Lloyd’s reaches settlement with Central Fund insurers

Lloyd’s of London has reached a financial settlement with insurers of its new Central Fund which will see the London market paid a total of GBP152 million.
Lloyd’s and the six insurers began arbitration in early 2003 following a dispute over the claims under a five-year insurance policy to support the fund. In January of this year one of the insurers, Swiss Re’s SR Business Insurance Co., was successful in arguing its case to the arbitration tribunal. Swiss Re wrote about 32.5% of the cover, and while the tribunal agreed with Lloyd’s on the interpretation of the policy, it decided Swiss Re was entitled to avoid the policy.
The latest settlement ends arbitration with Swiss Re and the other five insurers involved: St. Paul, Hannover Re, XL Re, Federal Insurance Co. and Employers Re.
Lloyd’s notes that in the worst case scenario, no payment by the insurers would have taken a GBP276 million chunk out of the Central Fund, but the settlement will result in a GBP226 million loss to the fund.
Rating agencies had already noted all possible outcomes of the arbitration had been factored into Lloyd’s ratings.