lloyd's of London have formed the Asbestos Claims Council. "The insurance industry faces overwhelming litigation", said Ray Stahl, chairman of the Council, "with 20,000 claims pending and tens of thousands more expected over 30 years. The flood of asbestos litigation is adversely affecting not only asbestos claimants but others seeking civil resolutions". "The ultimate cost in insurance payments will be in billions of dollars," he added "and, if past experience is repeated, half the insurance payments will be spent on legal fees and related defence costs". The Council, comprising senior claims executives of the insurers, formalises the objectives they have been pursuing informally:

In November 1982, a Lloyd's Working Party on accounting and disclosure, chaired by Ian Hay Davison, then senior partner of Arthur Andersen &Co, was established to review the Instructions for the Guidance of Lloyd's Auditors and, in particular, to consider what changes should be implemented for the audit at 31 December 1982.

An interim report was presented o the Committee of Lloyd's on 12 January 1983.

. The Working Party considered that certain matters required immediate action to emphasise the auditor's role and to improve the reporting of reinsurance arrangements both in syndicate accounts and to Lloyd's. In consequence, the interim report covered the following:- Disclosure of Insurance Interests, reinsurance and "Baby syndicates". Following Mr Davison's appointment as Deputy Chairman and Chief Executive, Ian Plaistowe FCA, also a partner of Arthur Andersen & Co, assumed the chairmanship of the working party. A number of other matters were thought to require further study and particularly concerned reinsurance, the auditing of syndicate accounts and the information which should be made available to Members and prospective Members. A report detailing initial requirements for reinsurance and disclosure was issued in April 1983. The working party's proposals on disclosure of reinsurance arrangements were approved by the Committee of Lloyd's. Following that approval, managing agents, member' agents and approved accountants were advised by letter of their responsibilities relating to reinsurance arrangements. The letter also outlined the Committee's requirement for disclosure of certain information relating to reinsurance in syndicate accounts, disclosure to Lloyd's of related party reinsurance contracts or arrangements and of certain other reinsurance contracts or arrangements

The working party has substantially completed its deliberations on proposed bye-law concerning disclosure of insurance and other interests by underwriting agents. The draft bye-law will be presented to the Council and circulated to the Market in due course for comment.

Daily Telegraph: Lloyd's out of line on Posgate suspension

Mr Posgate not only won his protracted and expensive case against Lloyd's to prevent his dismissal, but he was awarded costs - reckoned to he some £75,000 for each side. As a result, Mr Posgate was voted back on the board of the underwriting company Posgate and Denby.

"There was a breach of the rules of natural justice"

Daily Mail: ‘Goldfinger' wins a cast-iron case

INSURANCE chief Ian ‘Goldfinger' Posgate yesterday won a legal battle over his suspension from Lloyd's.

The High Court ruled that Lloyds had no power for such action and awarded him the estimate £75,000 cost of his appeal.

Mr Posgate, who claims he can earn up to £100,000 a year, said afterwards that he plans to claim at least £2 million damages from the firm which sacked him.

The millionaire insurance chief was suspended after allegations of bogus deals were made by the American company Alexander and Alexander after they took over a firm run by Mr Posgate.

Four directors resigned and Mr Posgate, who denied misconduct, was fired.

Yesterday he said he was delighted at the verdict and, legally, could probably resume business immediately. But he planned to wait until directors of his own company had talked to the underwriters.

"I would like to go back to Lloyds in a nice gentlemanly way," he said. "It is not my desire to sue them. My argument is with Alexander and Alexander who have damaged my reputation and deprived me of my livelihood.

"I feel I have been framed over matters about which I have no knowledge whatsoever. I am going to fight with all vigour for substantial damages. My contract alone is worth £1 million.

In the High Court, Lord Justice O'Connor said that Lloyds had acted in good faith when they felt they had to protect their reputation for integrity.

The underwriters sent letters about Mr Posgate to broking firms which the judge said amounted to suspension - a power not granted by the Lloyds Acts of 1871 and 1951.

The Lloyds Committee claimed that directives given in the letters were no more than "firm requests" to brokers not to trade with him while investigations into the alleged £31 million irregularities were continuing.

But the judge said "the letters did constitute suspension. That is the reality of the situation and, where a man's livelihood is concerned, the court should look at the reality of what has been done," he said.

Quorums and Appointments of Committees and Sub-committees Byelaw (No. 11 of 1983).

Direct Motor Business Byelaw (No. 12 of 1983, 17 January 1983).

Daily Telegraph: Beginning of end of Lloyd's humiliation

At last the Lloyd's insurance market is within sight of a resolution of its difficulties. After a most dreadful 1982, when Lloyd's became synonymous with corruption rather than good faith, a series of radical reforms are now being carried out:-

• A new Act of Parliament for the regulation of the market came into operation on January 1.
• Mr. Ian Hay Davison, formerly senior partner of accountants Arthur Anderson, has been appointed chief executive and a deputy chairman with special responsibility for regulation.
• A new controlling body (the council ) has been elected containing an impressive contingent of outsiders.
• Finally, last night. new rules for accounting and disclosure were published. Any comments must be tabled by February 16.

Thus Lloyd's has turned to all the well-tried remedies - strengthening the ruling body by statute and by personnel, admitting distinguished outsiders to a supervisory role and insisting on disclosure of possible conflicts of interest, buttressed by increased powers for Lloyd's auditors.

It is safe to say that this cure will work, provided that the treatment is carried out in full. That means, for instance, that a full separation between insurance broking firms and managing agents of syndicates must be achieved. There should be no exceptions or fudging. And although the market doesn't like it, the same breach should be made between ownership of insurance brokers and members' agents.

As for disclosure, it must be complete. The proposed rules published last night are exceedingly complicated only because they seek to make a series of distinctions between who should disclose what to whom.

Had the recent history of the market been more honourable, there might have been some sympathy for gentle application of the principle. But Lloyd's can afford nothing less than the rule that all potential conflicts of interest must be exposed to public scrutiny.

Daily Telegraph: Posgate decision delayed

THE COUNCIL of Lloyd's has delayed its decision on whether to order a fresh suspension from underwriting of Ian Posgate in the light of last week's court ruling that its original suspension had been outside the committee's powers.

At a meeting yesterday the ruling committee considered the allegations against Mr Posgate and "heard at length" his own rebuttal of the charges together with an application from Posgate and Denby Agencies to permit Mr Posgate to return to underwriting.

The Council stated that "by the unanimous vote of those present apart from Mr Posgate," the allegations needed further investigation before a final decision was made under the new powers of the Lloyd's Act. A subcommittee has been formed to look into the matter and, in the meantime, Mr Posgate has agreed not to recommence underwriting.

