Lloyd's chairman Sax Riley said in the letter to Names: "All market constituencies have raised concerns about the original `sale and leaseback' proposal. In light of these concerns, the CSG recognises that a `one-size-fits-all' approach based on the mandatory buy-out of security of tenure at this stage may not be the most appropriate way to proceed.

"Although the CSG may return to `sale and leaseback' if an alternative approach cannot be found, it has agreed to broaden the scope of its work to include a range of ideas that concentrate on matching the specific needs of different groups of managing agents with the aspirations of capital providers."

Association of Lloyd's Members (ALM) chairman Michael Deeny said: "The proposals were put out for consultation, they weren't a hard and fast plan and the consultation showed that the majority of the proposals had widespread support.

"The only one that people had real doubts about was the `sale and leaseback' proposal. So, I think it's perfectly reasonable that it should not be pursued in its original form."

Kiln director Andrew Fleming-Williams said: "Although people welcome the principle, they have accepted that the timing was a bit optimistic. This year all the existing capital providers see this as an opportunity in some cases to recover some of their losses they have made in the past. No one doubts [the ending of unlimited liability] will be achieved eventually."

Chatset editor Charles Sturge said: "It [Lloyd's] is clearly backtracking and trying to look for a way out of the mess it has got itself into.

"It looks as if it will have to rely on unlimited liability at least till the end of 2006. What is upsetting the Names is they feel they are being pushed out on an up cycle and they want to recover their losses."