Lloyd's challenge after huge terror bill

ONE year after being shaken to its core by the terrorist attacks on the US, the Lloyd's of London insurance market is voting on revolutionary plans to change its unique 300-year-old underwriting traditions.

Members of the market yesterday observed a minute's silence for the victims of 11 September, marked by the ringing of the Lutine Bell, which historically signalled the loss of a ship at sea.

But today chairman Sax Riley is looking to the future. In one of the most important meetings in the market's long history, he will try to persuade members to back his controversial plans to modernise Lloyd's.

Riley's reforms have been made more urgent by the market's huge 11 September losses. Lloyd's was the single worst affected financial institution in the world, with losses of £1.98bn.

The chairman believes his reforms are essential for Lloyd's to compete against rival insurance markets, including tax haven Bermuda. He wants to phase out the historic system where wealthy investors ('Names') are liable for losses down to their last cufflink. No new Names will be allowed to join from the end of this year. The market will become a franchise operation, rather like an exalted version of McDonald's, with the Council of Lloyd's at the centre, and individual syndicates as franchisees. He also wants to scrap the arcane three-year accounting period and replace it with an annual reckoning.

Some individual members have opposed the plans, but Riley is expected to win today's ballot thanks to support from corporate investors.

Trading at the London Stock Exchange came to a standstill yesterday for a silence in memory of the victims of the 9/11 attacks.