Times: Davison calls for more disclosure

Members of Lloyd's, many of whom risk their entire wealth as underwriters in the 300-year-old insurance market, will in future be given a much clearer picture of both the workings of their respective syndicates and the financial interests of the underwriting members who run the syndicates.

Proposals drawn up by Mr Ian Hay Davison, newly appointed chief executive of Lloyd's, call for the establishment of a central register requiring underwriting agents and those connected with them to disclose insurance interests. Recommendations on the disclosure of reinsurance contracts have also been presented by Mr Davison's working party in a second consultation documents.

This move towards tougher disclosure comes in the wake of the recent controversy at Lloyd's in which prominent members were alleged to have benefited from interests in secret offshore reinsurance companies. The two consultative documents have been approved by the Committee of Lloyd's and members have until the middle of next month to make their comments.

"Self-regulation means consultation and rules being made by the people on whom they are going to apply", Mr Davison said yesterday. While the disclosure requirement is confined to insurance interests, Mr Davison pointed out that related interests would be included: "If someone owns interests in a towel company and that company supplies towels to his underwriting agency, then it would have to be disclosed."

A number of specific additions to the existing instructions to Lloyd's auditors have already been made by the working party, but it is now also calling for comprehensive syndicate accounts to be prepared for the "names" (non-working members) on each syndicate. "Names should be treated like shareholders in a public company", Mr Davison said.

The working party proposes that under a new by-law disclosure will be required of all related-party reinsurance transactions. Lloyd's will require details of a syndicate's reinsurance arrangements, including concentration with any major reinsurer, although it is not intended to draw up a list of "approved reinsurers".

The working party considered that these were two areas where immediate action was required in order to emphasise the auditor's role and to improve the reporting of reinsurance arrangements both in the syndicate accounts and to Lloyd's. Further requirements concerning reinsurance are likely to be proposed to take effect later.

Another area of concern for both the Davison working party and the Higgins committee which is looking at the thorny issue of divestment by Lloyd's brokers of their underwriting agencies, has been the existence of so-called "baby" syndicates - small syndicates and which take the best (or lowest) risks.

On the recommendation of both working groups, the Committee of Lloyd's has agreed to establish a task force to investigate the nature and extent of "baby syndicates".

In its proposals for the establishment of a register of member's interests, the working party suggests a two-tier register. In one, underwriting agents would maintain financial details of their disposable interests and access to that part of the register would be restricted to members of the Council, the Committee and auditors.

The second, public part of the register would include all details of interests with the exception of the financial quantifications. Disclosure will cover the period after December 31, 1979.

The by-law would regulate the disclosures required in syndicate accounts and the audit of those accounts. A directors report would be required giving a fair presentation of all material interests at any time during the period of the account of those managing the syndicate. This is aimed at giving a clear picture of any relationship between an agent, a broker and an insurance company.

"Disclosure may reveal certain classes of relationship which may eventually be deemed unsatisfactory," Mr Davison said.

Daily Telegraph: Insurance reforms at Lloyd's

THE Lloyd's of London insurance market which has been riddled with scandals over the past few years, is to introduce a series of major r reforms aimed at preventing future abuses of the underwriting system.

Mr Ian Hay Davison, who is to take up the new position of dependent chief executive of Lloyd's next month, announced yesterday plans for setting up a register of all insurance interests, and related matters of underwriting agents.

It will be followed by a similar scheme for insurance brokers.

The registers, to be partly open to the public, are designed to show up potential conflicts of interest.

The committee of Lloyd's also met yesterday to consider last week's court verdict that it had been wrong to suspend Ian "Goldfinger" Posgate, its most successful underwriter, from underwriting. In spite of the verdict Mr Posgate has still not been allowed to return to underwriting.

The committee decided last night to set up a new investigating sub-committee to examine the case.

Letter from attorneys to the AWP: Re. Working Party activities past 12 months in asbestos related problems and which referred to the continuing increase in suits arising from asbestos-related claims and added the following.

(While certain coverage issues have yet to be considered by the courts, some have reached a final determination which have most emphatically demonstrated the courts desire to maximise coverage. Suits continue to be reported at approximately 500 per month. Some indications exist to suggest that the severity of injury and/or disease suffered by plaintiffs is less serious than had formerly been the case, although it is much too early to draw any firm conclusions. It is likely that considerable activity will develop in regard to damage allegedly existing in buildings which incorporated asbestos).

RAG Jackson is now deputy chairman. General developments. The continuing increase in Suits arising from asbestos related claims and the closer involvement of the London Market to the participation in settlements has required the claims committee to have a daily involvement and the working party to meet at frequent intervals. While certain coverage issues have yet to be considered by the Courts, some have reached a final determination which have most emphatically demonstrated the Courts desire to maximise coverage. This was patently evident in the decision of the US Court of Appeals' district of Columbia in October 1981, which expanded the lower Court finding in Keene -v- INA ....

Suits continue to be reported at approximately 500 per month.... some indications exist to suggest that the severity of injury and/or disease suffered by Plaintiffs is less serious than had formerly been the case, although it is much too early to draw any firm conclusions. All suits are being recorded in the databank, which is proving of considerable assistance to Underwriters' attorneys in developing statistical information vitally essential to the London Market.

Asbestos claims information office:

As the Market is aware, the Working Party has established an information office at Bankside House, Leadenhall Street. That office has up-to-date computer printouts from the databank relating to all claims against the insureds who are of most significance to the London market. These printouts give details of individual claims and the reserves established. Any participant wishing to inspect any of the printouts is invited to do so by appointment. The reserves set out in the attorneys' year-end reports relating to these insureds, which are currently being circulated to the Market, are based upon data-bank printouts.

The Information Office holds an index of all known Market involvements in the direct insurance of these insureds. Any Underwriter wishing to confirm his involvement may inspect the index by appointment. ...In addition there is available the fortnightly publication "Asbestos Litigation Reporter" which records all major developments. Property damage:

Underwriters should be aware that as a result of an order issued by the Environmental Protection Agency in May last year, it is likely that considerable activity will develop in regard to damage allegedly existing in buildings which incorporated asbestos. The EPA order has mandated that all schools and similar public buildings constructed prior to January 1979, must be tested within 12 months to determine the presence of friable asbestos.

Substantial questions arise regarding both the extent to which any coverage is afforded by wordings issued to insureds, and in the event that coverage is found to exist, the occurrence date for the purpose of attachment. The Working Party will continue to monitor this development, and should remind the Market that many London coverages provide separate limits in respect of property damage.

Daily Telegraph: Minet $17.5m claim on Howden hits snags

Minet Holdings is having problems recovering $17 5 million worth of reinsurance from Alexander Howden Group, which acted as its insurance broker.

For some months Minet has been trying to agree the figures with Howden for years going back to 1976. Howden had placed the policies with three Companies, including its own Bermuda subsidiary, Sphere Drake, which was also involved in allegedly similar deals for Howden directors.

