Lloyd's Losses

For almost three centuries, Lloyd's of London, a $5 billion insurance market, has provided coverage against earthquakes, floods, fires and storms, as well as all manner of man-made catastrophes. It pays off no matter what. When the U.S. boycotted the 1980 summer Olympics in Moscow to protest the Soviet invasion of Afghanistan, NBC collected $78.3 million from insurers because of lost advertising revenue.

Lloyd's is backed in covering these risks by syndicates, which are run by managing agents and made up of thousands of large and small investors, who are called "names." Lloyd's was once a clubby organization of British financiers, but now its investors are a diversified, international group, including more than 2,000 Americans and many famous people.

In good times, these investors earn a profit based on the premiums paid on policies. But when there is a disaster and a claim must be paid, the hallowed and inviolate rules of Lloyd's say that the names are liable and must pay. Says Lloyd's Chief Executive Ian Hay Davison: "Investors must show they are good today for the present value of future obligations."

Now hundreds of investors are discovering just what Lloyd's famous rule of unlimited liability really means. Two syndicates of the Richard Beckett Underwriting Agencies face claims of $164 million in one of the worst runs of trading losses in Lloyd's history. Some 500 investors might be forced to come up with $252,000 apiece or, in some cases, as much as $630,000.

They are none too pleased by the demand being made on them to pay up. Some of the names have hired a public relations firm and raised $1.5 million for legal advice and possible action. Basically, the investors are contending that their managing agents led them astray by misrepresenting potential dangers. They now want the agents to reimburse them for their losses.

Prominent names in the Beckett group include the Duchess of Kent, the Duchess of Marlborough, Mideast Businessman Adnan Khashoggi and Novelist Jeffrey Archer. Wealthy investors probably will have no difficulty paying off their share of the obligations, but others of more modest means could be painfully squeezed. Said Graham White, managing director of Beckett: "We've had several heartrending letters asking about the technicalities of bankruptcy."

The heavy losses at Lloyd's have come mainly from American legal cases in areas like product liability, medical malpractice, asbestosis and pollution. Other insurance claims stem from the Bhopal, India, disaster where at least 2,500 people died.