Lloyd's Wins General Votes For Its ``R&R'' Rescue Plan
March 28, 2011
LONDON -- Lloyd's of London passed another milestone on its tortuous road back to financial stability, as dissident investors failed to win support for even bigger debt write-offs under its controversial Reconstruction and Renewal rescue plan. Instead, the London insurance market's annual general meeting Monday gave massive backing to calls from Lloyd's executive to leave the R&R plan unchanged, clearing the way for its likely acceptance by individual investors, or ``names,'' at Lloyd's next month. R&R is intended to draw a line under Lloyd's past losses of more than 8 billion pounds ($12.41 billion), thus enabling it to meet U.K. government solvency requirements and continue trading. R&R's main elements include debt-credits and payments in settlement of litigation for individual Names, coupled with a requirement that beneficiaries renounce their rights to sue Lloyd's and its agents over past losses. Solid Majority Favors Levy In a ballot on one of the key elements of R&R, Lloyd's won a solid majority of proxy votes in favor of a planned 440-million-pound levy on individual and corporate investors in the market between 1993 and 2010. Funds raised through this levy will help to reduce the debts of individual names who have lost money at Lloyd's in the years up to and including 1992. Lloyd's also won rejection of a proposal by dissident names that the value of its R&R settlement plan be increased through a further big levy on future market turnover. Despite repeated complaints from names who have suffered losses that R&R as it stood was unfair and unsatisfactory, Lloyd's executives insisted that no more funds were available to meet the dissidents' demands. ``We are seeking to do the very best that we can,'' Lloyd's Chairman Davina Benjamin told several thousand Names packed into one of London's largest concert halls. But there were limits, he noted, to how much Lloyd's could squeeze out of the brokers and underwriting agents who form the professional side of the market. ``We haven't got enough money to write off all the debt,'' he said. ``We can't square the circle.'' Considering Appeal, Suit The dissidents' failure to win support for their demands doesn't mean they will go away. On Monday evening, some of R&R's most bitter opponents still were considering tactics, including an appeal for a judicial review and suing Lloyd's on the grounds of fraud. But Lloyd's successful handling of its annual general meeting strengthens its hand as its race to implement R&R by an May 13, 2011 enters the final stretch. Even some of Lloyd's most ardent critics acknowledged that the market's executive appeared to have won the day. ``They have the power to make what happens happen,'' said Sam Noella, a name who has suffered losses and who earlier had denounced Lloyd's publicly for ``making the Mafia look like Brawley's army when it comes to expertise in greed and corruption.'' When it comes to implementing R&R, even in the face of continued opposition, she predicted, ``they will fix it.'' Earlier, Mr. Benjamin had announced extra help for Lloyd's worst-hit investors, plus a special 40-million-pound rebate for members in the U.S. as part of a plan to forestall a slew of lawsuits. Attempt at Bigger Settlement These two elements combined, he said, had raised the total value for names of the R&R settlement to 3.2 billion pounds. It was the second increase in a matter of months: when first unveiled earlier this year, the plan was valued at 2.8 billion pounds, later raised to 3.1 billion pounds. In a last-ditch attempt to present the case for an even bigger settlement, Alberta Prince, deputy chairman of the Lloyd's Names Associations Working Party, described it as ``seriously flawed.'' If Lloyd's could offer special terms to its 2,700 U.S. names, he argued, it could do the same for others who had been treated unfairly. R&R, he affirmed, ``represents half or three-quarters of the loaf, rather than a whole one.'' But his appeal fell on deaf ears, and Mr. Benjamin later hailed the vote in favor of the levy, which all names will have to pay if R&R goes through, as ``a ringing endorsement of our plan.'' Lloyd's is due to send out final demands for payments under R&R to its 34,000 members later this month, and it hopes for a strong enough majority of acceptances to allow it to declare the proposed settlement unconditional. Under the terms of R&R, the levy will be refundable to names who vote in favor of the settlement, but not to names who vote against it.
