Broker inherits liability millstone
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Your support makes all the difference.LLOYD Thompson, the quoted Lloyd's broker, has emerged as a victim of Dai Ichi Kyoto Re, the Brussels-based reinsurance company that owes substantial sums to the London insurance market.
Lloyd Thompson unwittingly inherited the liability when it took over another Lloyd's brok-er, Graham Bell, last November. The size of the liability is not known.
Dai Ichi has been criticised for having dubious security and recently stopped underwriting. Since the Bell takeover, Lloyd Thompson has placed no new business with it. Richard Corfield, managing director of Lloyd Thompson, said that at the time of the takeover of Bell it was not practical to check out the status of the reinsurers with which the broker had placed business.
Questions were first raised about Dai Ichi four years ago, when US regulators found that the founding Japanese pension funds said to back it through the Umeda foundation in Tokyo did not exist in Japan.
At the time, Dai Ichi explained that the funds were not registered domestically because they were "not solicitous of investors in Japan" and were "subscribed to privately".
Doubts about Dai Ichi Kyoto Re's financial backing had been aired, Mr Corfield acknowledged. But he defended Graham Bell's decision to place the business with the reinsurer.
The security of many market players had been questioned, Mr Corfield said. "What would you say about Lloyd's security now? Are you suggesting that we don't place our business there?"
Mr Corfield said all but one of the eight reinsurance contracts with Dai Ichi Kyoto Re placed by Graham Bell were written for a 12-month period only. Claims may nonetheless arrive on some contracts, he admitted.
Paul Yorke-Wade of Corporate and Administrative Services, hired to rescue Dai Ichi, said Lloyd Thompson was seeking payment on behalf of insurers includine Korea Foreign Insurance and General Insur- ance Corporation of India.
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