Rising from the Ashes

With the launch of Equitas, the dust has finally settled on Lloyd’s of London. Kate Nicholas reports

With the launch of Equitas, the dust has finally settled on Lloyd’s of

London. Kate Nicholas reports

On Wednesday 4 September one of the most tumultuous chapters in Lloyd’s

of London’s 300-year history came to an end when the DTI announced its

consent for the reinsurance of the insurance market’s 1992 and prior

liabilities into a new body - Equitas.

While workmen laboured on the towering scaffolding outside to repair

Lloyd’s tarnished facade, inside the Lloyd’s building the sound of the

famous Lutine bell - traditionally rung to signal good or bad news to

brokers and underwriters. - rolled out three times: once to mark Lloyd’s

regret at the pain and suffering which its pounds 8 billion losses

wrought upon its members or ‘Names’ in the early 1990s; a second time

for joy at having finally completed its much vaunted reconstruction and

renewal programme (R&R), and thirdly to signal a new future.

In his smoke-filled fifth floor office, head of corporate communications

Peter Hill can now put the last four years behind him. ‘Our first job is

to readjust our minds away from crisis management to structure an

ordered programme managing the reputation aspects of the Lloyd’s

market,’ says Hill who, with PR consultants Angus Maitland and William

Clutterbuck of the Maitland Consultancy in the UK and Kekst and Co in

the US, steered the market through the PR minefield of reconstruction.

‘This department has been largely focused on R&R certainly for the last

18 months. This has meant that many of the other important things that

we should have got on with have not been possible.’

Peter Hill first joined the Corporation of London in 1983. A task force

headed by chairman David Rowland had already begun to consider

restructuring before the full impact of four years of losses was felt in

1992 and Hill found himself handling one of the most publicised

financial crises of the decade.

While Rowland found that he couldn’t even say ‘good afternoon’ at the

1993 Royal Albert Hall members’ meeting without being called a liar,

Hill fielded media enquiries about the tragic personal impact of the

losses on the Lloyd’s Names. ‘Emotion, angst, frustration, bitterness

and acrimony - it was all there,’ says Hill.

In the cold light of day, however, Hill says the media interest in the

worst affected was blown out of proportion. ‘This place has always had

an endless fascination because capital has a very human face. The

traditional Lloyd’s member has been well-heeled - pounds 250k gets you

in.The press naturally becomes interested, because it involves

politicians and pop stars. It [the losses] becomes a story of tall

people made small.’

The campaign to launch Equitas and the R&R plan began by establishing

the credentials of project heads such as mathematician Heidi Hutter,

followed by an intensive investor relations programme explaining the

plan and the alternative of continued litigation.

The failure of the first 1994 settlement offer highlighted the need for

consensus and for two-way flow of communication with the numerous Names’

action groups. Despite cynicism among Names about the project’s

viability Hill says: ‘The most influential voices in the action group

community, such as Michael Deeny of Gooda Walker, recognised quite early

on that if Lloyd’s really want to get this through, that we were going

to have consult with them and to take them into our confidence.’

As to criticisms that the settlement was inadequate, Hill admits: ‘It

wasn’t perfect, we never said it would be 100 per cent fair, it never

could be. What we did say is that we would give it every resource that

we possibly could.’ In fact when the ‘settlement offer finality

statements’ (providing an exit route for those members who wished to

leave the market) were sent to the Names at the end of July, the value

of the settlement had reached pounds 3.2 billion, at which point a MORI

poll indicated that 85 per cent of Names planned to accept, four per

cent to reject, while 11 per cent were still sitting on the fence.

A separate MORI poll showed that 90 per cent of Names said that Lloyd’s

had provided a constant flow of information and 70 per cent said they

had a clear view of the alternative.

On August 23, a group of US Names in Richmond, Virginia, nearly blocked

completion with a delaying injunction. Hill and his team spent a tense

weekend in their office until a Lloyd’s appeal overturned the


However, by the close of play at noon on 4 September, Lloyds was able to

claim a resounding success with 94.3 per cent of Lloyd’s Names opting to

reinsure their liabilities in Equitas. With Equitas now established as a

separate entity, the onus has shifted to its own PR firm Fishburn

Hedges, and while Lloyd’s still faces legal battles with the small

percentage of Names who have not opted for the R&R plan, Hill is finally

free to focus on the business of insurance.

‘It has been a chastening and traumatic period,’ he says. ‘In effect

what you have is old Lloyd’s now in Equitas and a new Lloyd’s. In that

respect it really is a phoenix. It has been, in terms of human

suffering, something that they [the Names] and we, will never forget,

coupled with our absolute commitment that no one is ever going to allow

this to happen again.’

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