Byline: tim freeborn
WHAT was the biggest company collapse in British history? Maxwell Communications? Bank of Credit & Commerce International? No, first prize goes to London United Investments.
Yet, while MPs and policemen have huffed and puffed about Maxwell and BCCI, the scandal of LUI and its missing [pounds sterling]5bn - possibly more - has gone almost unnoticed.
This is all the stranger since British people pay a levy each time they take out an insurance policy. It was only 0.25pc last year to raise [pounds sterling]48m.
But this little bill could run to a wretched [pounds sterling]500m, paid by you and me.
Even more galling, the cash does not even pay claims to British policyholders. Instead, the Policyholders' Protection Board is shipping it to the US to cover negligence claims against US doctors and lawyers.
It sounds crazy, and it is. But even odder events are unfolding at Lloyd's, where all too many of LUI's duff American insurance policies were reinsured. As that insurance market nears its make or break final settlement, all manner of insurers, US and British, are trying to cut deals to grab cash while it is available.
A policy might seem to guarantee [pounds sterling]1m of cover. But, if a reinsurer is going to fold before claims fall due, it could make good sense to settle for a smaller amount now, while there is cash in the kitty. The grand word for this is `commutation', and there is a lot of it about.
First, a bit of history. LUI was run by a gentleman called Ronnie Driver.
Rumour has it he would have rather liked a knighthood. LUI's board was adorned by the presence of Prince Michael of Kent, whose status as executive or non-executive was never explained. LUI's many offshoots specialised in liability cover for American business. Its customers ranged from huge companies such as Kraft Foods down to individuals and partners in the US professions.
Where other insurers feared to tread, LUI was eager to take customers' money and write them a policy. As a fairly small company, it could not keep all this risk for itself. It shared the odd billion with a host of reinsurers working in the London market. For this, it needed the help of insurance brokers, and few were more helpful than former Sedgwick vice-chairman Jim Payne.
Many of the Lloyd's syndicates that suffered heavy losses were eager customers of LUI and Payne. The LUI story was also enlivened by the [pounds sterling]35m of premiums that Driver and two other directors diverted to Liechtenstein. …