Lloyd's digs heels in

Lloyd’s of London is resisting demands to abandon its three-year accounting basis and move towards annual reporting.

Corporate investors are demanding annual reporting to create an attractive trading environment which recognises the transition of Lloyd’s capital structure to a more corporate basis from the individual Names who have dominated in the past.

The debate has been fuelled by the recent publication of ‘Priorities for Growth’ by Lloyd’s Market Board and by last year’s internal working party review of the market’s accounting provisions.

One actuarial company highlighted what many now see as an archaic and quaint system which has meant that syndicates are already reporting their results on a yearly basis while Lloyd’s reports only after three years.

It said advances in communications had made three-year reporting redundant.

An Association of British Insurers spokesman said: ‘This system was established at a time when it took ages for ships to be found when they were damaged and Lloyd’s did not want any nasty surprises by closing the books too early.’

He added that funded business, or three-yearly business, formed a relatively small percentage of the global insurance market in 1997 compared to annual business and that virtually every insurance company operates on an annual reporting basis.

Explaining that the three-year accounting practice stemmed from the need to keep the books open to assess more accurately the market’s liabilities from marine activity, Lloyd’s market reporting and solvency manager Paul Appleton said he was unconvinced about the need for 12-month results.

Appleton acknowledged annual accounting would allow both profits and losses to be distributed more quickly and that the additional problem of policies changing ownership each year was easing because of new corporate syndicate structures.

But the problem was significant enough to make annual accounting unworkable in the short-term, he said.