THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Friday, April 5, 1996 TAG: 9604050476
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY TOM SHEAN, STAFF WRITER
LENGTH: Medium: 64 lines
A bitter struggle between Lloyd's of London and wealthy Americans who stand to lose millions of dollars on their insurance investments has moved to Virginia.
Virginia's Division of Securities and Retail Franchising said it will ask the State Corporation Commission to temporarily bar Lloyd's from taking assets from at least 26 investors in the state.
Lloyd's syndicates, battered in recent years by heavy losses, are trying to recover $2.7 million - and possibly more - from Virginia residents to pay insurance claims, the securities division said in an affidavit filed with the SCC earlier this week.
An SCC hearing on the Securities Division's request for a temporary injunction against Lloyd's is scheduled for April 17 in Richmond.
Under Virginia law, memberships in Lloyd's insurance syndicates fit the definition of securities, the securities division said in its request for an injunction against Lloyd's.
These memberships, it said, were offered in Virginia but had not been registered with state regulators, a violation of state law.
The assets that Lloyd's is seeking from Virginia investors are in letters of credit, which are bank guarantees of payment on behalf of a customer.
All but one of the 26 Virginia investors in Lloyd's syndicates have resigned their memberships, but Lloyd's continues to seek payments from them, the securities division said in its affidavit.
Securities regulators in at least a half-dozen other states have taken steps to block Lloyd's from seizing assets of syndicate members in their states.
Thousands of investors in the United States and England already have sued Lloyd's, its auditors, lawyers and syndicate managers, claiming that they were misled about their financial obligations.
When applying to join a Lloyd's syndicate, individuals were told that were assuming unlimited liability and that a syndicate could take their entire net worth to cover any losses.
``However, the risk of this potential unlimited liability becoming an actuality was downplayed by Members' Agents, or Lloyd's, or both, by statements that the risk is merely theoretical. . .,'' the Virginia securities division said in its affidavit.
Lloyd's began in a 17th-century coffeehouse. It had been considered a pillar of the London financial world until it was crippled in the early 1990s by enormous losses and legal battles with syndicate members.
For most of its 300-year history, Lloyd's concentrated on insuring ships and their cargoes. But during the late 1970s and early 1980s, several of its syndicates began insuring against environmental risks, including asbestos and hazardous wastes, in the United States.
To raise the capital for this expansion effort, syndicates at Lloyd's courted thousands of wealthy individuals in the United States. But several of these syndicates have been swamped during the past decade with billions of dollars of claims that they could not meet. Syndicate managers responded by calling on their investors, or ``names,'' to cover these claims.
In England, hundreds of syndicates members have already lost their homes to satisfy claims from Lloyd's, and several suicides there have been attributed to Lloyd's-related losses. by CNB