Lloyd’s announced that it has reached a settlement with brokers Aon and Benfield of litigation centering on the placement terms of the New Central Fund insurance policy, issued in 1999. Benfield made a similar announcement.
The policy, underwritten by Swiss Re, Employers Re, The St. Paul, Hannover Re, XL and Chubb, formed part of Lloyd’s chain of security. It provided for £350 million ($505 million at the time) of cover over a five-year period with an aggregate limit of £500 million ($722 million at the time).
Lloyd’s claimed recovery on the policy following the attacks on the World Trade Center, but the companies denied total coverage. In March 2005 a settlement agreement with the insurers through arbitration proceedings established £152 million ($292.4 million at the time) as the total recovery amount. In accepting the settlement Lloyd’s made clear that it “reserved the right to pursue others involved in the placement of the policy for the shortfall” (See IJ web site Feb. 3, 2006). Initial claims reached £325 million ($640 million at today’s exchange rate).
The matter has been an ongoing dispute between the parties ever since, even though it was in the obvious interest of all concerned to settle the matter. Although the exact terms of the settlement remain confidential, it has apparently ended the dispute.
Benfield said the financial impact of the agreement “will be approximately net £8,000,000 [$15.73 million], which will be accounted for as an exceptional item.” Chief Executive Grahame Chilton commented: “We are pleased to have brought an end to this matter and we look forward to continuing our excellent working relationship with Lloyd’s.”
Lloyd’s said the “net liability disclosed by Benfield represents part of a wider overall settlement” reached with Benfield and with Aon, which so far has not commented on the settlement.
Sean McGovern, Director and General Counsel at Lloyd’s, stated: “The settlement we have reached with Aon and Benfield enables us to lay this matter to rest and continue our excellent relationships with both organizations.”
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