For Minet, Sphere Drake forwarded the reinsurance to a number of offshore Companies such as Europa Insurance of Gibraltar, in which senior Minet people had a stake. There is currently some disagreement how much Minet can claim and from whom.

The Department of Trade and the police fraud squad are investigating Sphere Drake and the Minet offshore companies which has made Howden careful about clearing the business.

In addition to the $17.5 million to the end of 1979, Minet is currently formulating a claim of some $5 million for the 1980 underwriting year. The delicate situation is made even more of a problem by the need to reach an agreement in time for the annual audit at the end of March.

Both companies are trying to avoid an outright conflict but some Minet people are getting impatient at the Howden policy of referring difficult questions to Alexander and Alexander of New York, which bought the company last year,

Also at issue is the basis on which the claim is to be made, so that even by the tortuous standards of Lloyd's reinsurance the claim on behalf of the syndicates is taking a very long time. Some portions of the claim are almost certain to go to arbitration.

Bellew Parry & Raven (Holdings) Ltd, an investment and holding company, purchased Archer & Massie (Underwriting Agencies) Ltd, the managing agent of Marine Syndicate 505, which had commenced underwriting for the 1981 account, for in excess of £1.3m. It is believed that some of the shareholders include A J Archer, I R Posgate, K Grob, and C L R Hart.

0 Feb 83

The Auditors' responsibility in relation to the assessment of the reinsurance to close was not fully defined until February 1983, when Lloyd's issued the annual "Instructions for the Guidance of Lloyd's Auditors as approved by the Secretary of State under the Insurance Companies Act 1982, Section 85(b)(2), which was applicable to the 1982 audit as at 31 December 1981 and which stated:-

Partly because of the difficulty of an auditor giving a judgement on the reinsurance to close - effectively the underwriting decision which in large measure determines the declared profitability or otherwise of the syndicate - no ‘true and fair' opinion was given on syndicate accounts. The report to members of a syndicate typically stated that:

From evidence to us by panel auditors it appears that, in the main, syndicate auditors interpreted their responsibilities narrowly and confined themselves to the solvency work (and specified audit testing geared to that) and discussion of the reinsurance to close with underwriters as set out in the audit guidance notes. It is also evident to us that panel auditors did not generally consider it part of their duty to enquire into the legitimacy or otherwise of reinsurances or their security, this being instead wholly the province the underwriter. Only from the 1982 audit was there any requirement to "examine ceded reinsurance arrangements entered into by the syndicate … and … in particular … consider:

Measures have recently been taken by Lloyd's to overhaul many of these procedures and to establish new ground rules for accounting and audit. However, despite the fact that much of what we describe is now history, it is clear to us that what we describe here represented normal audit practice in Lloyd's up to the middle of 1982. (The DTI report is dated 30 December 1985, but not published until August 1990..)

Further to the meeting of panel auditors held on 30 November 1982, I have now arranged for a "follow up" meeting on asbestosis. On 24 February 1983 at 2.30pm.... Mr Ian Davison and his working party will meet with the panel auditors thereafter at 3.30

The Council and Committee Byelaw (No. 13 of 1983, 7 February 1983).

Maintenance of Byelaws and Regulations Byelaw (No. 14 of 1983, 7 February 1983).

Miscellaneous Matters Byelaw (No 15 of 1983, 7 February 1983).

Suspension from Membership of the Council, the Committee, and Any Sub-committee Byelaw (No. 16 of 1983, 7 February 1983).

Deputy Chairman and Chief Executive of the Society Byelaw (No. 17 of 1983, 7 February 1983).

The ruling council of Lloyd's of London yesterday appointed Lord Wilberforce as the first president of its newly-established appeals tribunal. His appointment is for an initial term of three years.

Lord Wilberforce, aged 75, retired early last year after a 17-year term as a Lord of Appeal. In addition to a number of legal appointments, he wrote The Law of Restrictive Trade Practices, published in 1956, and numerous articles and pamphlets.

Mr. David Calcutt QC has been appointed deputy president of the appeals tribunal.

Mr. Peter Foden-Pattison, a former chairman of Lloyd's, becomes chairman of the disciplinary committees, with Mr. Jeremy Langton deputy chairman.

A number of new by-laws are to be published today, after the council meeting. They include one which will prevent any member who is under disciplinary suspension from sitting as a member of the council. This will prevent Mr. Ian Postage sitting on the council during his six-month suspension.

Daily Telegraph: Lord Wilberforce to preside over Lloyd's tribunal

Hearing held in Washington D.C. before the Subcommittee of the Committee on Education and Labor, House of Representatives: "The Effect of Bankruptcy Cases of Several Asbestos Companies on the Compensation of Asbestos Victims"

Manville has over 17,000 cases against it now. They project that there could be as many as over 30,000 in the next 30 years. There are several other asbestos companies that are faced with the same potential problem - perhaps not on the same level as Manville, but certainly of significance.

It is likely, then, that from 50,000 to 100,000 lawsuits will be commenced over a period of the next several years. If you litigated all of those, you would very likely bankrupt not just Manville but many other companies as well and bury the courts in the process.

The Council of Lloyd's has appointed Lord Wilberforce as president of the Appeal Tribunal of Lloyd's. The appointment, by mutual agreement, is for a period of three years and is thereafter renewable. Mr David Calcutt QC has been appointed as Deputy President. His appointment is for a period of five years and thereafter renewable. The tribunal will sit as and when required.

Mr P L Foden-Pattinson, an ex-Deputy Chairman of Lloyd's, has been appointed Chairman of the Disciplinary Committees. Mr M J Langton, an ex-Chairman of Lloyd's Underwriting Agents' Association, has been appointed Deputy Chairman. Twelve other persons were appointed to the Disciplinary Committees.

I Hay Davison took up his appointment as Deputy Chairman and Chief Executive of Lloyd's. His salary will be £120,000, which will make him one of the highest paid administrators in the City. He has been granted leave of absence from Arthur Andersen & Co for three to five years. Mr Davison's appointment comes after an initial personal approach to him by the Governor of the Bank of England, Lord Richardson, on 23 December 1982.

Daily Telegraph: Lloyd's agents ‘advantage' over members

PEOPLE working with the Lloyd's organisation are making money at the expense of the 17,000 external members who put up the money and bear the risks according to a report on the underwriting agencies at the insurance organisation.

Low-risk business areas like the management of syndicates can make participants more money than by the risk-taking in the syndicates, says the 255- page document which has analysed the accounts of 274 agencies at Lloyd's. It adds that there are still unregulated potentials for conflicts of interest.

"An investment of £5,000 in an agency can produce a very substantially greater investment percentage return than an investment in the underlying syndicates," it says.

In fact the £5,000 in the agency can produce more profit than £250,000 in the syndicate, yet it is " clear where most of the risk lies."

