Reinsurer's letter containing allegations of invalid claims is withdrawn
A revolt by Lloyd's managing agents has forced Swiss Re to withdraw a letter disputing claims involving investment banks.
The banks are embroiled in financial scandals such as laddering, Enron and Worldcom.
A letter, seen by Insurance Times, dated 5 January 2004 and signed by Swiss Re's chief claims strategist Rick Murray, said the reinsurer had conducted "an audit of 'leading' underwriters we reinsure with respect to certain of these claims (laddering, Enron and Worldcom)".
Most claims are professional indemnity (PI) and directors' and officers' (D&O).
The letter then states that the audit returned "unsatisfactory results", in particular blaming "serious and continuing breach of the cedants' obligation of co-operation with their reinsurers".
It is understood that Sackville Syndicate Management, SVB Syndicates, Faraday Underwriting and Canopius' Syndicate 4444, formerly Trenwick Syndicate 839 and 44, have received the letter. All these managing agents write financial institution risks.
On receiving the letter, a number of managing agents reacted with outrage.
One market source said: "We were really p****d off when we received this letter because it questioned the validity of certain claims.
"This is not how the insurer and reinsurer relationship works."
The source added that Swiss Re had said that because criminal proceedings were being taken against some Enron and WorldCom directors, the reinsurer had no obligation to pay out.
But according to a claims director at a leading managing agency, Murray saw the error of his ways two weeks ago. "Swiss Re has withdrawn the letter after taking soundings from the market. Rick Murray now knows it was a mistake to send the letter out and had meetings with the market.
"The market is much happier with the situation and with Swiss Re."
A spokesman for Swiss Re said: "This matter has now been resolved to our satisfaction."