Lloyd’s Of London Has Problems

Press, Volume CVII, Issue 31449, 16 August 1967, Page 20

Lloyd’s Of London Has Problems

Lloyd’s underwriters are seriously worried about the fall in membership applications and the problems of attracting new members over the next two years, a special

writer reported in the “Australian Financial Review.”

As a result Lloyd’s is facing a severe shortage of capital which will make it more and more difficult for underwriters to find cover for big risks. This year applications to

join—new members come on risk on January 1 of each year—have been halved. Last year they amounted to about 250 and the average for the last five years is around 200. There has also been some increase in resignations, but all the 6050 members passed this year’s audit requirement.

The final results for 1964, to be released shortly, could well show an overall loss. But the worst year was 1965 with hurricane Betsy, and members will not have to pay out the full losses until early next year. This could have another damaging effect on new applications and resignations. Last week, after the reports of losses in the latest round of U.S. riots, some underwriters were inundated with calls from members worried about further calls on their resources.

No Relation

Underwriters were able to point out, however, that reports of total losses need bear no relation to the final insured loss. (In the Los Angeles riots early reports put losses at SUSI7S million although the final insured damage was only SUS 37 million). But more important, underwriters were able to point to the fact that the massive increase in premiums and drastic revision of terms since Los Angeles and Betsy had led to big reductions in total liability and risk of loss.

In some cases reinsurance treaties with American companies have been renegotiated with doubled premiums, doubled excess (the figure losses have to reach before anything is paid out) and halved maximum liability. The revised terms themselves highlight the capital shortage and, although syndicates may now be operating profitably, the three-year accounting system means that this will not become clear for two or three years.