US approvals allow Lloyd's rescue to go ahead

Lloyd's has cleared the last regulatory hurdle ahead of its key annual meeting in London today, confirming yesterday that it had received the approval of just enough US securities regulators to allow its pounds 3.1bn rescue to go ahead.

By a deadline for agreement set at 0100 British Summer Time yesterday morning, Lloyd's managed to win the approval of regulators in states where 84 per cent of US members reside, 4 percentage points above the minimum required for the agreement to take effect.

A number of US states, including Missouri, refused to sign up over the weekend to the pounds 40m deal, which had been agreed in outline with a committee of US regulators on Thursday afternoon.

The annual meeting in the Royal Festival Hall today will be asked to approve a pounds 440m contribution by 34,000 members to the pounds 3.1bn rescue, the first in a series of votes on the package by action groups and individual members which stretch out to the end of August.

An extraordinary general meeting in the same venue, requested by rebel members, will also vote today on motions to improve the offer substantially. The Lloyd's authorities expect, on the basis of opinion polls, to win both votes comfortably, but if they lose the rescue attempt may have to be be called off.

The US committee had little more than 48 hours to win the signatures of individual US states and Lloyd's intends to try to persuade those that have not signed to change their minds.

Lloyd's had been forced to negotiate with the US securities regulators because they had issued a series of orders that had the effect of blocking the rescue offer to the insurance market's 2,700 US members, a minority of the 34,000 total.

Lloyd's agreed to pay up to pounds 40m to the US regulators in return for their agreement to drop all actions against the market. The regulators are to use the money to improve the offer to US names by more than 20 per cent, giving them a better deal than the rest of the membership.

Confirmed acceptances include seven states where 1,674 members reside, 62 per cent of the US total. These are New York with 321 and California, with 555 - the two biggest - as well as Louisiana, Colorado, Texas, Illinois and Florida.

As well as gaining 80 per cent coverage of members, Lloyd's insisted that 18 named states sign up. Because many states have small numbers of members, the actual number of regulators refusing could still be quite large. Missouri, which refused, has 67 members.

A rejection by regulators covering 16 per cent of Lloyd's US members would only marginally reduce the cost of the deal. Last week, Ron Sandler, Lloyd's chief executive, said that if rejections amounted to up to 15 per cent, the credits would be recycled to regulators that did approve the deal. Beyond that level, the package will be reduced pro-rata.

Mr Sandler described the agreement to give US names preferential treatment as an "uncomfortable choice".

In a statement issued in New York, Peter Lane, managing director of Lloyd's in North America, said: "We believe this agreement with securities regulators recognises our mutual regulatory concerns and presents a sound and practical way to resolve all outstanding state disputes regarding Lloyd's."

He added that it was unfortunate that some regulators had not yet acted to gain the benefits for Lloyd's members within their states.