The report also notes that agencies have "one of the most extraordinary capital structures in the United Kingdom "with a variety of unusual types of share. These would be required only if "the intention is to share profit over different groups of person with different interests."

It also notes that underwriters have shares in the management of syndicates other than their own, and adds: "Whether reinsurances effected between such syndicates and whether the relationship itself is in the interests of Names or not is a matter for the market itself to judge."

But the report suggests more immediate causes of concern in the decision by a Lloyd's committee not to tell members about " binding authorities," as they wound then be "burdened with too much potentially confusing information." The report dubs that as of "either a remarkably Victorian mentality or a remarkably low level of legal advice."

Binding authorities permit overseas brokers to write insurance on behalf of a syndicate. "Names would be well advised not to give hostage to fortune by allowing any diminution in their rights to disclosure" about contracts entered into on their behalf.

The report warns that undisclosed reinsurance policies led to the scandals disclosed over the past year. Conflicts of interest and breach of trust "are more likely to occur in any commercial environment where undisclosed transactions are permitted."

It also wants disclosure of investment managers, since management of the premiums through Lloyd's represents collectively one of the largest investment management responsibilities in the City of London. This would include disclosure of connection between underwriter-agent, and investment manager.

Lloyd's " will have to live with the fact that full disclosure of conflict of interest is an inherent part of principal and agency law." Unless the regulations are equitable to all parties "with balance in favour of non-working names" there will be a blood-letting session at periodic intervals.

Then Lloyd's will either be regulated from outside or the members will "cease their forbearance and realise that although they need the good will of agencies and underwriters, Lloyd's needs them more."

Daily Telegraph: Lloyd's chairman to declare interest

SIR PETER GREEN, chairman of Lloyd's, will reveal to members of the syndicates managed by his company Hogg Robinson his personal business interests whether or not Lloyd's passes a bye law requiring members of the Council to make public their relevant interests.

This will be part of a series of regulations requiring greater disclosure, but Sir Peter yesterday made clear he would expect other members of the Lloyd's ruling committee of full-timers to follow his lead.

The bye law will require only the same data as the Companies Act, details of interests' (direct and indirect) in the company's contracts, but it may not be ready for some months.

Ian Hay Davison, the chief executive of Lloyd's who started work there just a week ago, said yesterday that "an awful lot is going on" and Lloyd's is not being "sluggardly" in tightening self-regulation.

Another rule currently being drafted will require underwriting agents to disclose other insurance related interests.

Lloyd's will examine the register, said Mr. Davison, to see whether any of the relationships are "improper." If so, his new job will include banning undesirable links. The register will not be ready for the current audit, but will still have to date back to 1979 Mr. Davison added.

At yesterday's meeting the Council was also debating whether insurance or overseas interests should be able to own Lloyd's brokers. One of the options being discussed is the reimposition of the 20 p.c. ceiling for external ownership of brokers.

Lloyd's is also concerned at the extent of its jurisdiction, and is examining what it can do with the overseas subsidiaries or parent companies. Current view is that regulation will extend overseas as well.

"If any organisation describes itself as a Lloyd's broker it should be expected to conform to our requirements m respect of ethics," Mr. Davison said, "This will be a high priority".

Daily Mail: Bermuda troubles are Lloyd's opportunity

Hair shirts or full exposure are rig of the day. Lloyd's ruling Council has now decreed that each of its members must declare all his business interests, with chairman Sir Peter Green setting the example.

So, if now at Lloyd's a few faint smiles creep out like the first green shoots of spring, that can have nothing to do with troubles elsewhere . .. for instance, in Bermuda, where a major company is to be sold or shut, having provided against losses which appear to run into tens of millions of pounds.

The name is Walton. They belong to Phillips Petroleum of the U.S., one of the world's biggest oil companies.

Like many others in Bermuda, Walton were originally set up as a captive insurance company - the idea being that the parent can pay its insurance premiums to its captive and charge them against its tax at home, while the captive flourishes in the tax-free air of the mid-Atlantic.

The U.S. taxmen became tougher on companies with captives, insisting that the captive should insure other people and not just serve as a letter-box for its parent. Some parents, like Phillips, replied by building their captives up to play in the international league.

Walton have played and lost. Phillips are looking for someone to buy the business or, failing that, will over a period of years run Walton down and close them.

In Bermuda, Walton's John Kemp blames the general state of the insurance market. "The appraisal we carried out showed the opportunities for underwriting profit, which have not existed in recent years, will not exist In the foreseeable future."

The figure now current, for the reserves which Walton have provided against losses, is $65 million (£42 million). Mr. Kemp calls that figure "somewhat misleading" and adds: "We believe that we have an asset base more than sufficient to cover the operations of Waltons."

The word from Bermuda is that another company may follow Walton out. It was bound to happen somewhere. World recession has left too many insurers chasing too little good business.

To some, that did not matter while the price of money was high - they could earn enough interest on the premiums to make up for what they lost on underwriting.

That was no way to a healthy insurance market and now the game is over. Other reinsurers will pull out of the market, supply and demand for insurance will come back into balance, margins will widen and the survivors - Lloyd's chief among them - will look for better days

If only all the insurers who drop out can, like Walton, leave no legacy of bad debts to the survivors. That would put the humour back on Lloyd's face.

Minutes of Panel Auditors Meeting. H R Rokeby-Johnson, Chairman of AWP (The minutes recorded the following.

In June 1982 the US Labour Department gave the following statistics: 21 million workers have been significantly exposed to asbestos in the last 40 years. 8,200 - 9,700 deaths from cancer attributed to asbestosis per annum for the next 20 years. 3,000 products in daily use contain asbestos. $38 billion total claims for deaths expected. At present there are 25,000 plus claims on the data base for direct asbestosis claims. There are on file: 19 major companies assured, 39 lesser companies assured and 200 minor companies assured. Johns-Manville went into bankruptcy on 26 August 1982 with 4,000 closed cases plus 17,000 cases outstanding. They are expected to get 52,000 cases by the end of the century. Other points made included the following. In US "double dip" can occur: a plaintiff can sue the employer as well as the holding company. "Downwind" claims are by those who have got asbestosis by wind borne dust. Friable asbestos has been used in buildings that must now be removed).

There are on file:	19 major Companies assured
	39 lesser Companies assured
	200 minor Companies assured

3. Johns Manville is the largest chapter 11 bankruptcy arising from Asbestosis. Went into bankruptcy 26 August 1982 with 4,000 closed cases + 17,000 outstanding....... They are expected to get 52,000 cases by the end of the century.

d) Owens Corning have 10% of the US market.

2. "Down wind" claims: those who have got asbestosis by wind borne dust.
1. Buildings: where friable asbestos has been used in buildings that must now be removed...

The meeting commenced at 2.30pm. .... Mr Ian Davison and his working party will meet with the panel auditors thereafter at 3.30.

