Lloyd’s ‘names’ Hunted

[Guest Tim]

LLOYD’S ‘NAMES’ HUNTED

 

Troubled Lloyd’s of London has turned its attention to Australia to "vigorously pursue" 179 Australian "names" who have a total debt liability of $70.2 million to the insurer.

 

And they have appointed Australian insolvency experts Ferrier Hodgson, to do the job, the same firm working to uncover fugitive Christopher Skase’s hidden millions.

 

Partner Mr. Greg Meredith told me Lloyd’s had instructed him to go after "names" who were refusing to pay what they owed, through legal action. ‘But those who are unable to pay will be dealt with on the basis of their financial capacity. We will seek to come to an arrangement with them within the bounds of that financial capacity.’

 

Lloyds has filed the "names" in Australia into two categories - the "can’t pays" and the "won’t pays". For those refusing to meet what Ferrier Hodgson says is their obligation to Lloyd’s, ‘we have had a great deal of experience in large-scale debt recovery actions.’

 

The 307-year-old Lloyd’s has 34,000 members, or "names" who pledged their capital, and often their homes, to allow it to underwrite insurance which has seen losses of Stg.8.7 billion in the past five years. Apart from 812 Australian "names", there are 440 in New Zealand, 101 of them sharing a liability of Stg.20.1 million, following disastrous claims between 1988 and 1992. "Names" underwrite risk after satisfying Lloyd’s that they have assets of Stg.250,000 and placing in trust funds assets equal to 20-25% of the value of the premiums they are permitted to write. For many years the cheques have flowed in unhindered by war or natural disaster. But in a bad year the "names" are liable for losses and their liability is unlimited, "names" being individually liable to the full extent of their assets.

 

 

Mr.Jack Boorne, a Sydney merchant banker, is a "name" who has lost heavily, but who told me it would be "indelicate" to ask him how much. ‘Save to say it has effected our lifestyle and our expectations.’ He is chairman of the Australian Association of Lloyd’s Names. ‘Of the 34,000 "names" world-wide, I would say 4,000 of them would be in deep distress. For 20 years it was a very good deal to be a Lloyd’s "name". You just put up a guarantee - like your house - every year and every year you got a nice cheque. Then Lloyd’s agents got greedy like many other salesmen, encouraging people to use their assets twice; Lloyd’s behaved badly and "names" lost; it had become like a McDonald’s franchise.

 

‘If you lose money on the Stock Exchange through unwise investment in shares, you shrug your shoulders and you lose. But people have been encouraged to put up their wealth to invest (in Lloyd’s) and wealthy people have been crippled.’

 

Australian "silvertails", as Mr. Boorne calls them, unwilling to meet what Lloyd’s say is their obligations, have had their tax returns for the past five years subpoenaed. Bank documents listing their assets after applications for loans, giving rosy pictures of their financial position at the time, have been seized. Many phone hours have been spent between Australia and Lloyd’s in London in efforts to broker debt deals. ‘Lloyd’s have told us they are not going to take away the dignity of "names" having difficulty in paying. They will leave them with some property of value and an income; and they will come to an arrangement with mortgages so that when they die, instead of the property passing to the family, the Lloyd’s debt will get paid off.’

 

There has been, said Mr.Boorne, anecdotal evidence of worried "names" in Australia suiciding after being faced with paying out large sums of money with no clear idea when the debt will be cleared, or of having no money at all to pay. Now, however, there is a new reconstruction and renewal plan that will provide members with a final reckoning of all their 1992 and prior liabilities, to be voted on soon.

 

In Melbourne, Mr.Patrick Moore, a "name" who says he is one of the few who actually made money through his Lloyd’s investment, counsels those who have lost, some of them without fee. Mr.Moore, a Cambridge economics and law graduate who is expert in corporate finance and analysis, says: ‘I have helped people who are destitute. Ferrier Hodgson are acting with a lot of sympathy with those who have difficulty paying. There are people well past retiring age who have spent 40 years in business providing employment for Australians. And now they are being asked to pay all they have left. People who are honourable enough to pay are being left destitute.

 

‘But there are also shirkers, people who can pay, but who are not paying. I think it is entirely improper. This offer by Lloyd’s means that ongoing "names" are paying for it; it is coming out of my hip-pocket. The shirkers think they are clever by not paying, but it doesn’t rest very well with the Australian way of giving everybody a fair go. And I don’t think it rests well with British justice, as we perceive it.’