Daily Telegraph: Further huge losses loom for Lloyd's members

LLOYD'S of London members, some already hard-hit, are about to suffer more huge losses following a dramatic deterioration in the finances of another syndicate involved in the notorious "LMX spiral".

About 1,000 members of R J Bromley syndicate 475 could be facing losses of more than 500pc of the syndicate's 1989 capacity.

If losses reach that level equivalent to £128m in value terms, they would beat even the worst losses incurred by Gooda Walker syndicate 298, where members are now threatening legal action.

News of the losses is likely to spark anger at a meeting tomorrow of agents who introduced members to the syndicate. They include some of the market's biggest agents, Murray Lawrence, Sedgwick and PW Kininmonth.

The latest market estimate of the loss is far greater than members were led to believe in March last year when accounts warned of a loss of about 60pc of capacity.

It follows growing losses on Hurricane Hugo and the 1987 European storms above the syndicate's reinsurance protection, and was discovered following a review by its managing agent Spratt & White, part of the Knightstone Group - the firm that emerged from the disintegration of the Poland agencies in 1991.

Members were told of the deterioration in a letter from Knightstone chairman Trevor Bradley just before Christmas .

He said the minimum loss had soared to 200pc, "but it could be considerably worse than this."

Expectations for the 1990 year are for a 50pc loss but Mr. Bradley who has called for a loss review by Lloyd's, said this could also rise.

Syndicate 475 was run by Roy Bromley until he was ousted as underwriter and head of the Bromley agency in May 1991 in circumstances he is still disputing in the courts. The syndicate ceased trading at the end of that year and is now in "run-off."

Its problems stemmed from the high-business of reinsuring the top slice of the catastrophe risks of other syndicates.

"We are all for a review," he said. "The reason for these losses has to be established because they are so absolutely appalling. We think we have the expertise to sort it out after the Poland excess of loss.

The People: Royals and pals hit by cash crash

The Duchess of Kent Prince and Princess Michael of Kent, Prince Charles's close friend Lady Romsey, and the Queen Mother's cousin Simon Bowes Lyon, have all been hard hit.

Lloyd's members known as Names - have had a disastrous year, facing losses of £2 billion.

Lady Patricia Ashmore, wife of Vice-Admiral Sir Peter Ashmore - who for 13 years was the Master of Her Majesty's Household faces crippling claims of more than £500,000.

The Queen's personal vet in Windsor, Philip Ayrton Grime honoured with the Commander of the Victorian Order and the man who looked after her horses and corgis - is threatened with demands of £1 million plus.

Princess Anne's former father-in-law, Major Peter Phillips, is another big loser and is being forced to quit his luxury home. He put his £385,000 Tudor manor house on the market last August.

Lady Romsey, Sir Angus Ogilvy, Prince and Princess Michael of Kent and the Duchess of Kent are all on the hit list, with losses totalling hundreds of thousands of pounds.

Lloyd's have been accused of "structural rottenness," with allegations that fat-cat insiders stitched up the low-risk high-profit business at the expense of outsiders.

Author Jonathan Mantle - who wrote the best-seller For Whom the Bell Tolls on the inside story of the Lloyd's crisis - said: "I have been told on good authority that the Queen is furious with Lloyd's.

"Disastrously for members of the royal inner circle, they were on some of the worst-hit syndicates."

He added: "It's not surprising that Lloyd's recently retired chairman David Coleridge didn't get a knighthood in the New Year honours.

Financial Times: Merrett deal aims to attract corporate capital to Lloyd's

Merrett Group, one of the largest agencies at the Lloyd's insurance market, yesterday announced the launch of a company formed to reinsure exclusively business underwritten by its nine syndicates.

The deal involving J.P Morgan, the US investment bank, Marsh & McLennan, the world's biggest insurance broker, and other international investors - represents the first step by any agency to attract corporate capital to the Lloyd's market, in the wake of recommendations last year by the Rowland task force.

Merrett Group itself will have no stake in Underwriters Capital (Merrett), which will be Bermuda-based. But Mr. Dennis Purkiss, chief executive, insisted that the company represents a "a new source of capital" for the group. J. P. Morgan and Marsh & McLennan will each invest $7m in Underwriters Capital (Merrett). It will start with $70m in capital

The new company will provide quota share reinsurance - reinsuring a certain percentage of risks underwritten by Merrett syndicates in return for the same percentage of the premium - for a minimum five-year period.

Many Lloyd's agencies are examining ways to attract outside capital, following the decline in the number of Names - individuals whose assets back the market's underwriting - and Mr. Purkiss predicted that the deal could be the first of a number at Lloyd's. He said: "There is not much doubt that Morgan and Marsh McLennan will use it as a blueprint."

Some syndicates have already taken advantage of new rules introduced by Lloyd's last year allowing them to make greater use of quota share reinsurance deals, but Merrett is the first agency to have negotiated arrangements of this type.

Merrett group's capacity - the maximum amount of premiums it can underwrite under Lloyd's rules - will amount to about £400m. Under the revised regulations Merrett can underwrite an extra 25 per cent of this amount if premiums in excess of this capacity are ceded to an outside quota share reinsurer.

Both Marsh & McLennan and J. P. Morgan have won a reputation for sponsoring innovative insurance deals. They launched another reinsurance company, Mid-Ocean, with capital of $350m, last November.

Sunday Telegraph: British insurer arrested in US

British insurer Alan Teale, who used to run the failed Miami Insurance Exchange, has been arrested by the FBI in Atlanta, Georgia, after what the authorities are calling one of America's biggest insurance frauds. On Friday he and his wife Charlotte Rentz, were charged with robbing 5,500 clients of $50 million.

Victims, mostly Californian, included owners of businesses destroyed in last year's Los Angeles riots, motorists and people denied health cover by conventional insurers. Teale's aim, said the FBI, was "to receive millions of dollars in premiums while failing to pay claims".

A former secretary of the Lloyd's Insurance Brokers Association, Teale, 61, and his wife were arrested after a grand jury in Mobile, Alabama, named them in a 41-count indictment. It described a scheme ranging from America to the Caribbean, Belgium and Ireland involving more laundering and fake deals to disguise Teale's involvement.

The indictment charges Teale with using foreign companies and bank accounts to avoid American licensing and auditing procedures. The grand jury alleged: "Once the defendant's companies were shut down by state insurance regulator, they and their [unnamed] co-conspirator would start new companies under different names."

After the Miami exchange collapsed, Teale gained control of Georgia-based Victoria Insurance, which itself folded in 1988. There hare been suggestions that $16 million of premiums vanished into the Bank of Credit and Commerce International in London.

