WASHINGTON — Actions by U.S. state securities regulators could jeopardize the survival of troubled Lloyd's of London, the giant London insurance market, a Lloyd's official said Monday.
U.S. insurance regulators say such a collapse could lead to a wave of insurance company insolvencies in this country, because many American insurance companies have insured part of their own risk with Lloyd's.
California and eight other states have taken steps to stop Lloyd's from collecting money from Americans who are Lloyd's "names"--individuals who put up their own money to cover the costs of the risks that Lloyd's underwrites, with the potential for either steep losses or heavy profits.
The states contend that the individual investments are securities. They allege that Lloyd's violates state securities laws by failing to warn U.S. investors of huge possible risks from claims related to such hazards as asbestos.
Lloyd's, which hotly contests the characterization of the investments as securities, lost about $12 billion in the five years ending in 1992, largely to claims related to asbestos, pollution, hurricanes and floods.
On Monday, as a group of about 20 states was about to join those that had already filed actions against Lloyd's, the North American Securities Administrators Assn., the organization of state securities commissioners, agreed that Lloyd's would not draw any money from American names held in U.S. trust funds until at least May 14. The delay could allow Lloyd's time to negotiate a settlement with states.
Tennessee and possibly several other states were expected to join the states in filing actions against Lloyd's anyway.