Financial Times: Lloyd's underwriter under investigation

OFFICIALS of Lloyd's of London, the insurance market are investigating a possible breach of trust over the management of money of Lloyd's underwriting syndicate funds.

An underwriter, Mr. Peter Coucher, has ceased his employment with syndicate 691, which is managed by Bellew and Raven (Underwriting Agency) at Lloyd's and wholly owned by the Bellew Parry and Raven Group, said Lloyd's yesterday.

"Mr. Coucher has at the same time severed all connections with syndicate 889 and Coucher Underwriting Agency and has resigned as an underwriting member of Lloyd's," continued the Lloyd's statement.

The statement added: "It is understood that Mr. Coucher may have been guilty of a breach of trust in connection with syndicate trust funds, the sums under investigation are said to total about £6,500 and relate to transactions which occurred over a number of years. Lloyd's has been advised that the trust funds will be made good. The matters are being inquired into by officials of the corporation. Mr. Coucher is co-operating fully with the inquiries.

The Committee of Lloyd's has approved the appointment of Mr Ian Plaistowe as chairman of the Working Party which is currently reviewing the Instructions for the Guidance of Lloyd's Auditors. Mr Plaistowe replaced Mr Ian Hay Davison when the latter took up his appointment as Chief Executive and a Deputy Chairman of Lloyd's.

Mr Plaistowe, is the senior partner and a partner in the Accountancy and Auditing Division of Arthur Andersen & Co. He has held a number of appointments with the Institute of Chartered Accountants in England and Wales and is currently a member of the Institute's Investigation Committee. In 1981/82 he was chairman of the London Society of Chartered Accountants. In 1975/76 he was secretary of a Sub-Committee of the Institute's Auditing Practices Committee. He was educated at Marlborough College and Queen's College Cambridge.

The Council of Lloyd's has appointed Lord Wilberforce as President of the Appeal Tribunal of Lloyd's. The appointment, by mutual agreement, is for a period of three years and is thereafter renewable. Mr David Calcutt QC has been appointed as Deputy President. His appointment is for a period of five years and thereafter renewable. The tribunal will sit as and when required.

Mr P L Foden-Pattinson, an Ex-Deputy Chairman of Lloyd's, has been appointed Chairman of the Disciplinary Committees. Mr M J Langton, an Ex-Chairman of Lloyd's Underwriting Agents' Association, has been appointed to the Disciplinary Committees.

Daily Telegraph: Lloyd's must disclose more

Lloyd's will have to provide extensive extra information to the Department of Trade as a result of a new set of regulations laid before Parliament yesterday. These will bring Lloyd's into line with the insurance companies and enable the department to compare their businesses.

The additional information is the outcome of very protracted negotiations between the department and Lloyd's and will require details of Lloyd's reserves and trust funds. It

Daily Telegraph: Appeal Court rejects Moran

CHRISTOPHER MORAN, the insurance broker expelled from Lloyd's insurance market last October, cannot challenge a Lloyd's arbitrator's finding that he had acted "discreditably" in operating an aviation underwriting syndicate, the Appeal Court ruled yesterday.

Eagle-Picher Industries, Inc. -v- Liberty Mutual Ins. Co., 682 F.2d 12 (1st Cir. June 30, 1982), cert. denied, 460 U.S. 1028: Court of Appeals for the Fist Circuit applied the manifestation theory to trigger coverage for asbestos bodily injury claims.

Daily Telegraph: Posgate to fight Lloyd's over membership ban

It is part of a process gradually removing Mr Posgate from all connection with Lloyd's. He was suspended from underwriting, but he sued and the High Court overturned the Lloyd's decision. Lloyd's duly passed a new by-law permitting administrative suspension and used it.

To ensure that the PCW Underwriting Agencies enquiry, which is being conducted by Mr Peter Millett QC and Mr Nigel Holland FCA, is completed as speedily as possible, Mr Simon Tuckey QC has been appointed by the Special Committee of Lloyd's to join the enquiry. It is intended that Mr Tuckey should have particular responsibility for that part of the enquiry relating to all reinsurance and purported reinsurance business transacted by Lloyd's syndicates through the agencies of PCW Underwriting Agencies Ltd, WMD Underwriting Agencies Ltd and T E Sampson & Co Ltd, including syndicates through the agency of Gardner Mountain & Capel Cure Agencies Ltd for which PCW Underwriting Agencies provide the underwriters.

Daily Telegraph: Lloyd's notice of suspension

LLOYD'S has warned under writers Raymond Brooks and Terence Dooley that it intends to suspend them from Lloyd's under the new bye-laws brought in this year. The action! follows four months of investigation into Fidentia Marine Insurance Company of Bermuda owned by Brookgate Investments, which was in turn controlled by Mr Brooks and Mr Dooley.

Fidentia is thought to have taken reinsurance from syndicates run by the two men. At a meeting of the ruling committee of Lloyd's yesterday Mr Brooks and Mr Dooley wore given 24 hours to write to members of their syndicate outlining the position.

But they were given a fortnight to prepare their case for a hearing before the committee at which they may submit oral or written evidence both about the fact of suspension and the reasons driving Lloyd's to taking such action. To cover that two week period Lloyd's has taken "certain interim measures."

Daily Telegraph: Brooks & Dooley in Fidentia link

RAYMOND BROOKS and Terence Dooley who are threatened with suspension by Lloyd's have told members of their syndicate that they are still beneficiaries of Fidentia Marine Insurance of Bermuda.

The company had taken reinsurance from syndicates for which they are underwriters but previously they had claimed it had been sold.

The committee has served notice on Mr. Brooks and Mr. Dooley that they have a fortnight to prepare a case for a hearing to show why Lloyd's should not use its new power of administrative suspension to stop them doing any more business there.

Mail on Sunday: Now, a Minet secret comes to light

WITHOUT comment I offer extracts from a confidential statement now in my hands made to Department of Trade inspectors looking into the affairs of Minet Holdings and the PCW and WMD underwriting agencies.

The document was signed by a Lloyd's underwriter in the Minet case. Peter Cameron-Webb and Peter Dixon, formerly of Minet, are mentioned.

"I was told that there was a premium excess problem in the group. By premium excess problem they meant that the premium income had been overwritten on certain names."

"Mr. Cameron-Webb stated there was overwriting within the group and that he proposed to effect a five per cent quota reinsurance, the implication being that it would be five per cent of the premium income of the names as a whole, so WMD would be just as affected as PCW."

"Mr. Cameron-Webb said he knew of a company with whom it could be placed. He went on to say that if a profit was made it would be divided between myself, himself and Peter Dixon in the proportions of 50 per cent to me and the other 50 per cent to them."

"It might be useful for me, he said, as they knew I would need it to buy a house."