"Super Bowl' of insurance frauds. The FBI said he became so well known to regulators that he always tried to hide his role in companies.

Daily Telegraph: Syndicate wins claims against Eagle Star

Syndicate 640 at Lloyd's of London has won its case against Eagle Star, so removing a threat to the quick settlement of claims by Lloyd's underwriters.

The insurance company had refused payment on the syndicate's reinsurance policies unless there was a "demonstrable legal liability".

Such a bar would have meant the "Wellington Agreement" at Lloyd's set up to accelerate payment to suffers from asbestosis, might have been stopped. It would also prevent underwriters reaching a compromise over claims.

The decision from Judge Diamond awarded victory and costs to the syndicate. He ruled that Eagle Star had to pay monthly debit notes against "honest payments" without demanding legal liability proof in each case

The syndicate. formed in 1919, is being closed and Syndicate Underwriting Management was sealing off accumulated liabilities by taking out "whole account unlimited run-off" reinsurance cover with Eagle Star for the risks still lingering from pre-1965 policies.

Up to June 1991, Eagle Star paid claims on that cover but since then the two sides have been locked in legal battle.

The Recorder: Limited victory for Shell in coverage appeal.

Daily Journal: Shell insurer must pay for toxic cleanup

Business Review: Aetna Boosts Reserves by $180 Million For Asbestos, Environmental Claims

NEW YORK - Investment analysts called Aetna Life & Casualty Co.'s $180 million boost in asbestos and environmental claim reserves a sign that the Hartford-based insurance company has gotten a better grip on its current claims adjustment expenses, primarily legal fees.

Aetna announced late Tuesday that the reserve increase, plus continued poor results in its commercial property/casualty business, accounted for a fourth-quarter after-tax loss from continuing operations of between $155 million and $165 million.

But the announcement caught many analysts off guard, even though ITT Hartford Insurance Co. of Hartford, Conn., and Crum & Forster Inc. of Warren, N.J., recently pumped billions of dollars into their reserves for the fourth quarter of 1992.

"It's not that anyone hasn't known the company has asbestos and environmental exposures. But it gave no Indication earlier that the company would be doing something with property/casualty reserves," said senior analyst Gloria Vogel of Shearson Lehman in New York.

However he said he was not surprised by the company's timing. "It makes a lot of sense to take the loss in the fourth quarter of 1992," he said. "From an investor's point of view, 1992 has already been written-off as a bad year" for insurance companies hit with billions of dollars in catastrophe claim including $3 billion for Hurricane Andrew alone.

Chris Heller, Aetna's spokesman. denied the insurer was trying to hide the losses in the fourth quarter. "This is not a case of us dumping," he said. "There are very specific things in recent months that led us to this action."

Mr. Heller said $80 million of that increase is to fund asbestos claims. He said the company now can estimate its legal claims as a result of recent action by the Center for Claims Resolution, Princeton, N.J., which worked out a settlement in 800 asbestos cases consolidated by a Maryland court. The center is a mechanism created by 20 former asbestos makers and their Insurers to pay claims of people injured by asbestos.

The remaining $l00 million reserve boost is for the company's continuing increases in environmental cases and the cost of litigating such actions, he said. "Aetna's one of the biggest players in environmental cases," said William Passannante, a partner with Anderson Kill Olick & Oshinsky of New York, which has represented plaintiffs in environmental cases. "There are hundreds of cases, and each one is potentially millions of dollars worth of exposure."

"We anticipate taking no action," said William Cavanagh, a director at Standard & Poor's, which rates Aetna "AA" on its senior debt. "They, like all other commercial companies, are going to have to deal with losses from toxic liability losses over time."

"A lot of companies need to be doing this. This is an accounting recognition of those losses," agreed Chester Murray, associate director of Moody's Investor Services, which rates the company "AA2." Aetna is "catching up to the economic realities of the situation," he added.

"The company wants to clean the slate and position themselves to report improved earnings going forward," said John Snyder, senior vice president of the P/C department of A.M. Best of Oldwick, N.J. which gave Aetna an "A" rating.

Business Review: Weather woes send shivers up the spines of Lloyd's names

A paper recently presented at the annual congress of the National Insurance Brokers of Australia catalogues the enormous increase in claims resulting from natural disasters over the past five years. It also outlines reports by various insurance and reinsurance firms to deal with such claims in the future.

Sunday Telegraph: Worst fears confirmed at Gooda

ABOUT 4,000 Lloyd's Names on the stricken Gooda Walker syndicates face bad news tomorrow when Ralph Sharp, head of GW Run Off,. delivers his interim report.

Already fearful of eventual combined losses of more than £580 million, they are likely to find the figures for the 1989 open year and 1990 at the outer limits of their loss estimates. Worst news is likely in spiral Syndicate 298 and stop-loss Syndicate 387, though 290 may not be as bad as feared.

Meanwhile. another action group. representing Names on Syndicate 126, where Ian Posgate was underwriter, are launching a protest campaign. They have not been able to close their accounts for 1980, 1981 and 1982, showing a loss of 150 per cent of capacity on United States liability and pollution business, much placed by broker Minet.

Underwriter Michael Harris of the A J Archer agency is managing the run-off - he also writes for Syndicate 947, which reinsured with 126. Action group founders Kimbarra Mahon and Richard Micklethwaite want Lloyd's chief executive Peter Middleton to pressure Archer to close the years rather than run them off for a fee. They have protested to agency chairman Jeremy Hardie.

Financial Times: Losses for Gooda Walker syndicates put at £924m

GOODA WALKER syndicates at Lloyd's of London suffered losses of nearly £924m in the four years to 1990 - possibly the largest experienced on the Insurance market according to estimates released yesterday.

An interim report from GW Run-Off, the agency managing the defunct syndicates, showed losses for 1989 of £621m - or nearly 30 per cent of losses across the entire Lloyd's insurance market for the year.

Some 4,000 Names - the individuals whose assets underwrite the market - on the seven Gooda syndicates also received initial estimated losses for the 1990 underwriting year of £188m.

Mr. Michael Deeny, chairman-elect of the Gooda Walker Action Group, said last night: "This is absolutely horrific. It's larger than we expected and very depressing for Lloyd's Names."

But Mr. Ralph Sharp, GW Run-Off chairman, said the estimates could increase substantially because they took no account of asbestosis and pollution losses or allowances for the collapse of reinsurance companies.

In a measure of the difficulty facing Names, the report showed that only two thirds of the £598m in calls made from syndicates during 1991 and 1992 had been received by the end of last year.

Syndicate 387 alone posted losses of 750 per cent of its underwriting capacity for 1989, the last year in which it wrote insurance business and the highest proportion on a Lloyd's syndicate.

