The most valuable after-the-event legal (ATE) expenses insurance package so far placed in London will enable liquidators in Australia to launch a AU$1 billion (£400 million) legal action against banks including Bank of Scotland and Lloyds TSB.
The £19.5m policy was arranged by City broker Blackmore Borley with non-Lloyd's underwriters, including General Star and First Legal Indemnity.
Bell's liquidators allege that two banking syndicates, one of which was led by Lloyds TSB, wrongly obtained money from the Alan Bond-run Bell group when it collapsed in 1990.
The liquidators claim that in January 1990, when Bell was either insolvent or on the brink of insolvency, the banks improperly obtained securities over substantially all of the assets of the group.
When Bell collapsed, the banks enforced the securities, realising about AU$282 million (£115 million), almost discharging the debts owed but leaving all other creditors unpaid. It was the largest corporate failure in Australian history at the time.
"The placing of insurance cover in support of the action ensures that it will be seen through to its conclusion," said Tony Woodings, one of the liquidators. "And the decision to accept the risk demonstrates the strength of the action. The banks should be under no illusion that this action will now be prosecuted to its conclusion."