Lloyd's deal faces setback: Complaint against KPH may undermine settlement
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Your support makes all the difference.FRESH allegations involving pounds 130m of losses and affecting 1,750 underwriting members of Lloyd's of London surfaced yesterday just a day before the insurance market makes an offer to members designed to resolve legal action.
Lloyd's intends to offer about pounds 1bn to more than 17,000 members to head off litigation following huge losses in the market.
The financial plan, due to be announced today, is designed to help members facing a total of pounds 2bn in losses and could be challenged in the courts.
By next year all Lloyd's members will have faced total losses of pounds 7.5bn over four trading accounts.
But a setback to a possible settlement occurred at the weekend when John Mallinson, solicitor to the Corporation of Lloyd's, received a complaint from members whose affairs were managed by the KPH underwriting agency. The agency managed syndicate 745, which has 1,750 underwriting members and has suffered losses of more than pounds 130m.
An action group seeking financial restitution for syndicate 745 members has claimed that a late booking of a reinsurance contract was indicative of a 'lack of good faith'.
Members of the action group have been arguing that the 1989 underwriting account was improperly closed by agency managers. KPH reported losses of more than pounds 20m for the 1989 underwriting account, which climbed to more than pounds 130m in the following trading account.
The allegations have been categorically denied by KPH. It said the contract was disclosed in the accounts of syndicate 745 for 1991 and 1992. The contract was placed with the Frankona, the German reinsurance group, and was designed to reduce insurance losses on syndicate 745, which had been hit by large claims arising from Hurricane Hugo.
Members say there may have been a serious miscalculation of estimates of the syndicate's profitability or losses in the 1989 and 1990 trading accounts. They say the Frankona contract should be fully investigated.
Salomon Brothers, the US investment bank, has abandoned its attempt to raise a dollars 300m fund to invest in the Lloyd's insurance market next year, writes Paul Durman.
This leaves Lutine Capital Corporation as the last of the new investment companies still trying to raise more than pounds 100m for Lloyd's.
Lutine is also rumoured to be encountering difficulties raising money and to have postponed the pricing of its share offer.
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