Asbestos may cost Lloyd's Names £1m

ABOUT 15,000 former Lloyd's Names - investors in the Lloyd's of London insurance market - could face demands for as much as £1m each after the US moved closer to setting up a $140bn (£75bn ) fund to settle asbestosis claims.

The US Senate is bringing forward legislation to set up the fund in a bid to agree all past and future claims from people poisoned by asbestos, the fire-retardant material formerly used in the construction industry.

The setting up of a trust to be financed by companies and insurers would mean an immediate call on funds from Equitas, the run-off vehicle set up to settle claims after the Lloyd's insurance market came close to collapse in the 1990s.

Equitas may have to put up $10bn, about 20% of the amount the insurance industry is expected to have to put into the fund. However, its reserves are currently reckoned to stand at $6bn.

Christopher Stockwell, chairman of the Lloyd's Names Association, said clauses in the US Bill indicate that any shortfall would have to be covered by Names who funded Equitas.

Stockwell believes about 15,000 Names still alive and solvent were on syndicates writing asbestos insurance prior to 1993. If they had to fund a $4bn shortfall, the average claim on them would be £135,000, rising to £1m for those exposed to several syndicates.

'The consequences could be very serious for thousands of Names who could face new demands for cash and the possibility of the Financial Services Authority freezing their assets,' he said.

Names, most of whom are reckoned to be in their seventies or older, lost on average £350,000 in the Equitas reconstruction. Many are attempting to recoup their losses by suing the Government, claiming it failed to regulate Lloyd's properly, or by getting the Parliamentary Ombudsman to bring forward an Equitable Life-style investigation.

'If Names are called on for more cash, there will be a huge political stink, not least because many MPs or MPs' parents were Names,' said Stockwell.

Equitas will be fighting its own battle to change the US legislation. The proposed Bill says any demands from insurance companies will not be so large as to bankrupt the insurer, with one exception - Equitas.

An Equitas spokesman declined to comment on how much it believes it will be asked to pay but added: 'If there is a fair and impartial commission [to decide who pays what], we will be able to pay. We will continue to strenuously oppose the terms which leave Equitas the only company not protected from being made insolvent.'