Business Notes: Insurance

Well-known for what it does -- insuring everything from actress's legs to communications satellites -- 303-year-old Lloyd's of London is less well understood for how it does it. Unlike most insurance companies, which have limited liability, Lloyd's is a society of underwriters or "names" who pool their funds in syndicates. When times are good, the names reap hefty profits. But when times turn foul, these investors are liable down to their last penny for claims against the syndicate. Recent big-time disasters like the explosion of PanAm Flight 103 over Scotland, America's Hurricane Hugo and the Exxon Valdez oil spill have turned the purses of many names inside out.

Last year Lloyd's posted a loss of nearly $900 million for 1988 -- its first in 21 years. During the past 24 months, more than a fifth of its investors have resigned. Soon the venerable firm may be changing the way it does business. A task force has proposed that Lloyd's allow some corporations to participate in the syndicate and limit future losses with the imposition of a 0.25% premium limit paid into a fund to help the names recoup losses above a fixed amount. That way, some of the names may venture back into the pool.