Solvency crisis at Lloyd's, says DTI
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.LLOYD'S OF LONDON insurance market is facing a solvency crisis, according to a letter from the Department of Trade and Industry seen by the Independent on Sunday.
The letter, written to a name and signed by a senior civil servant at the DTI, implies that names, the individuals whose private wealth supports the market, could face a cash levy within the next few months.
It refers to the two annual solvency tests that Lloyd's must pass: the market-wide "global" test and a second one.
The letter reads: "Lloyd's is also subject to a second solvency test that the names separately must demonstrate that their insurance assets exceed their insurance liabilities. This test stands alone and is a precondition to the global test. This test is giving rise to some difficulty."
The letter also says that the problem can be resolved "by some well-known solutions within Lloyd's gift" - a reference to the need for a levy on the market's members.
The admission by the DTI that Lloyd's has a solvency problem is a reversal of the position it took at a hearing of the Treasury select committee in February.
The problem arises because of non-payment of losses by approximately 7,000 insolvent names. A name is insolvent at Lloyds when underwriting losses exceed his or her known assets.
At 2 September last year, this group of 7,000 had liabilities worth £1.35bn more than their assets. This figure is understood to have fallen to only £1.1bn by early 1995. European insurance law requires that the Lloyd's market maintains sufficient assets to cover this shortfall. It appears that the DTI now believes this will not be the case at the time of the next solvency test in late August.
It is understood that Lloyd's is to link the call for more cash from names with the offer of an amnesty on all future losses arising out of business written before 1993.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments