Lloyd's has told brokers Aon and Benfield of plans to sue them for more than $577.5 million over their role in a disputed insurance policy to cover the market's Central Fund.
“This is not a decision we have taken lightly,” said a Lloyd's representative, Thor Valdmanis. “But our discussions over the last six months have not produced any results, so this is the logical next step.”
Both Aon and Benfield issued statements regretting the action and vowing to contest the suit. The two reinsurance intermediaries represent 19 percent of the premiums placed in the Lloyd's market.
The action stems from the role Aon and Benfield played in arranging an insurance policy Lloyd's bought for its Central Fund in 1999. When the six insurers involved in the deal–including Swiss Re and Hannover Re–refused to pay up to $880 million in claims, Lloyd's was forced to take a $486 million charge against 2004 profits. Lloyd's eventually settled with insurers for $268 million and is now seeking to make up the difference from its brokers.
The case may take up to 18 months to come to court, Mr. Valdmanis noted.
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