"After assuring me that what they proposed to do was legal, Peter Cameron-Webb went on to say that it was common market practice and that Toby Green had done it for years."

The late Toby Green was the father of Sir Peter Green, chairman of Lloyd's.

Later in the statement this underwriter recalls receiving £1,000 in notes in an envelope about three times in three months as he was short of money at the time.

The Council of Lloyd s suspended Ian Posgate from sitting on the ruling Council and its Sub-Committees until 25 July, when the Council will review the decision. Mr Ian Hay Davison said that the decision to suspend Mr Posgate was quite logic in view of the fact that he had already been suspended from underwriting insurance business at Lloyd s after allegations that he was involved in fraudulent reinsurance transactions.

21 Mar 83

The Council of Lloyd's ratified the formation of a committee to be known as the Investigations Steering Committee ‘ISC'. The committee succeeded the ad hoc committees previously set up to oversee certain inquiries. The ISC comprises:-

and will direct and control all inquiries and investigations conducted in accordance with Lloyd's self-regulatory responsibilities. It reports to the Committee of Lloyd's.

The Insurance (Lloyd's) Regulations 1983 (1983 No. 224) (which came into force on 22 March 1983) revoked the Lloyd's (Audit Certificate) Regulations 1982. Regulation 4/Schedule 2 of the 1983 Regulations set out the new required form of Audit Certificate to be provided by the Auditor appointed by the Members' Agent under Section 83 ICA 1982. The new certificate was identical to the previous certificate save that "underwriters" became "underwriting members" and "the Committee of Lloyd's" became "the Council of Lloyd's".

Daily Telegraph: Posgate removed from Lloyd's ruling council

Ian Hay Davison, chief executive of Lloyd's, said the move was "appropriate, logical and right," following the decision to suspend Mr. Posgate from his £700,000 a year job as underwriter. Lloyd's does not have to give a reason for its decision, he added

Lloyd's has brought together all its investigations under one steering committee – including around a dozen informal inquiries. One of the more formal investigations is into the Brooks & Dooley underwriting agency at Lloyd's, where the control of funds has been placed in "safe hands."

At its meeting yesterday the council also decided to keep a register of its own members' business interests. The external members will disclose all their connection and a code of practice is being drawn up by Mr. Davison to guide members on what interests are considered acceptable.

BPR were informed on 28 March 1983 that Lloyd's were to undertake an internal investigation into BPR's affairs. The inquiry was established formally on 3 February 1984, some eleven months later.

28 Mar 83

The Lloyd's Working Party, chaired by A W Higgins, set up on 17 March 1982 to enquire into all aspects of the Underwriting Agency System at Lloyd's issues Part 1 of its 50-page Report on ownership and control of Underwriting Agencies.

Among the matters w will be covering in our next report to the Council are the following:

We are co-ordinating with the Plaistowe Working Party on the recommendations for the regulation of information, accounts, audit and reinsurance. (Part 11 was issued in September 1983 and recommended that preferred and parallel underwriting be banned)

The Special Committee of Lloyd's appointed Mr Simon Tuckey QC to assist the PCW Enquiry being conducted by Mr Peter Millett QC and Mr Nigel Holland FCA.

5. The said certificate shall in particular state whether in the opinion of the auditor the value of the assets available to meet the underwriter's liabilities in respect of insurance business is correctly shown in the accounts, and whether or not that value is sufficient to meet the liabilities calculated -

1. in the case of liabilities in respect of long term business, by an actuary; and
2. in the case of other liabilities, by the auditor on a basis approved by the Secretary of State.

Financial Times: Green to quit board of Hogg Robinson

SIR PETER GREEN, chairman of Lloyd's insurance market, is to resign from the hoard of Hogg Robinson Group, the insurance broker with extensive Lloyd's underwriting interests. Sir Peter is the largest private shareholder in Hogg Robinson, owning more than 2.5 per cent of the equity.

The move, announced yesterday, has come ahead of any negotiations which Hogg Robinson will have to enter into about the future sale of its Lloyd's underwriting agency company, Janson Green, which Sir Peter chairs.

Hogg Robinson said yesterday that Sir Peter will step down from the board at the end of the group's financial year on March 31 " to avoid any conflict of interest over the future of Hogg Robinson's Lloyd's underwriting interests."

Under new private legislation, designed to improve Lloyd's self-regulatory mechanisms, all Lloyd's brokers must sell their shareholding links with the agency companies, which manage the affairs of Lloyd's members, in just over four years. Janson Green, which manages the .affairs of hundreds of members of Lloyd's one of the agencies affected.

There were worries that Sir Peter might, in any forthcoming negotiations, face a conflict as a board member of Hogg Robinson, chairman of Janson Green and the holder of the largest number of voting shares in Janson Green.

Mr. Ian Hay Davison, Lloyd's chief executive, said yesterday: "I think Sir Peter has set a commendable example."

In addition to his Hogg Robinson shareholding, Sir Peter is also a director of Cresvale Securities, which carries out investments and provides services for Lloyd's syndicates, including those under the management of Janson Green. Janson Green holds 49 per cent of Cresvale and Cresvale is listed as an associate in Hogg Robinson's accounts.

Sir Peter also has an interest with the Imperial Insurance Company (Grand Cayman) where Hogg Robinson holds 20 per cent of the equity.

Daily Telegraph: Peter Green leaves Hogg Robinson

SIR PETER GREEN, chairman of Lloyd's, is resigning from the board of Hogg Robinson, one of the major insurance brokers at Lloyd's. He will leave at the end of the company's financial year on Thursday " to avoid any conflict of interest over the future of Hogg Robinson's Lloyd's underwriting interests."

Brokers have five years to sell their syndicates, which are often very profitable.

Daily Telegraph: A nice juicy scandal

NOTHING like a nice juicy scandal to titillate viewer interest. Panorama (BBC-1 ) last night cashed in on the widespread allegations of corruption currently disturbing one of our oldest and most respectable institutions, Lloyd's of London.

Moving between stately homes in the Shires, millionaires' mansions in the Home Counties and tax havens in Bermuda, Switzerland and Gibraltar, David Lomax uncovered a tale of intricate upmarket skulduggery which would have done credit to a writer of superior adventure fiction.

You could tell he was working in a sensitive area from the alacrity with which a couple of reluctant interviewees summoned the police. Most of the others returned smoothly evasive or at best, elliptical answers. Like Lloyd's newly appointed Chief Executive, Ian Davison, who assured Lomax: "If we let the sunshine in, the mists will go away."

The Lloyd's insurance scandal centres on the practice of re-insurance - perfectly legal in itself, providing it is done legally. What is actually happening, according to "Panorama," is that some Lloyd's directors are secretly hiving off premium income to "tax haven" companies which they themselves own, thus depriving the not very clued-up lay underwriters (names, as they are known in the trade ) of their proper dues.

