The legal machinery grinds on. It is worth remembering that many more British Names than U.S. Names have been bankrupted and owe money to Lloyd's. The British Names associations are looking at the treatment of the Names in the United States and intend to insist on the same treatement. Mean while, the British government is doing their best to shore up Lloyd's. Whether they succeed or not will probably be decided by the end of August, 1996.
WASHINGTON -- The Securities and Exchange Commission asserted that parts of an agreement Lloyd's of London has with American members of its insurance syndicates "are void on their face" because they violate U.S. securities laws.
In a move that could have an impact on Lloyd's restructuring plans, SEC General Counsel Richard H. Walker contended that U.S. members, or "names" could not waive their rights to get full disclosure of Lloyd's plans to set up a new reinsurance company, called the Equitas Group. The assertion was made in a friend-of-the-court brief filed in a civil case in federal court in Richmond, Va.
The suit was brought by about 100 of the estimated 2,700 U.S. names. It asks the court to stop Lloyd's from soliciting members in Equitas until Lloyd's discloses more information about the company, which is designed to shelter Lloyd's from huge, pre-1993 claims against a number of syndicates that were unable to pay them.
The British governement rejected the SEC's position, saying in it's own brief that the U.S. names agreed to give "exclusive jurisdiction" to English courts. An injunction by a U.S. judge "may well have a fatal impact" on Lloyd's attempts to resolve the claims under a process called "reconstruction and renewal," the British breif states.
British insurance regulators have set an Aug. 31 [1996] deadline for Lloyd's to prove that the members of its syndicates are solvent. Teams of Lloyd's representatives have been meeting with members around the world to convince a majority to forgo their legal claims and work out a settlement that will let them sign up with Equitas.
The reconstruction and renewal process, the British brief states, "has reached a very delicate stage involving 34,000 names around the world, "and it would be inappropriate" for a U.S. court to interfere on behalf of a "very small number of names."
"We're just asking for information," said A. Stephens Clay, lawyer for the members seeking the injunction. Lloyd's, he said, should be required to make the same disclosures for Equitas that a U.S. company would be required to make for a stock offering.
Referring to the U.S. members, who are being asked to come up with $288 million to settle past claims and join Equitas, Mr. Clay said that none of them have seen the calculations for the claims or the financial projections that would assure them that Equitas can remain solvent. If Equitas fails, the U.S. members could remain liable for the old claims.
"Some say it's adequately funded, some say it's not," said Mr. Clay. Judge Robert E. Payne, who asked the SEC to file its brief, will hold a hearing on the injunctoin request Monday. A spokesman for Lloyd's noted that it's position - giving sole jurisdiction to British courts - has been upheld in eight different lawsuits in the U.S. since 1991.