Equitas model for toxic debts

Gosport MP and treasury select committee member Sir Peter Viggers says the Lloyd’s Equitas model could work for the banks’ toxic debts, the Times reports.

Sir Peter was elected to the council of Lloyd’s of London, the insurance market, in 1990.

“The problem we experienced then was the spiral of insurance, where one insurer would underwrite risk, then pass it on to a reinsurer and the risk would go round and round. Someone would take part of the risk of a North Sea oil project, then they would pass it on to someone who also had underwritten part of the risk in the Gulf of Louisiana, then someone else would slice the risk again and, before you knew where you were, you only knew that you were exposed to 0.7 per cent of syndicate 962’s risk. But you weren’t exactly sure what that was. So you had no idea what your exposure was.

“The problem now is very similar. Then we separated the good assets from the bad and ring-fenced them into a separate vehicle – in Lloyd’s case, it was Equitas. I know how difficult it is to separate them out. Then, we had an entire floor at Lloyd’s, sealed off, and the likes of Ron Sandler spent months identifying what these assets were worth. Many of us spent nights worrying whether the Equitas model would work, but it did.”