The future of Lloyd's central fund is uncertain after an arbitration tribunal has ruled that one of the six carriers, Swiss Re, does not have to pay out.
The tribunal proceedings began in April 2003 when the Society of Lloyd's sought to recover funds under a five-year insurance contract written to support the new central fund.
Swiss Re wrote 32.5% of the cover.
The arbitration found in favour of the Society of Lloyd's on the issue of the proper interpretation of the wording of the policy.
However, on the basis of its findings with respect to the presentation of the risk to Swiss Re, the tribunal held that Swiss Re was prima facie entitled to "avoid the policy".
The finding is subject to the panel considering Lloyd's argument that Swiss Re had affirmed the policy.
The tribunal has deferred reaching any conclusions on the issue until after completion of the evidence in relation to the five other insurers.
If, in the worst case, the insurance policy was avoided by the six insurers, Lloyd's central resources would reduce from £1.9bn to £1.6bn, it said today.
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