One "name" interviewed by Lomax was a stately home owner in Yorkshire who had suddenly been presented with a bill for £46,000. "You don't expect to make that amount of money, but you don't expect to lose it either," she said bemusedly. Christopher Moran self-made insurance millionaire, seen on his private Scottish ski run, talked of "morally and legally unacceptable practices."

Some extremely well-placed eminences, including Lord Cromer, former Governor of the Bank of England, and Sir Peter Green, chairman of Lloyd's, conceded that there might be "conflicts of interest" at work in the international insurance field. "The whole of life is a conflict of interest," remarked Sir Peter hopefully. Mr Davison promised that his two-year investigation would "empty all the rotten apples out of the barrel."

Toplis & Harding (Asbestos Services) Ltd incorporated with the principal purpose of providing services relating to the incidence of asbestos related claims. Certain of the directors are derived from leading Non-Marine Underwriters and Claim Directors of main player Lloyd's Underwriting Agencies.

Asbestos Working Party Chairman D Tayler (Pulbrook/Stewart Wrightson) replaced by H R Rokeby-Johnson (Sturge).

Costs of Asbestos litigation. Study published by the Rand Institute for Civil Justice.

The Rand Corporation published details of transaction costs up to 1982. Almost all of the 25,000 claims which have been made became the subject of law suits. Up to the end of 1982, 3,800 claims had been settled by asbestos producers or their liability insurers: 18% without payment, 78% by compromise before commencement of trial, and 4% after admission to trial. 70% of the law suits took place in the coastal States (ship-building industry) of California, Massachusetts, New Jersey and Texas, and in the inland state of Pennsylvania. The State of New York has hardly been affected by asbestos suits because its limitation period for claims in tort ends ten years after the latest illegal exposure, i.e. normally at a date when the asbestos victim has not yet discovered the disease

.By the end of 1982, a total of approximately U.S. $1,000m had been spent on the partial and complete disposal of claims, lawyers and court costs, and in respect of internal administration expenses by asbestos producers and liability insurers. For the 3,800 claims for damages which were disposed of, it is said that the average payment for damages was U.S.$64,000, whilst the average total for a claimant's lawyer's fees were U.S.$37,000, and for producers' and insurers' lawyer's fees U.S.$55,000. Consequently each dollar by way of compensation involved expenses of $1.59. It is true that the average award of damages is estimated to be higher by one source: The Asbestos Litigation Group, consisting of 150 lawyers acting for plaintiffs with asbestos claims, calculates the figure as $90,000. In any case this does not affect the disproportion between the damages paid and "technical costs". For lung cancer and mesothelioma average damages were higher: $119,000 and $319,000 respectively. In 198 out of the 170 suits decided by the courts, punitive damages averaging $219,000 were awarded. Of the total of approximately $400m which had to be paid in settlement of the 3,800 claims to victims and their lawyers, $275m had to be met by the liability insurers of asbestos suppliers, mainly under a reservation of rights. The answer to the question of who is finally to bear this cost burden and the costs to be expected in future will determine the economic existence of many suppliers as well as many liability insurers. In this connection the interpretation of the term "occurrence" used in liability insurance policies is very important.

Sunday Times: New rumpus set to hit Lloyd's

A new series of revelations involving reinsurance payments of £70m and centring on Lloyd's broker Bellew, Parry & Raven is set to shatter the relative calm in the insurance market.

An investigation of the brokers and the closely connected Midland Reinsurance Company in Bermuda has now been added to the remit of lawyer Anthony Coleman and his committee investigating on behalf of Lloyd's. They have already spent three months looking into the tangled affairs of Lloyd's underwriters Raymond Brooks and Terence Dooley and their links with Fidentia, the Bermuda reinsurer at the heart of a series of alleged risk-free reinsurance contracts. Now the inquiry will probe:

• the real ownership of Midland Re
• Midland's Re's links with Brooks and Dooley
• Bellew, Parry & Raven's secret purchase of an underwriting agency

Coleman has already forced Brooks and Dooley to backtrack on a letter sent to syndicate members in December which stated they had severed all connections with Fidentia in 1978. The underwriters have now admitted that they were among the beneficiaries of Coral Holding, a discretionary trust set up to purchase Fidentia.

Coleman has now been told that Midland Re is controlled in the same way with the ultimate beneficiaries including Bellew Parry & Raven. Both Midland Re and Fidentia share the same Bermuda legal firm - Conyers Dill & Pearman.

Midland's Re's most public activity has been as a staging for the large sums sent as reinsurance premiums to Bermuda by Brooks and Dooley via various brokers including Bellew & Parry. In all, cash transferred in this way totalled $20m - with as much as $2m often changing hands at one time.

But although Brooks and Dooley accounted for a substantial proportion of Midland Re's business, the Lloyd's investigators do not believe it was set up solely for their use.

In all some $100m - equal to £70m - found its way through the Midland Re books and the Coleman committee will check the business of any other Lloyd's syndicate that had major dealings with Midland Re.

Coleman will also probe the top secret deal, finalised in February, between Bertie Grattan-Bellew, a near neighbour and shooting partner of Lloyd's chairman Sir Peter Green, and James Archer, the underwriter brought out of semi-retirement b Alexander & Alexander to head the former Posgate marine Syndicate 127.

This involved the sale of Archer & Massie Underwriting Agencies to Bellew, Parry & Raven for just over £1.5m, a surprisingly high sum given that the agency's short life - it was set up two years ago - has precluded any trading figures being published.

A major function of Archer & Massie is to underwrite for Syndicate 505 - a "baby" syndicate consisting largely of working members of Lloyd's including Ken Grob, Ian Posgate, Ron Comery and Grattan-Bellew.

Archer was the majority shareholder in Archer & Massie. He collected around £1m for his shares. Posgate and Grob were also shareholders.

But the Coleman committee's biggest immediate hurdle - and one that is shared by Lloyd's solicitors Linklaters - is to overcome its recent rebuff after its joint recommendation that Brooks and Dooley be suspended was turned down by the Lloyd's committee with Stephen Merrett the only committee voice favouring a hard line. Fellow hawk Ted Nelson was excluded from the meeting because his close links with Bellew, Parry & Raven.

Stephenson Harwood, solicitors for Posgate (who was suspended late last summer) are alleging bias in a letter to Linklaters. Posgate said yesterday he was "disappointed that the committee seemed to have agreed on a whitewash a week before it sat".

