September 16, 2003 by Canadian Underwriter
Lloyd’s of London chairman Lord Peter Levene tackled the themes of tort reform and the unfair regulatory burden placed on the London market, in a speech yesterday to a U.S. audience.
Speaking at “Town Hall Los Angeles”, Levene revisited the issue of tort reform in the U.S. to stem the tide of litigation and its escalating costs. He pointed to a Tillinghast-Towers Perrin study showing U.S. tort costs are now equivalent to a 5% tax on wages, and that by 2005 tort costs could equal $1,000 per capita annually, if nothing is done to remedy the situation. “My point is that today’s culture is a brake on enterprise and innovation,” Levene says. “The fear of being sued is making everyone more and more cautious to the detriment of everyone. This new culture does more than simply sap the will of the risk taker. It corrodes the economy.”
A survey of Los Angeles business leaders taken at the conference shows that there is awareness of the issue. Ninety-five percent said the cost of litigation is a drain on the economy, while 94% said they were concerned about the impact of liability costs on their own business or industry.
Levene also took aim at U.S. regulators for requiring Lloyd’s to hold collateral via trust funds – covering 100% of its gross liabilities in the U.S., or about US$9 billion. He says the requirement discriminates against foreign-owned companies, as domestic insurers are not required to meet the same level of collateralization, and acts as a trade barrier. “Lloyd’s, who has stood by the U.S. in good times and bad, is treated in the same way as a new kid on the block. Is that fair? Far more crucially, how does it help the American entrepreneur, who is looking for insurance to cover a new business, if Lloyd’s and other reputable foreign companies are not competing on a level playing field?”