Names ready to scupper Lloyd's reform

Lloyd's of London saw its efforts to reform itself radically slapped down yesterday by Names, who voted by more than two to one against proposals that would have eroded much of their power inside the historic insurance market.

It has been forced to agree to meet Names next week in an attempt to try to negotiate with them over which changes they are prepared to accept and which ideas will be scrapped completely.

Lloyd's has been forced into this situation because individual Names hold the vast majority of voting rights, so they can block fundamental reform of the organisation even though they only provide 20 per cent of the capital in the market. Lloyd's pointed out that based on the vote held this week, its reform proposals actually prevailed. It said the votes cast at Thursday's meeting showed 80 per cent of members backed the reform package, with 20 per cent voting against it.

Sax Riley, Lloyd's chairman who formulated the ideas for change, said the result provided a "decisive mandate to implement our proposals".

This vote was weighted according to how much capital each member puts into the market. This meant that companies that underwrite at Lloyd's, which largely favour reform, were always likely to win this vote.

But the council of Lloyd's, its governing body, knows this was a hollow victory because Names can still call an extraordinary general meeting to review the proposals.

According to Lloyd's rules, a vote at an EGM would have to be on a one-member, one-vote basis. Individual Names make up about 15,000 of Lloyd's 16,000 members, making it simple for this group to block any plans they do not like.

The indication is that most Names want to scupper many of Lloyd's proposals, as was reflected in the fact that this week's vote saw Names reject the reforms by 3,356 to 1,393 measured on a one-member, one-vote basis.

The main area of contention is a proposal to reform the act of parliament that governs the organisation. Many Names believe Lloyd's wants to replace the one-member, one-vote by the weighted system that favours companies. One Name said yesterday's vote result meant a new Lloyd's Act was "as dead as a dodo".