Lloyd's turns to companies for more clout

RADICAL changes in the operation of Lloyd's are set to take place next year in a bid to beef up its competitive position in international insurance markets, writes John Moore.

For the first time industrial companies that have their own insurance operations, known as "captive" insurers, will be able to trade at the 300-year-old institution.

Lloyd's is allowing captive insurers to form their own business units in its Lime Street headquarters for an initial fee of GBP 35,000 and annual charges of 2.45% of their business volumes. In return, Lloyd's has told its underwriters and brokers in an internal memorandum, captives would gain access to a network of international licences to trade business as well as the benefit of a favourable credit rating, which Lloyd's has gained from leading vetting agencies. Captive companies provide insurance cover for their parent companies and subsidiaries within their groups but often seek insurance business from outside their organisations. Hundreds of millions of pounds of new business could flow into Lloyd's as a result of the plan. The move comes as angry Names meet tomorrow to protest about the growing influence of companies in the market, which they fear is weakening their position. Next year there are expected to be fewer than 5000 private investors compared with 34,000 at their peak before the financial troubles of the early 1990s, which nearly ruined many of them. More than 400 companies will be providing around GBP 7 billion of Lloyd's total financial backing of GBP 10 billion. Baronets Sir Richard Cooper, Sir Mark Goodson, and Sir William Jaffray, supported by 700 investors, are seeking to block Lloyd's proposals to give companies more influence. "No good reasons have been offered to Names for accepting the loss of power," the protesters have said.

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