Business Insurance: The asbestos crisis

Some say the insurance industry could be ultimate victim when the dust settles: Will the insurance industry survive the avalanche of asbestos claims hitting it or will it become the controversial mineral's last and largest victim? No-one is sure, but it is clear the industry has never before faced the potential liability brought by asbestos litigation, experts agree. Asbestos companies - and their insurers - already face more than 20,000 claims from workers who say they were injured by exposure to asbestos.... it is estimated that another 30,000 to 200,000 claims may still be filed. These claims could cost billions of dollars, some estimate, imperilling many primary and excess insurers and reinsurance companies... "Asbestos is the single biggest problem we find in the industry," says Floyd Knowlton, at the Travelers Corp. "But the numbers aren't anywhere near the numbers that the Chicken Littles are saying." "It would be premature to say the industry would go bankrupt," adds Dennis Connolly, counsel to the American Insurance Assn. Only under the worst possible scenarios - settlements and jury awards skyrocket and courts adopt policy interpretations that give policyholders the maximum amount of coverage would the industry be imperilled, he says. But others, who cite studies that predict tens of thousands will die from asbestos diseases in the next few decades, are not as certain. Insurers like Commercial Union Insurance Co. have long argued that, under certain coverage theories, they won't be able to handle an unprecedented number of claims caused by asbestos and other toxic substances. "Insurance companies are not capable of handling these (claims) on a direct basis" says William E. Bailey, CU's Senior VP and claims counsel, and even those who don't believe the insurance industry as a whole will fail agree that some individual insurers, especially less-capitalised excess insurers and reinsurers, may fall a major problem almost all agree, is that no-one has a good handle on what the industries' ultimate liability will be. "The variables are just unbelievable" says Kent Wilson, a defence attorney with the Chicago law firm of Peterson Ross Schloerb & Sidel. Before any real determination can be made, the industry must know the number of future claims, how much they will cost and how the risk will spread out between primary and excess insurers and reinsurers....

At least 2 major studies have tried to assess the potential impact of asbestos claims on the insurance industry. Although they reached far different conclusions, both said the impact will be enormous. One by a Professor at the Yale University School of Organisation and Management says the estimated indemnity cost will be $38-2bn computed with a net worth of $11-5bn for the major insurance companies involved. "The large payments that will result from asbestos product liability suits are likely to go beyond the financial capacity of the insurance industry to meet them as well as their other obligations" Professor MacAvoy concludes. "Unless public policy action is adopted, some future claimants will remain uncompensated while certain asbestos and insurance firms will go bankrupt." A study by insurance industry analysts Conning & Co published late last year estimates the potential impact at a much smaller $4bn to $10bn. Conning does not foresee the entire industry going under, but says some insurers could possibly fold. "Generally, the impact on the insurance industry is not expected to be catastrophic because of the long period over which the claims will be experienced", it says. "However, the impact upon individual companies could well be severe since there appears to be significant concentrations of coverage in a limited number of insurance companies and their reinsurers."

Lloyd's circular letter to the Members of Lloyd's in respect of the Underwriting Agency System at Lloyd's. The Chairman of Lloyd's, Peter Green, states

In September 1982, a consultative paper was issued by the Working Party, dealing with Ownership and Control of Underwriting Agencies. That part of the Working Party's work is now complete and I enclose a copy of the Report which will be considered by the Council in the near future.

Chapter 10 lists the matters still to be considered by the Working Party. I understand that although it is not planned to issue any further consultative documents, views will nevertheless be welcomed by the Working Party on these subjects. This letter has been sent to all Members of Lloyd's".

(The final version of Part 1 of the Report is dated 28 March 1983)

Daily Telegraph: Lloyd's divestment rules strengthened

NEW RULES to strengthen the controls over those who own and manage Lloyd's underwriting agencies are proposed in the first part of a Lloyd's working party report on the agency system. Part of the report puts forward the details proposed for enforcing the divestment by insurance brokers of their managing agency interests, adding provisions to the effect that no less than two-thirds of the voting power in a managing agents must be held by Lloyd's members. A new recommendation, that no more than 40 p.c. of the voting power in a syndicate can be owned by any one person, could lead to further divestment if it is accepted.

The ownership recommendations look likely to encourage the introduction of several classes of shares in an agency, including non-voting shares. David Stebbings, deputy Chairman of the committee, commented yesterday that "there is nothing precluding non-voting shares by law, and it is not for the Council to ban them if people want to use them in non-listed companies."

The restrictions on ownership will cause considerable controversy, particularly from working members of Lloyd's who favoured the idea allowing Market forces free rein. But the committee rejected this on the ground that "those who manage agencies should be within the jurisdiction of the Council."

It also underlines the need for directors of agencies to give satisfactory details of "character and suitability."

An analysis of the comments from various bodies and persons forwarded by the Committee to the Lloyd's Working Party on Accountancy and Disclosure, now chaired by Ian Plaistowe, senior partner of Arthur Anderson .& Co, prior to finalisation of the accountancy manual setting out the rules for annual financial reporting to Names.

The Lloyd's Working Party set up to review the Instructions for the Guidance of Lloyd's Auditors and, in particular, to consider to consider what changes should be implemented for the audit at 31 December 1982 submit a report to the Committee detailing initial requirements for reinsurance and disclosure. The Working Party's proposals on disclosure of reinsurance arrangements were approved by the Committee of Lloyd's. Following that approval managing agents, members' agents and approved accountants were advised by letter of their responsibilities relating to reinsurance arrangements. This letter also outlined the Committee's requirement for disclosure of certain information relating to reinsurance in syndicate accounts, disclosure to Lloyd's of related party reinsurance contracts or arrangements and of certain other reinsurance contracts or arrangements. Shortly afterwards, the Working Party completed its deliberations on a proposed Byelaw concerning disclosure of insurance and other interests by underwriting agents. The draft Byelaw will be presented to the Council and circulated to the Market in due course for comment.

Business Insurance: Some collecting awards though they are not ill

A former worker at a Mississippi shipyard recently won more than $1,000,000 in compensatory and punitive damages for his exposure to asbestos between 1953 and 1971. But the victim, who was diagnosed as having asbestosis had missed 30 fewer days of work in the last 5 years and was currently managing a warehouse in Alabama.

To assist with the work of implementing those aspects of the Lloyd's Act dealing with self-regulation the Council of Lloyd's appointed three advisers to Lloyd's on self-regulation. The appointments, which are on a half-time basis, are for three years, and those who have agreed to serve are:-

Daily Telegraph: Howden may be sued to recover $8m

THE independent new management of the Alexander Howden Group's Lloyd's syndicates has already recovered £2.4 million from the company run by sacked underwriter Ian Posgate over some of his reinsurance arrangements, and may have to sue Howden itself to recover another $8 million.

In a letter to syndicate members Jeremy Hardie, chairman of Alexander Syndicate Management brought in to sort out the mess, warns that he is still in the middle of secret "discussions and negotiations" and may take legal action to get information or recover money."

For four years the Howden syndicate had been accumulating credit in a reinsurance contract. In 1977 Mr Posgate's own company Posgate & Denby added its syndicates to the contract, and in return for one premium of £30,000 claimed the whole fund of £2.65 million, says Mr Hardie's letter.