Brave Move That Beat the Odds to Bail Out Lloyd's

Summary

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SOMETIMES I wonder whether the Financial Services Authority, if it had had the responsibility for regulating the insurance industry in 1995 as it does now, would ever have allowed Equitas to be launched. Equitas was the run-off insurance company that picked up all the unsettled asbestos and pollution liabilities of the old Lloyd's of London.What is certain is that without it, the insurance market would not have survived. Yet here Lloyd's is now, totally regenerated and shortly to announce probably its best-ever trading results.

Here too is Equitas, yesterday announcing completion of its remarkable deal with Berkshire Hathaway whereby Warren Buffett's company takes on virtually all responsibility for its remaining debts. Just one more small tidying-up by Equitas should be completed in a couple of years, and then the thousands of onetime Lloyd's Names who looked to be permanently trapped by the old market's liabilities will finally be in the clear. It is a quite astonishing achievement. You would have got very long odds indeed for a bet on a successful outcome when Equitas was launched. Indeed, it never did get a clean audit report . That is why the question is so pertinent. The problem with Equitas at launch was it had massive but unquantifiable liabilities, and assets that in comparison looked pitifully small. Yet the then regulator, the Department of Trade and Industry, had to sign a certificate that said the group was solvent.

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Brave Move That Beat the Odds to Bail Out Lloyd's

It was a hugely courageous thing to do, given the information available at the time, but the DTI stepped up to the mark. Insurance regulation has chang...

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