The other syndicates - 164, 290, 295, 296, 298 and 299 -showed losses of between 5 per cent and 150 per cent in 1986-90.

Additional costs for 1986-89 rose by £142m, of which £46m was attributed to exchange rate losses and £24m was in further reserves against claims connected with Hurricane Hugo.

GW Run-Off said that it was investigating several aspects of the management of the Gooda syndicates, including "under-reserving" - making insufficient provision against possible losses -on syndicates 164 and 290, and bonuses and salaries paid to former staff and a fleet of cars charged to syndicate funds.

Daily Telegraph: Gooda Walker loss tops £1bn

THE HUGE losses on the Gooda Walker insurance syndicates have worsened further, taking the estimated total deficit to more than £1 billion.

Members agents, who look after the 3,500 members of Lloyd's involved in the syndicates previously managed by Gooda Walker, were yesterday told that the combined loss is estimated at £925m for the open years up to and including 1990.

This does not include the expected losses for 1991, which have yet to be quantified, hut will take the total over £1bn.

G W Run-Off, the substitute agency formed to look after the Gooda Walker syndicates' affairs, is investigating bonus payments and salaries paid to former Gooda Walker staff. In particular, it is looking at the salary increases paid to Derek Walker two years ago.

It has also discovered that a fleet of 19 cars for the use of former Gooda Walker senior staff was charged to syndicate trust funds. These cars were subsequently sold under a sale-and-leaseback agreement and G W Run-Off is trying to recover the money.

Ralph Sharp, chairman of G W Run-Off, said; "I am not interested in what cars they were but I can assure you they weren't Mini's." Mr. Sharp refused to disclose the size of bonuses paid to former Gooda Walker staff. "It is a legal matter. I can't comment."

Mr. Sharp said the 1989 accounts worsened by £142m during last year. Some £46m of this deterioration is blamed on sterling's devaluation and a further £12m for interest charges resulting from the delays in losses being funded by members.

Lloyd's of London is charging interest of 5pc over base rates on overdrawn balances and has refused calls for help on currency hedging, despite a considerable proportion of its Central Fund being held in US dollars.

Cash calls totalling £403m have been collected but a further £195m remains outstanding.

David Young, deputy chairman of accountants Touche Ross, is to take over as chairman from Mr. Sharp, who will remain a director.

Financial Times: No Rewrite for Lloyd's Horror Story

High above the trading floors of Lloyd's of London, David Rowland. chairman of the troubled insurance market, contemplated the latest round of bad news. It was, he said, "horrific."

The source of his concern was in nearby Lloyd's Avenue, where managers were trying to salvage the fortunes of 3,500 underwriting members whose affairs were once managed by the Gooda Walker agency.

They had just announced that losses had climbed to £925m. For individuals in insurance syndicates, that meant an average liability of £264,285 each. Since the bulk of the losses will have to be met from their private wealth, many face financial ruin.

The Lloyd's market as a whole is expected to report up to £2bn worth of losses this year - on top of £2bn in losses last year and £500m in 1991.

Few financial institutions have suffered so big a loss over so short a time and survived intact. There has been widespread comment that Lloyd'', the oldest insurance market in the world, is close to "meltdown." In other words, not only are the members facing financial ruin, but Lloyd's itself might be facing bankruptcy.

Entering this troubled area is Mr. Rowland. He took over as chairman of Lloyd's at the beginning of last month but he has already created a small place in Lloyd's 305-year history. As the first paid chairman of the market, Mr. Rowland, 59, will receive £450,000 a year.

How did he feel about the losses now threatening to wipe out the generation of accumulated wealth of Lloyd's 20,000 members?

"I feel horrific but I cannot rewrite the past," he said. "What I am trying to do is to think about the future in such a way that it can benefit all members, and practical ways in which we can deal with the past. The losses are real. There is nothing I can do about that."

That is cold comfort for underwriting members, forced to watch their wealth spent on the financial consequences of oil spills or transferred to American companies that have been sued successfully by former employees who have contracted the lung disease asbestosis.

"I am not trying to avoid responsibility," Mr. Rowland said. "We should all feel responsible for those losses in a proper sense." He stressed that this statement did not suggest legal responsibility, obvious mindful of the minefield that he might get into.

How then can the members be helped? "I cannot invent money, I cannot rub a magic lamp for money to appear from it. I try to explain what the situation is."

There is, he says no solution other, than to try to increase Lloyd's resources through profitable trading in the future, to apply that profit to the members who have risked their own capital, and to strengthen the internal institutions within Lloyd's.

In spite of the turmoil within Lloyd's, dramatic changes are being made in the style of management. Until comparatively recently Lloyd's was run like a club rather than a business. The lunches were good and the management was indifferent.

The management structure has been strengthened. In the past few months a dynamic chief executive, Peter Middleton, has been appointed at £250,000 a year.

A former monk and diplomat, whose last job before joining Lloyd's was running the Thomas Cook travel agency, Mr. Middleton has made a good impression among the underwriting members. He has persuaded them that he is looking for solutions to their problems and is anxious to head off further rounds of costly litigation.

On the regulatory front, Mr. Rowland is supported by Brian Garraway, a former trouble-shooter at BAT Industries.

If Mr. Middleton has struck a hopeful note among the members, Mr. Rowland is more cautious about whether past troubles can be dispatched. By the end of April Mr. Rowland hopes to have drawn up a business plan for the market, incredibly the first ever produced at Lloyd's.

Mr. Middleton's brief extends to giving a strong lead to the hundreds of companies and executives that operate at Lloyd's

"He does not have the right of instruction over competing companies in the market but he can provide an influence," said Mr. Rowland, who formerly headed Britain's largest independent insurance broker, Sedgwick Group.

Meanwhile Mr. Rowland wants new capital brought into Lloyd's. In a report on the market's future last year, he recommended that not only individuals but also companies, and particularly insurance companies, should be allowed to invest in Lloyd's.

"It would be unwise in the present situation to bank on our future capital being provided by individuals," he observed.

So in the future he wants market forces to "produce" a framework for incorporated capital, a fair structure which will have the support of all members.

Economist: British insurers - Royal romance

FOR the last three months of 1992 British investors and Royal Insurance enjoyed a passionate love affair. Shares in the company have soared since September 16th, when sterling left Europe's exchange-rate mechanism (ERM); Royal's share price plunged to 118p during that day, then more than doubled to touch 294p in January. Though the price has slipped a bit recently, most analysts expect a further rise soon.

