Lloyd's Names will be forced to sell their right to trade next year following cash calls of £786m by syndicates, writes Yvette Essen.
But analysts have predicted a lack of demand for capacity will ...
Lloyd's Names will be forced to sell their right to trade next year following cash calls of £786m by syndicates, writes Yvette Essen.
But analysts have predicted a lack of demand for capacity will cause a slump from 20p to 2p for every £1 of business sold.
Managing agents for 26 syndicates including St Paul, Crowe, XL Brockbank, Limit, Jago, Amlin, Wren, Alleghany, Wellington and Newmarket have asked for the cash by November 9. The money will fund losses from 1999 to 2001, which will include World Trade Centre claims and satisfy US regulators requirements. Each individual Name is estimated to face a £50,000 bill.
On Tuesday and Wednesday (October 16 and 17), Lloyd's held its second annual auction enabling members to surrender all or part of their right to underwrite for 2002.
As Insurance Times went to press, Charles Sturge, editor of Lloyd's directory Chatset, said: "Not many Names will have much money to pay the cash calls. It will be a case of bargain basement hunting and they will drop out of the market."
But he added they would get little revenue by selling their capacity.
Syndicates such as Atrium 570 and 609 have made requests to increase the amount of business they can write by more than 90%.
"Names are in a terrible situation because the more they have to sell, the less they can write. It is a catch 22 situation," he said. "But we are probably going to see a surplus in capacity. People would have had to pay 20p last year, but now it will only be 2p."
John Francis, director of members agency Hampden Private Capital, said: "Big price falls are expected due to late pre-emptions and the effect of World Trade Centre losses."
"A considerable amount of capacity will be dropped. It is unlikely Lloyd's will meet predicted total capacity including pre-emptions of £13.9bn and this final figure may be less than this year's £11.1bn."
Association of Lloyd's Members (ALM) chairman Michael Deeny said: "Next year will be one of the most profitable in the history of Lloyd's. I personally will be paying my cash call and will be doubling my underwriting."
Chief executive Frank O'Halloran said the money would be used to buy additional Lloyd's capacity at "selected syndicates".
He said it would also be used to improve QBE's debt to equity ratio in a bid to improve its credit ratings. Shares were offered to institutional shareholders at AUS$5.50 (£1.90) a share.
Standard & Poor's revised QBE's ratings from negative to developing.
