'Backhanders' claim adds drama

A DRAMATIC intervention came during the three-hour meeting at the Royal Festival Hall as an underwriting member, Daniel Salbstein, alleged that the professionals in the market had received 'backhanders', writes John Moore.

He claimed correspondence showed that the top Lloyd's insurance underwriter, Richard Outhwaite, received a payment of dollars 5m in a business transaction in the early 1980s.

Mr Salbstein quoted from correspondence between the insurance broker Bowring Reinsurance and the large US insurance group Fireman's Fund Insurance Company dated 20 October 1981.

In the letter, a copy of which has been obtained by the Independent, Hady Wakefield, director of Bowring, said to Joseph Brown, vice-president of Fireman's Fund: 'I also said to you there would be a number of 'nuts and bolts' to put together because Outhwaite wanted dollars 5m to work to his benefit without going through the books as such.'

As the audience gasped David Rowland, Lloyd's chairman, asked his deputy, Stephen Merrett, to explain what had happened. Mr Merrett described the deal as a 'sub-contract' on a reinsurance programme, adding that nothing untoward had taken place.

Mr Rowland told the audience that if they had any evidence of wrongdoing they should bring it to the attention of the market's authorities.

Mr Outhwaite said after the meeting: 'I remember the terms of the contract. Fireman's Fund paid dollars 5m direct to other reinsurers and not to my syndicates. There were no commissions paid to me and the payment was nothing to do with us.'

He said the suggestion at the meeting was 'completely wrong and ill- considered'.

Fireman's Fund was attempting to lay off risks that it had taken on from another large group of syndicates at Lloyd's under the management of the Sturge agency. While Outhwaite syndicates had agreed to assume some of the Fireman's Fund liabilities they insisted that the remainder was placed elsewhere.

Lloyd's officials said after the meeting that the matter of the correspondence had been brought to their attention some time ago and the issue had been studied. Lloyd's had found no evidence of irregularities.

Lloyd's said that the dollars 5m had flowed to another company called the New England Re. However, Lloyd's admitted that the wording of the letter was 'unfortunate'.

A number of Outhwaite syndicates specialised in taking on the liabilities, which had their origins with other syndicates at Lloyd's. More than 2,600 members, including the former Prime Minister Sir Edward Heath, have been hit by losses of pounds 264m on this class of business.