Attitudes have changed fast. Before the rally, rumours were rife that Royal faced collapse. In February 1992 it announced a record pre-tax loss of £373m ($660m) for 1991 and did not pay a final dividend. The following year seemed bound to be worse, thanks to big losses on mortgage-indemnity insurance. which partly reimburses lenders for losses when borrowers default.

Royal has made provisions of £360m to cover mortgage-indemnity losses, and further provisions are expected. The insurer was already badly weakened by trouble abroad. Between 1988 and 1990 it had had to give its loss-making American subsidiary £700m to boost its reserves. Royal's solvency ratio, a main measure of financial strength which shows capital as a proportion of non-life premium income, tell to 25% in June 1992 - its lowest level since 1974. The average for the five British composites (which insure both lives and general risks)was then 38%.

Yet the insurer's six month figures were less awful than expected. And at the end of 1992 Royal's solvency ratio had edged up to around 31% (against the industry's 44%), helped by the sale of foreign assets,

Off-loading an 18.8% stake in Aachener und Munchener (AM s), a German insurer that has since been bought by a French rival, raised £249m in December 1991. In February 1992 Royal's Dutch subsidiary was sold to Epic, a joint-venture with AMB and Italy's Fondiaria in which Royal has a 33% stake. Royal got £110m and lost £165m of non-life premium income from its solvency ratio, boosting the figure by four percentage points. In November Royal and Sun Alliance. a British insurer, merged their Australian units; Royal received about £50m, 40% of the combined firm and a further one-point boost to its solvency ratio. A convertible bond issue in December raised £76m.

An upturn in Britain's insurance cycle allowed Royal to raise premiums; this, tighter financial controls and a new emphasis on profits rather than market share, helped it make money. So did the interest-rate cuts following sterling's exit from the ERM; these probably saved the company, reckons Youssef Ziai, an analyst at Morgan Stanley. Even before September there had been signs that the worst of the mortgage-indemnity problem was over, among them the slowing of house repossessions, lower interest rates further reduced the rise in mortgage defaults and more recently have begun to buoy house prices. Without its mortgage-indemnity losses, Royal would actually have made a profit in 1992.

The shares of all the composites have prospered since mid-September. If ‘s have outperformed the others, it is largely because the insurer's starting position was shakier. Yet some analysts think that Royal is still undervalued. At the end of 1992 its shares traded at a 20% discount to its net asset value. The other composites were at a premium of at least 11%; Commercial Union, which avoided the mortgage-indemnity debacle, traded at a 41% premium. Royal's net assets would, in fact. shrink if it turned out that the insurer had not made sufficient provision for mortgage-indemnity losses. But most analysts reckon Royal is a good short-term bet (though the other composites have probably peaked). They are less bullish long-term.

Royal's American business is now profitable but only a shadow of its former self. And for all that the firm insists that its European and Australian joint ventures make "Strategic sense", it has in fact had to slash its overseas ambitions. Britain now generates around half of Royal's non-life premium income, compared with a quarter in the mid-1980s. Premium income is anyway falling as customers balk at higher prices. Royal admits to an 8-10% decline in volume in the past two years.

David Nisbet, an analyst at County NatWest, reckons the firm is only half-way through its long-term shrinkage. On January 29th it decided to cut its losses by winding down Royal Re, the reinsurance subsidiary that it nearly sold to America's General Re in 199:. There may be further sales, possibly of Royal Life. When this process ends, a big international company will have become a middle-sized British firm with a few overseas bits. Will investors love Royal still?

Sunday Telegraph: Lloyd's ponders public status

A RADICAL proposal to convert Lloyd's of London into a public company is being considered by the insurance exchange's market board as it works on a new business plan. Lime Street sources said yesterday.

If adopted. the plan, to be put to Lloyd's chairman David Rowland and chief executive Peter Middleton next month, could enable Lloyd's, which faces 1990 losses of up to £2 billion, to issue shares.

That would take corporate membership, mutualisation and limited liability much further than initially envisaged, but there is support among underwriters for radical measures.

Former Lloyd's deputy chairman Richard Hazell is expected to resign soon from the exchange's regulatory board, which was set up last month. He is leaving Lloyd's to chair the United Kingdom subsidiary of American insurer Liberty Mutual.

Until last summer Hazell underwrote for Syndicate 190, run by discount house Cater Allen's Lloyd's arm. The syndicate has been hit by past losses on US liability and other policies, though Hazell's successor John Wetherell says syndicate reserves of £300 million should be adequate and 1991 and 1992 should be profitable. Cater Allen is in expansionist mood, though company sources say talk of an imminent tie-up with Sturge is premature.

Sunday Mirror: £30,000 blow hits Camilla

Members of the Royal Family and others in their circle are also under threat. They include Prince and Princess Michael of Kent, the Duchess of Kent, the Queen Mother's cousin Simon Bowes-Lyon, and Prince Charles's close friends Lord and Lady Romsey.

Financial Times: Life groups in Japan gain losses concession

JAPAN'S ministry of finance is likely to allow life insurance companies to postpone booking foreign exchange losses on international bond investments for the year ending March 1993.

Although life assurers are allowed to value foreign securities at book value, they are required to book losses once the market value of the investments falls more than 15 per cent. Both Canadian and Australian dollars have fallen sharply against the yen this fiscal year, and leading life assurers are believed to be holding some Y300bn ($2.41bn) in unrealised losses.

Independent: Increased losses likely at Lloyd's

Two of the most troubled underwriting syndicates in the Lloyd's insurance market are poised to announce increased losses.

Managers of syndicate 745 are expected to warn underwriting members that losses are far worse than the anticipated £132.5m so far announced. A letter will be sent to members by the M J Marchant agency, which looks after the affairs of the syndicate.

Edward Benfield, chairman of Kininmonth Lambert Marine XL that losses on the 1989 and 1990 underwriting accounts could rise as high as £400m.

syndicate's 1,750 members. He has urged Lloyd's to reopen the 1989 account and hold a fresh audit.

Marchant took over the management of 745 from KPH Underwriting Agencies all the end of last year and since then managers have been struggling to get more reliable information about the syndicate's trading position.

The losses have been caused by larger-than-expected payouts on insurance claims arising from European storm damage in 1990. KPH has already warned that the forecast £132.5m losses expected for the 1990 account could be "subject to material change".

At the Spratt & White underwriting agency company managers are attempting to draw up a detailed report on the affairs of syndicate 475 following the suicide of the former underwriter Roy Bromley, found dead from a gun-shot wound last month.

Losses have climbed from £14m to £54m and underwriters and brokers expect them to be higher.

The syndicate suffered from larger-than-expected losses from Hurricane Hugo in 1989 and early 1990 European storm damage.

