The end of unlimited liability Names heralds a fresh start. Or does it? Elliot Lane asks what's going on
Tony Markel's scathing attack on Lloyd's two weeks ago acted as a neat preface to the publication of the Bain report which hit the headlines last week.
His comment that the market had its second chance with the introduction of Equitas but had "screwed it up" may be slightly unfair, but does this report scream out - third time lucky? Or is it three strikes and you are out?
With the probable end of the unlimited liability Names, the fresh start which heralded Equitas' creation may finally be a reality. Back in 1996 there were calls for one-year accounting, but the voices were in the minority. Tradition was the excuse for keeping the three-year accounting system, though underwriters quietly enjoyed the luxury of having time to "correct" any major losses on their books.
Now Lloyd's might adhere to the more conventional GAAP accounting. The modernisation so badly needed could finally come in the establishment of a single franchise board to replace the regulatory and market board committees. One voice in one market.
The question now is how much will it cost to buy out the unlimited liability Names? The Association of Lloyd's Members was right to say this restricts its members from recovering losses from the WTC disaster because the Inland Revenue will not permit the losses to be carried forward against limited liability underwriting.
Those Names who had nothing to lose and were ready to throw the house, car, wife and children into the pot are now left with very limited options. As one Name said to Insurance Times last week: "What new vehicle are they hoping to put Names in after 2005? Are they going to resurrect the Titanic?"