No alternative to accepting the improved offer

Comment

It is hard to believe that the first Lloyd's offer to its aggrieved names three years ago was a miserable pounds 900m. In the last week alone, the market has managed to magic out of the hat the same amount simply by reducing the funding requirements of the Equitas reinsurance vehicle from pounds 1.9bn to pounds 1bn, a saving of pounds 900m. But then all negotiations involve brinkmanship. Lloyd's must have seen the possibility much earlier this year of reducing the cost of Equitas to names, but held the card back to the last minute, when it would have the maximum psychological effect.

The names' action groups, for their part, have also played it pretty rough, and close to the brink at times. So have the auditors, who grudgingly agreed in the late stages of the negotiations to pay pounds 100m or more into the settlement - a lot less than they ought to contribute, given their central role, but progress all the same.

As ever with Lloyd's, nothing is simple. The settlement offer itself has been raised by only pounds 300m to pounds 3.1bn. The other pounds 900m is technically not part of Lloyd's offer to the names but a reduction in what they have to shell out to Equitas. But it comes to the same thing in the end - the overall package is pounds 1.2bn better than it was when the outline settlement was published in February.

Having delivered such a surprise with the pounds 900m, Lloyd's risks encouraging the most militant members to press on with their campaign in the hope that there is another chunk of money up another baggy sleeve somewhere. However, this time Lloyd's is probably serious when it says there is no more available. With the August deadline looming for proving to the Department of Trade and Industry that the market is solvent and can continue trading, there is not much time left.

The main action groups have been drawn deeply into these final rounds of negotiations. Some of their leaders are too closely identified now with the offer to do anything but back it. There are still hundreds of bankrupt names in such deep trouble that the settlement cannot solve their problems. But the chances of majority agreement have not looked better since this whole sorry business started. There is no sensible alternative to accepting it, even if the argument is bound to continue for a couple of months over detail.