Meanwhile, an action group of underwriting members who form syndicate 418, which is fighting for financial restitution in the wake of nearly £200m worth of losses, has replaced its lawyers, Richard Butler, with More Fisher Brown.

Sunday Times: Lloyd's insiders ‘failed' to warn names

THE implication of a single letter must be causing David Rowland and Peter Middleton, Lloyd's of London chairman and chief executive respectively, more sleepless nights than any other issue as they tackle the intractable problems of the insurance market.

They now know that for 11 years many agents did not follow advice from the then deputy chairman and inform names about asbestosis claims which might have stopped many of the 19,000 new names from joining the market and encouraged others to leave. Instead many of these names now face ruin.

Neville Russell and other panel auditors wrote the letter on February 26, 1982, during the passing of the new Lloyd's Act which granted the market self-regulatory powers and immunity from prosecution. In it, Lloyd's Council received a bleak warning that many syndicates faced unquantifiable losses "arising from asbestosis and related diseases ... there have been ... 13,000 individual claimants. Total exposure... appears to be considerably in excess of this figure . . . most syndicates are not very certain of their reinsurance recoveries ... most syndicates will incur losses on their own writings of reinsurance business. Very little of this has been advised so far."

Murray Lawrence, then deputy chairman, wrote to agents on March 18, 1982 and, inter alia, advised them "... where the reserve for asbestosis represents a material proportion of the total reserves of the syndicate, agents should consider whether or not to leave the account open".

The letter continued: "It is the agent's responsibility to ensure that the reserves provided for asbestosis are sufficient to meet the syndicate's liabilities … Managing and members' agents are strongly advised to inform their names of their involvement with asbestosis claims and the manner in which their syndicates' current and potential liabilities have been covered."

It is unlikely agents realised the extent of the real dangers. But without action by agents to satisfy the auditors, affected syndicates simply could not be given a clean bill of health. Agents faced a simple choice. Should they expand into the problem and find new names in the hope of absorbing the losses, or be frank and risk undermining the market?

Many agents chose the former and hoped for the best. They added 19,000 new names to the existing 20,145 in 1982. Old names were encouraged to write more business and join the syndicates. At the same time the volume of business and the risk borne by affected names, who have unlimited liability, rocketed by 250%.

Agents presumably hoped all would be well. They must have convinced themselves it was in the interest of everyone to be economical with the truth. If they blew the whistle, the accounts of these syndicates in the 1982 year could not be closed; all but the deaf would leave the blighted syndicates.

Worse still, several agencies were being fattened for public flotation, so potential profits from such deals would have melted. With open years draining away to the millennium, existing names and insiders would face ruin. So what agents saw as promoting "the good of the market" fortuitously coincided with the self-interest of the professionals.

The fig leaf they offered to satisfy the panel auditors, apparently, was that some syndicates took out "unlimited syndicate stop-loss policies," in which one syndicate reinsures the "tail" of another. This is a kind of insurance ‘‘daisy chain'' otherwise known as whole-account reinsurance, and its value is cosmetic. Risks go round in a circle but liabilities stay firmly with names.

Little warning was given by the members' agents during the 1980s to the 19,000 new recruits. Nor was a waning given to the new names at their obligatory meeting prior to joining the syndicate with a senior Lloyd's representative, whose job is to point out the risks of the insurance market.

So as syndicate years were closed and the problem built up, managing agencies were floated on the stock market, new names were recruited and money was coined for the agencies for another 11 glorious years.

Agents appear to have gambled that the asbestosis losses would not be as large as they had been warned and that profitable business would soak them up over the years; they lost both bets. Claims ate pouring in. With the bill for natural disasters reaching £4 billion, even the most optimistic agree there is little chance of profits this side of 1996.

The panel auditors' letter now forms the foundation of various actions being brought by names who joined since 1982 and face ruin. They claim agents did not tell them about it so they were recruited on a false prospectus. If they had been warned they say they would not have joined in the first place.

Those who joined before 1982 claim that if they had been shown the letter they certainly would not have increased their underwriting. These names are not only drained of cash in the short term by the losses of the "spiral", but also face never-ending losses from these open years "down to their last waistcoat button". Who knew what and when will become clearer in court hearings.

Sunday Times: Nightmare on Lime Street

TOM BENYON, former Tory MP, former business and former chairman of Lloyd's Society of Names, may not be everyone's cup of tea, but he has become something of a hero to the thousands of names who have been forced to the edge of ruin by huge losses.

From the ashes of the legal battles of the past few years, Benyon has rescued what he reckons is a vital document: a letter from Neville Russell, the firm of auditors, which suggests that Lloyd's agents knew more than it was letting on to its names about the potential disaster of huge asbestosis claims.

His point is that after this portentous warning, there should have been a large "Joining Lloyd's Can Damage Your Wealth" warning attached to every application form. Instead some 19,000 inspired to join the Lime Street insurance market, attracted by the easy, almost guaranteed pickings that had the rule for many years.

When that fateful letter arrived 1982, the situation at Lloyd's was very different from today. The Council of Lloyd's, then chaired by Sir Peter Green, knew thousands of Workers in Britain and America were dying long, agonising deaths from asbestosis. Two years earlier they had set up a working party to look into the problem of the lung disease, worried that Lloyd's might face big pay-outs. But nobody at this stage could have predicted the huge damages awarded by the American courts which have so far cost Lloyd's £1 billion, with the prospect of more claims stretching into the next century.

At the end of a letter to them he strongly advised managing and members' agents to inform their names of their exposure to the risks. Whether the agents actually warned names is the main matter now in dispute. Many of the 19,000 names who subsequently joined Lloyd's claim nobody ever mentioned the word "asbestosis".

In 1989 John Donner, a members' agent whose names were losing millions on asbestosis claims, complained to Lloyd's that some underwriters had been privy to valuable information on the disease which they had kept themselves. He suggested that underwriters "in the know" had quickly dumped their asbestosis exposure on other underwriters, notably Richard Outhwaite and Stephen Merrett.

The suspicions have persisted. Last year, names took Outhwaite's agencies to court for negligence and succeeded in negotiating an out-of-court settlement for £116m compensation.

Sunday Times: Lloyd's names take fresh hope from 1982 letter

Some of the 19.000 people who became names at Lloyd's since 1982 are taking fresh hope from a letter that clearly shows Lloyd's was warned about the wave of asbestosis claims about to hit it.

In the letter, dated February 1982, a group of auditors including Arthur Young and Ernst & Whinney, warned that the potential exposure to asbestosis claims, which already totalled 13,000 by that stage, was being seriously under-estimated.

