View from City Road: Investors dragged into Lloyd's bail-out

The ground-breaking legal decision by Mr Justice Saville that companies looking after individuals' affairs at Lloyd's of London have a duty of care will send a shiver through the market. However, there is a long way to go before names win restitution for their losses. The real legal dogfight over the circumstances that have led to losses of more than pounds 5.5bn over the past three years, and the potential ruin of many members, is not scheduled to conclude before 1995.

Unless there is an out-of court settlement before then the members are in for a lengthy and costly haul. Yet even if a compromise is reached it is likely to leave most of the names dissatisfied.

Most are looking for 100p in the pound for their losses and something on top for the grief they have suffered. Lloyd's is aiming for a centralised out-of-court settlement by the end of this year.

A centralised settlement will rely on syndicates and insurance companies that have insured the agencies for errors or omissions. The amount of money available from this quarter is around pounds 700m, a tiny amount when set alongside pounds 5.5bn losses, implying a low payout the names will certainly resist, particularly when they realise they are shuffling money out of one pocket into another.

So Lloyd's has to find lots of new money if it is to offer a convincing solution. Behold, new money is appearing on the horizon, in the shape of corporate investors, who will find themselves caught up in any market-wide bail- out of the members. The terms on which they are joining do not protect them from this fate.