Cotesworth's difficulties in finding a capital provider for 2002 may have been worsened by its exposure to a number of Independent Insurance's reinsurance contracts, say London Market sources.
Any potential provider would have to take the managing agency on as a going concern. This now seems to be of no value.
The sources said the Lloyd's managing agency, which suspended trading last week, was one of many Lloyd's agencies that underwrote a significant amount of reinsurance deals with Independent for the 1997 and 1998 years of account. Cotesworth's losses on the contracts are around £20m.
Cotesworth's management has admitted its failure to gain a new capital provider caused the company to suspend trading. Speculation in the Lloyd's market suggests Cotesworth's two syndicates, 535 and 1688, may go into run-off.
But when asked about the Independent reinsurance claims, deputy chairman and managing director Norman Britten told Insurance Times the company did not “make public statements on specific issues”.
He added: “The annual reports as at December 31, 2000 – reporting on the closure of the 1998 year of account – have not had to be re-opened as a result of the Independent collapse.”