But Lloyd's insists Benyon is simply raking up old allegations which it has already disproved. David Rowland, the new chairman, said: "This is not a revelation. An investigation by outsiders found there was no substance to these claims."

John Rew, who succeeded Benyon as chairman of the Society of Names last year, said he, too, believed recruiting agents had not warned new or existing names of the dangers. Peter Middleton, newly appointed chief executive, said he was not worried about the letter. "Sir David Walker who conducted a special investigation of Lloyd's for the council and other independent figures didn't find any substance to it," he said. "Second, I don't believe a conspiracy is possible at Lloyd's because I haven't met any people who can keep their mouth shut."

Bob Hughes, director of regulatory services at Lloyd's said: "A huge amount of information on asbestos was available to all underwriters and they were invited to visit the asbestos-working-party office. It is wrong to suggest Lloyd's failed to do all that it could."

One prominent member of the council in 1982. who did not wish to be named, said: "Of course names were suckered into joining Lloyd's, but they were suckered through snobbery and greed, not because they weren't told about asbestos."

However, in 1990 Lloyd's announced that Walker's inquiry had found no truth in allegations that some underwriter's had access to privileged information and used this to dump their asbestos liabilities on other underwriters. "No evidence has been established that information was withheld from the market by the asbestos working party," said a press release at the time. Significantly, however, there was no Comment in the release about the amount of information made available to outside names.

Sunday Times: Lloyd's luck

Lloyd's insists it did pass on the warning, from a panel of auditors in 1982, that asbestosis claims were going to be far greater than had been anticipated. Indeed there is a letter from the previous chairman, Mr. Murray Lawrence, passing the information down the line.

But how far did the warnings go? Since then, some 19,000 unfortunates have been recruited as names and it is difficult to imagine many of them willingly putting everything at risk with that warning in front of them. Indeed, I have the letter Lloyd's received in front of me as I write and would run a mile from joining Lloyd's if I had seen it.

Benyon, like most who have lost money (which is just about everybody in this past decade), would cheerfully hang the lot of them at Lloyd's, but he has a point. Asbestosis did not come as the bolt out of the blue we were led to believe.

There were solemn warnings that this problem was going to be huge and all-encompassing (the letter says that the losses were being apportioned on an industry basis, so that if one carrier went bust, the loss would be spread over the others - which is what happened) yet new names were busily recruited.

Sunday Telegraph: Lloyd's £1bn call

A SWEEPING plan to compel Lloyd's of London's 270 insurance underwriting Syndicates to pay between £500 million and £1 billion into a central market-owned body, CentreWrite, is being considered by the Lloyd's market board. This would be accompanied by an equally large loan to Lloyd's or a membership levy of a similar amount and would clear the way for radical restructuring.

The proposal is designed to ensure the market would have enough money to meet its 1990 losses and be able to attract new individual and corporate members without deterring them with the legacy of past disasters. It would require all syndicates to reinsure their 1990 results and place all their reserves with CentreWrite, which would receive no premium.

Senior underwriting agents have been canvassed already about the proposal, which some in Lime Street see as the way to clear the decks before turning Lloyd's into a public company. It is one of several ideas presented to the market board, which is due to submit a business plan to Lloyd's chairman David Rowland and chief executive Peter Middleton in April.

That happens to coincide with the expiry of many of the writs served against Names who have been unwilling or unable to meet their syndicate losses.

A global settlement of disputed calls is also seen as crucial, but it still hinges on agreement by so-far unwilling reinsurers of agencies' errors and omissions policies to underwrite it.

• LIONCOVER, set up by Lloyd's to pool the scandal-ridden Peter Cameron-Webb syndicates' outstanding business, is having trouble with its own reinsurance claims. Lioncover showed a £40 million shortfall for 1991 and resistance by reinsurers is delaying its accounts for 1992.

Meanwhile, members of Syndicate 745, whose former underwriter, David King, is suing for wrongful dismissal, face a 50 per cent 1990 cash call in April and the final result could be several times worse. The Outhwaite agency's Syndicate 317 could show a loss of more than 30 percent for 1990.

Independent: Lloyd's names asked to find £43m

MANAGERS of the troubled Lloyd's insurance syndicate 745 have asked 1,750 underwriting members to provide £43m from their own resources to help meet steadily rising insurance claims.

The syndicate is facing losses of more than £132m for the 1990 underwriting account, caused mainly by a flood of claims from the European storms of 1990.

Laurence Cheetham, a director of the KPH Underwriting Agencies company that manages the affairs of the syndicate, has told other agents who introduced members to the syndicate: "We must warn you that there will be a deterioration." Underwriting members will be asked to pay £22m in April as a first instalment and the balance in July.

Because of the mounting losses on the 1990 underwriting account KPH has decided to leave the books open so that liabilities can be more accurately assessed.

The agency's managers are carrying out an extensive review of the background to the losses, and a detailed explanation and full details of the cash call are to be sent to underwriting members later this week.

There is widespread speculation within Lloyd's about the eventual size of the losses for the 1990 underwriting account. Andrew Elliott, an underwriter working closely on sorting out the problems of the syndicate, admitted yesterday that some speculation at Lloyd's had suggested that the eventual loss could be as high as 1,000 per cent of the syndicate's financial capacity.

If that happened, it would mean a loss of more than £430m for the syndicate.

Mr. Cheetham has told other agents: "There is likely to be a further cash call in the early part of 1994 and you and your names [the underwriting members] will be advised of the estimated amount that will be required in the report and accounts."

An action group has already been formed among the under-writing members to protect their interests and gain financial help.

Edward Benfield, a professional insurance broker who is a member of the syndicate, has urged Lloyd's to reopen the syndicate's 1989 account, which showed a loss of £22.3m, and hold a fresh audit.

Independent: Lloyd's set to probe losses suffered by two syndicates

LLOYD'S of London is poised to appoint internal inquiry teams to examine how losses of nearly £200m have fallen on two of the market's insurance syndicates, writes John Moore.

Both teams will include an accountant aid two market professionals. They will examine the affairs of syndicates 475 and 745.

The affairs of syndicate 475, formed of 1,750 underwriting members, were once managed by Roy Bromley, who committed suicide last month after losses rose from £14m to £54m.

The other syndicate, 745, managed by KPH Underwriting Agencies, is also formed of 1,750 underwriting members. Its managers are seeking £43m from members to help to meet £132.5m of losses that have fallen on it.

• A Lloyd's inquiry team led by Kieran Poynter, of the accountants Price Waterhouse, has concluded that Gooda Walker syndicate 299 ran up £39.9m worth of losses because of five "catastrophe" claims, including those arising from the Piper Alpha oil rig disaster. The inquiry team found that there was no evidence that the syndicate had an improper relationship with Walsham Brothers, one of the most successful firms of small insurance brokers at Lloyd's, which it used.

