Lloyd’s of London, States Extend Cease-Fire
WASHINGTON (AP) _ Lloyd’s of London agreed Monday to new conditions before it would attempt to seize assets from about 2,700 U.S. investors, some of whom face financial ruin.
For its part, Lloyd’s won greater protections from state regulators for its $20 billion bank accounts, used to pay claims in this country. But negotiations continue over lawsuits that accuse Lloyd’s of securities fraud.
The agreement came after weekend meetings between Lloyd’s and the North American Securities Administrator’s Association, which represents state regulators. A previous ``cease-fire″ agreement had been set to expire Tuesday.
So far, nine states have sued Lloyd’s, alleging it defrauded U.S. investors by recruiting them to invest in the British insurance market without adequately informing them of the risks.
Lloyd’s, which strongly denies the charges, has accused some state regulators of bringing lawsuits that would tie up crucial bank accounts and threaten the insurance market. The Lloyd’s of London insurance market has lost about $12 billion in the five years leading up to 1992 due to a string of hurricanes, floods, and enormous claims from pollution and asbestos lawsuits.
Philip Feigin, head of a NASAA panel investigating Lloyd’s, said Lloyd’s agreed through May 14 not to seize the U.S. investors’ letters of credit, which are backed by personal bank accounts, homes and other assets.
After May 15, Lloyd’s agreed to give two weeks’ notice to investors and regulators before seizing the letters of credit. State regulators retain the right to attempt to block such seizures after that time.
Peter Lane, managing director of Lloyd’s North America, said while the insurance market isn’t planning to seize assets after the May 15 deadline, it still reserved the right to make a seizure.
``That’s our quid pro quo,″ Lane said. ``If the states do nothing, we will not draw on the letters of credit...″
Lane said Lloyd’s wouldn’t try to seize funds of U.S. investors in states that don’t interfere with the Lloyd’s restructuring plan and don’t attempt to seize part of Lloyd’s U.S. bank accounts.
Such an agreement would place additional pressure on states such as California, which has sought to grab a portion of Lloyd’s U.S. bank accounts to repay investors.
The agreement isn’t binding on states, but Feigin predicted ``it will be favorably received on the state level.″
``This does nothing to interfere with the payment of claims to policyholders,″ said Feigin, who also is Colorado’s securities administrator. ``Lloyd’s will be able to pay any policy holder, any claim.″ Feigin’s comments came at a press conference that was delayed 25 minutes while he worked out the final details in a telephone call with Lloyd’s lawyers.
Asked if the agreement provides additional protection for Lloyd’s U.S. trust funds, Lane replied, ``We believe so.″ Lloyd’s considers these trust funds, based at Citibank in New York, crucial links in the chain to repay Lloyd’s investors.