Plans to raise the minimum amount of money needed to invest in Lloyd's by £50,000 have come under fire from private investors.
The Prudential Supervision Committee (PSC) of the Lloyd's Regulatory Board has decided to increase the capital required to join or start a Lloyd's syndicate from £300,000 to £350,000 in 2002.
Head of the United Names Organisation's (UNO) legal team, John Henderson, said: “The message Lloyd's is sending is that there is not a lot of mileage in being a private Name. The future definitely lies with the corporates.”
Head of marketing, reporting and solvency at Lloyd's, Patricia Hakong, said the 17% hike in the minimum funds at Lloyd's (FAL) requirement was only for new members in the first year of underwriting. She added this did not apply to existing associates.
Patrick Moore, committee member of the High Premium Group and deputy chairman of the Australian Association of Lloyd's Members (AALM), said: “This is obviously a move to discourage the smaller Names at Lloyd's.
“But, by doing so, Lloyd's is sending out a clear message they want serious players in the market. This move is obvious – Lloyd's is a more sensible place to invest seriously.”
Individual members are still allowed to use other personal wealth assets, such as property or shares, to account for up to 10% of their net FAL requirement. But the UNO, which represents 230 private investors, has criticised Lloyd's for forcing Names to lay down more cash.
“At the end of three years of losses, Lloyd's reaction is to increase its liquidity of reserve funds,” Henderson said.
Lloyd's spokesman Adrian Beeby said: “The decision to raise the funds was taken as part of a review of financial security in the late 1990s.
“It was concluded the minimum requirement should be raised from £250,000 to £350,000 over three years. The reason we did this was to ensure there was sufficient capital to meet expected liabilities and to make sure individuals and corporate players were treated more equally.
“Following the losses of the late 1980s and 1990s, this move also helps to prove Lloyd's is a serious place for investment, where you have to possess substantial capital to be a participant.”