Daily Telegraph: Shaw strides centre stage

Australian Sun-Herald: Grilling for Lloyd's chief over huge insurance losses

AUSTRALIAN member' of giant international insurer Lloyd's of London are planning a hot reception for chief executive Peter Middleton when he arrives in Sydney this week.

Lloyd's names, of whom Australia boasts more than 500 out of a total 20,000 world-wide, have incurred massive losses recently, leaving trail of bankruptcies, court actions and even suicides.

Already local names have prepared a list of explosive questions seeking information on a host of issues ranging from Lloyd's solvency to alleged concealment of losses, the extent of massive asbestosis claims, claims of malpractice and the real extent of losses in the US from Hurricane Andrew.

During the late 1980s, Lloyd's was rocked by massive losses - the first in more than 20 years - after a spate of natural disasters, including Hurricane Andrew, severe storms in the UK and Europe and the loss of the Piper Alpha oil production platform in the North Sea.

Lloyd's was also hit by claims worth more than $150 billion from victims of asbestosis world-wide.

Amid the crisis surrounding Lloyd's, chairman David Coleridge resigned last July and chief executive Alan Lord retired two months later.

The insurer's underwriting capacity has now fallen by 40 per cent to $18 billion and many names regard Mr. Middleton's visit - officially to discuss Lloyd's direction for the 1990s - as a recruitment drive to attract new capital and placate angry members

Local names are keen to quiz Mr. Middleton, a former travel business executive with no experience in the insurance industry.

Before joining Lloyd's, Mr. Middleton was group chief executive of the Thomas Cook Travel group and was head of banking operations at the Midland Bank for two years. Early in his career he spent 16 years in Britain's diplomatic service.

Lloyd's, which reports three years in arrears, is forecast to incur a $1 billion loss for 1991 after suffering losses of $A4.6 million in 1989 and $A3.3 billion in 1990.

"We have been through some very bad years," Mr. Middleton said recently.

After operating for 305 years, the worlds biggest insurance market next month will produce its first business plan Mr. Middleton said

"The business plan will be radical," he said. "Names will begin to benefit from the restructuring over the next few years."

But local names are expected to subject Mr. Middleton to severe examination.

Information provided to local names alleges "concealment of the huge amount of known asbestosis claims in 1982 in order to dump the ‘reinsurance' on other members and to give time for insiders to escape their liabilities.

A spokesman for Mr. Middleton in London said the chief executive was unavailable for comment.

Australian Sun-Herald: Lloyd's may be facing $5bn loss

The losses for 1990, due to be reported in June, are expected to be the worst in Lloyd's 306-year history.

A leaked report suggests the loss will be higher than the $5 billion announced for 1989.

In the past three years Lloyd's and its 20,000 members have suffered losses worth more than $10 billion.

But a spokesman describing the news as speculation, said Lloyd had resources of $40.9 billion, there was no question policies would not be honoured, and name should he able to meet commitments.

Asbestos producer USG Corporation, the parent holding company of United States Gypsum Company, filed a pre-packaged plan of Reorganisation under USCA Chapter 11.

The Chairman of Lloyd's, David Rowland, forwards the document entitled "Planning for profit: a Business Plan for Lloyd's of London" to Members.

Times: Global warming sends cold shivers through insurers - Violent weather could destroy the reinsurance market and leave the public uninsured against natural catastrophes

World weather patterns are changing dramatically, triggering a string of natural disasters and forcing the insurance industry to take harsh remedial action t6 stave off a crippling flood of losses. The recent storms that ripped through America, leaving more than 100 dead and wreaking havoc from Cuba to Quebec, are unlikely to cost as much as earlier hurricanes. But they have worried insurers.

Later this week, Sun Alliance, one of Britain's strongest composite insurers, is expected to reveal, in its figures for 1992, losses from Hurricane Andrew, which swept through the Bahamas, southern Florida and the Gulf of Mexico before blowing itself out in Louisiana. It resulted in the biggest claim the insurance industry has ever faced.

Several rivals have already announced losses from the hurricane, which has cost more than $17 billion - a figure that is still rising. Last month, General Accident, for example, disclosed worse that expected losses of £65 million.

One Lloyd's underwriter said: "We are living in a much more dangerous climate. There is no doubt that global warming is taking place, causing much stronger and much more frequent hurricanes."

This view is shared by Jeremy Leggett, a scientific director at Greenpeace, who said: "A globally warmer atmosphere is expected to herald stronger and more frequent windstorms, storm surges, rising seas, floods, droughts, increased subsidence following soil shrinkage on clay substrates, and many more unpleasant impacts."

Signs of climate change are evident. Over the past 20 years, the average snowfall over the northern hemisphere has fallen 8 per cent and lake temperatures in Canada have increased 2 degrees Celsius. Mountain glaciers are in retreat, the Arctic ice-cap is declining, California is in its seventh successive year of drought, southeast England is in its' fifth and southern Africa is in the grip of the worst drought in living memory, Dr. Leggett noted in recent research.

The costs to insurers from wind-storms and other natural catastrophes have run into tens of billions of dollars, and the bulk of disasters have been in the past six years. In January 1987, Siberian winds howled across Europe, submerging Georgia in floods, followed in October by severe windstorms in the UK, which cost British insurers £2 billion, of which £430 million was reinsurance cover.

Between 1966 and 1987, there were no catastrophes that caused losses in excess of $1 billion. Of the 15 catastrophes that have cost more than $1 billion each since 1987, ten were windstorms, which accounted for more than 85 per cent of the combined total loss of $53 billion.

These losses have sent cold shivers through the insurance industry, leading to a massive pricing reaction. George Lloyd-Roberts, a leading Lloyd's underwriter, said premiums have been hiked up to reflect the crippling losses suffered in recent years while academic evidence is triggering further upward shifts. "However, we don't yet know whether this is a short term blip in weather patterns or is of a longer-term nature," he added.

The latest fall out from the market is NW Re, a three-way joint venture between Norwich Union, Winterthur, of Sweden, and Chiyoda, of Japan, which has been a big market player. NW was driven out because of the huge losses it made as a result of Cyclone Iniiki, which cost the world-wide insurance industry more than $1. 4 billion and Hurricane Andrew. NW's move

follows the departure of a string of other insurers, including English & American and the reinsurance arms of Cigna, of the US, and Yasuda, of Japan. As a result, the amount of catastrophe reinsurance available in the London market, which probably provides about 50 per cent of the world-wide catastrophe cover, has shrunk from an estimated $100 billion five years ago to its present level of between $35 billion and $50 billion.

