Government set to approve a scheme to release Names from long-standing asbestos liabilities
Thousands of Lloyd’s Names will be one step closer to shedding their remaining asbestos liabilities by 2009, according to market sources.
The government is set to give the green light to the establishment of a company that would take on the Names’ remaining liability. The company would be set up by Equitas, an organisation created to reinsure and run-off Lloyd’s’ liabilities for and prior to 1992, following a period of huge pay-outs by Names for asbestos-related claims.
The first phase of the deal, completed in 2007, involved an agreement between Equitas and the National Indemnity Company (NIC), a subsidiary of Warren Buffett’s Berkshire Hathaway. NIC reinsured all of Equitas’s liabilities while also giving $5.7bn (£2.8bn) of extra reinsurance cover, in return for a premium.
The second phase of the deal would see all remaining liabilities of reinsured Names transferred into a limited company. Currently, the Treasury is drafting legislative changes to allow this, after which the High Court must give its approval.
If phase two is completed before the end of 2009, NIC will provide up to $1.3bn of additional reinsurance cover.
Michael Deeny, chairman of the Association of Lloyd’s Members (ALM), which represents Lloyd’s Names, welcomed the development. He said: “The Treasury’s legislative changes are a first step although there is still a lot to do. Getting High Court approval will be a lengthy and complicated process.”
Upon its foundation, Equitas had £15bn of liabilities and expected to take 40 years to settle outstanding claims. It is the largest solvent run-off reinsurer globally.