The long-running dispute has finally ended, but the result is veiled in secrecy
The Lloyd’s Central Fund dispute has finally ended in a settlement with broking firms, Benfield Group and Aon. But it is unclear if today’s settlement provides satisfactory closure for Lloyd’s in this expensive saga.
The long-running disagreement followed calls on the Central Fund in the wake of the September 11 terrorist attacks. In April 2003, Lloyd’s began arbitration proceedings against Swiss Re and five other reinsurers who disputed some of the claims made under a contract designed to protect the Fund.
In 2005 Lloyd’s reached a settlement agreement with the reinsurers for £152m but revealed the financial impact of the arbitration would reduce the Central Fund by £226m. At the time, it reserved the right to pursue others for the shortfall.
In February the following year Lloyd’s started legal action against Benfield and Aon in relation to their involvement in the placement of the policy. Lloyd’s said it was seeking a total of £325m in compensation.
While Benfield has confirmed an £8m financial hit the true value of the settlement is unclear, it could be much larger. Lloyd’s commented in a statement: “The net liability disclosed by Benfield represents part of a wider overall settlement reached with Benfield and with Aon.”
Aon has not disclosed any financial impact. A spokesperson said: “Aon's contribution to the global settlement and the financial impact for Aon reflects its role in the placement."
Detailed terms of the agreement remain confidential.
Alll parties have stressed their relationships stayed strong despite the dispute.
Sean McGovern, director and general counsel at Lloyd’s, commented: “The settlement we have reached with Aon and Benfield enables us to lay this matter to rest and continue our excellent relationship with both organisations.”
Benfield’s chief executive Grahame Chilton said: “We are pleased to have brought an end to this matter and we look forward to continuing our excellent working relationship with Lloyd’s.”
In 2000, Lloyd’s took out an insurance policy covering calls on the Central Fund. The contract was a £350m per annum excess of £100m loss policy covering the years 1999-2003 (up to a maximum of $500m over the entire policy period). Lloyd’s spent £78m in premiums paid to the reinsurers Swiss Re; St Paul; Hannover Re; XL Re; Federal Insurance Company and Employers Re.