This sharp contraction is making itself felt. Insurers are unable to lay their hands on as much reinsurance as they want and, as a result, many companies are being left with inadequate catastrophe cover. Five years ago, companies could pick up cover for $500 million of losses. Now, they are lucky if they can get cover for more than $100 million.

There is worse news elsewhere. Some regions around the world are not able to lay their hands on any reinsurance at all. Earlier this year, a lament was heard from the Caribbean that international reinsurers were shying away from the area with the hurricane-prone region north of Trinidad and Tobago suffering the worst. The problem has surfaced because local insurers are failing to demand high enough premiums from the insured, and, as a result, they cannot afford to buy the reinsurance, the price of which has gone through the roof.

High-risk areas, such as Hawaii, Florida and the Caribbean, are thought to be suffering the most. In the Caribbean, it now costs an insurer between 50 per cent and 60 per cent of its insurance premiums to buy catastrophe cover. One underwriter said he knew of one northeast American company that was having to shell out 37 per cent of its total premiums for catastrophe cover; five years ago, the figure was about 8 per cent.

The increased premiums were necessary to "bribe the reinsurer to do business", Mr. Lloyd-Roberts said. In 1987, there were about five reinsurers covering a risk, this fell to three to four the next year, to two in 1990, one in 1991 and in 1992 "that one would be decidedly wobbly", he added.

In order to entice the limited amount of reinsurance cover available, insurers are having to bear a bigger portion of the risk before the reinsurer's cover kicks in. That is, the level of deductibles are rocketing, resulting in the reinsurers bearing a lower amount of any losses. Because of this development, the London markets share in the losses from the recent US storms is expected to be negligible, despite estimates of total insurance losses ranging from £600 million to £3 billion.

The UK reinsurers are looking relaxed as they have covered only losses that exceed £3 billion. Five years ago, they would have been in a very different predicament, covering losses in excess of, say, $2 billion, with a resulting $1 billion hit. Furthermore, the amount covered has fallen. The reinsurers have provided cover for $8 billion of losses, after the $3 billion deductible, compared with the $16 billion layer they would have been likely to provide before 1987.

The marked contraction in reinsurance has also forced the insurers to look more closely at the risks they are underwriting. Countries such as the US are being broken down into zones of varying risk and reinsurers are picking and choosing where and how much they will cover. This is a marked change from the good old days when regions were more homogeneous.

Also, the days when insurers could subcontract the risk to reinsurers, enabling them to be ignorant of the facts, are gone. Insurers are beefing up their analysis because they are being forced to bear a bigger slice of any risk and because some believe the risk is on the rapid increase.

Dr. Leggett gives a warning, however, that this may not be enough. "Healthy economies are impossible without a healthy international insurance industry. It is becoming increasingly clear that a healthy insurance industry ‘will not be possible in a world in the grip of human-induced climate change." Changes in terms and premiums will only buy time for the insurance industry and unless action is taken to cut greenhouse-gas emissions, the insurers' prospects look bleak.

"Everybody is very nervous," Mr. Lloyd-Roberts said. "If there is a major catastrophe this year, I think the catastrophe market could collapse."

The threat of continued violent weather patterns is real and, as a result, there is a serious possibility of the reinsurance market collapsing. The effects would be far-reaching and the ultimate result would be the unacceptable situation of the public finding itself without any insurance cover against natural catastrophes.

Financial Times: Report raises new criticism of syndicates

MANAGERS of four loss-making Gooda Walker Syndicates artificially inflated their profits in the 1980s through the improper use of specialised reinsurance policies, a detailed report alleges.

A 200-page report prepared by GW Run Off, which is now handling the affairs of the syndicates. was passed to the Serious Fraud Office earlier this week, and has prompted fresh criticisms of regulation at Lloyd's.

Mr. Michael Deeny, chairman of the Gooda Walker Names Action Group, which is co-ordinating the Names' own legal action said: "It reveals an appalling state of affairs. It shows a total failure of regulation by Lloyd's."

One agency manager said the events showed that the system had failed Gooda Names completely. "We have to recognise that."

The report's findings have also been sent to the insurance market's investigation committee, whose examination of the syndicates has been underway for some months. The report could also be used as evidence in the legal action being taken by more than 2,000 Gooda Walker Names against their agents.

Members of the Gooda Walker syndicates are among the worst-hit of the insurance market's Names - the individuals who supply its capital. Their losses amount to more than £900m, with many individuals facing losses in excess of £1m.

The report focuses on the use by Gooda Walker syndicates of "time and distance" policies -reinsurance policies which allow Lloyd's syndicates to manage their reserves against long-tail claims which emerge many years after the inception of policies more effectively.

Such deals allow insurers to "discount" their reserves against future claims. Policyholders pay a reinsurance premium which is then invested by the reinsurer, with the proceeds - less a profit for the reinsurer - repaid at an agreed future date to meet claims.

Insurers are allowed to credit future benefits from such policies in the year in which they buy the policy. The report shows that between 1980 and 1988 the profits of four syndicates - numbers 164, 290, 295 and 298 - were increased by some £37m as a result. In some years in the early 1980s virtually all profits were generated from such policies. But few details of the policies were included in syndicate accounts.

During these same years the profitability of Gooda Walker syndicates attracted many Names to join, with each of the syndicates' capacity - or capital base - expanding significantly.

The report says that the reinsurers of some of the policies in turn reinsured their exposures with the same Gooda Walker syndicates.

The investigators were unable to find any evidence that the Gooda Walker syndicates had prepared formal cash-flow forecasts which would detail when they expect future claims to emerge. These are essential for the controlled use of "time and distance" policies.

Warnings from Lloyd's regulators that "there could be no question of [a Gooda Walker's syndicate] reinsuring its own risk back to another Gooda Walker syndicate" were apparently ignored, adds the report.

Investigators have identified three policies purchased from Pinnacle (the Bermuda-based company which provided reinsurance to the Gooda Walker syndicates), elements of which were reinsured to other Gooda Walker syndicates.

Times: Lloyd's syndicates' profits enhanced'

HUNDREDS of Lloyd's names were attracted to join the Gooda Walker syndicates because of profits that had been "significantly enhanced" by reinsurance policies according to the latest report from the affairs of the agency.

The 200-page report, which took more than a year to complete, was commissioned by GW Run-Off, the company appointed to manage the syndicates after the Gooda Walker group went into voluntary liquidation in October 1991. Written by Ken Randall, a former Lloyd's regulator, the report criticises the running of the syndicates by professional agents at Lloyd's to the detriment of names, many of whom are amateur investors.