Equitas Re Shortchanging of Corporate America Made Easy Part II What To Do About It

Author's Note: The first article in this series, "Part I:
How Equitas Re Gets Away with It," was published in the preceding edition
of ABI Journal. This article deals with English law and relevant
circumstances as of April 2, 2006. Detailed discussion of Equitas Re is
at Astor's Equitas Re Handbook (2002; ISBN 1 873994 26 5), and Astor's
Insolvency at Lloyd's and Equitas Re, 2nd Ed. (2006; ISBN 1 873994 90
7). The author's own technical terms are defined at his Master Glossary,
which is downloadable from www.astorlaw.com/downloads. The reader should
note the considerable legal complexity of the Lloyd's enterprise and the
'Equitas' construct, of which the present article conveys only an indication.
This article should not be construed as criticising those U.S. corporate-assured-at-Lloyd's
boards, CFOs and outside insurance lawyers whose approach to, and knowledge
and practice of, relevant "Lloyd's" and 'Equitas' law and or practice
has been faultless.

Orientation

As discussed in last month's article in the present series, Equitas Re—the
Lloyd's enterprise's own plain-vanilla captive reinsurance company (on whose
holding company Lloyd's has a board seat¹)—is not part of any formal front-office
insolvency process binding, or even formally intended to be binding,² on any
EquitasRe-assured-at-Lloyd's. The 'Equitas' construct is not a form of liquidation,³
administration,⁴ receivership,⁵ s.425 scheme of arrangement⁶ or any other insolvency
process. No liquidator, administrator, receiver, scheme manager or any other
insolvency guardian is involved in any front-office⁷ aspect of either the Lloyd's
enterprise's or Equitas Re's insolvency. No EquitasRe-assured-at-Lloyd's creditor
is party to, or was invited or permitted to vote on, any relevant instrument
or has any supervisory role in its operation. Indeed, a curious feature of the
'Equitas' construct is the absence of any collectivisation of or by EquitasRe-assureds-at-Lloyd's,
whom Equitas Re picks off one by one. No court has approved any aspect of the
'Equitas' construct.

No Front-Office Legitimacy

The improvised 'Equitas' construct, which cost members of Lloyd's millions
of pounds to contrive,⁸ wholly lacks legitimacy as a front-office insolvency
process or device. In law and reality, the EquitasRe-assured-at-Lloyd's creditor
retains in full all his rights for full recovery against the original debtor,
whoever precisely that may be. Even the Lloyd's enterprise itself has expressly
acknowledged its liability to pay EquitasRe-assureds-at-Lloyd's in full.⁹ Yet
Equitas Re has particularly averred falsely a transfer of liabilities from the
supposedly insolvent Lloyd's enterprise to Equitas Re personally in a way legally
binding on the uninvolved EquitasRe-assured-at-Lloyd's.

Business Plan Requires Shortchanging

The 'Equitas' stratagem is assisted by the Lloyd's enterprise's inaccessibility
for EquitasRe-reinsured claims, including the unavailability at Lloyd's of any
claims-handling facility for any EquitasRe-reinsured liabilities. All creditor
EquitasRe-assureds-at-Lloyd's must treat with its front company Equitas Re—as
both claims handling agent and reinsurer principal—instead of with the
enterprise itself. Equitas Re then uses various negotiating ploys¹⁰ to try to
settle with disoriented EquitasRe-assureds-at-Lloyd's individually, usually
accompanied by the entreaty or enticement to be 'commercial' rather than emerge
with nothing at all. Many a major U.S. corporate EquitasRe-assured-at-Lloyd's
is believed to have fallen for it, emerging from Equitas Re with a supposedly
princely sum formerly known as insurance. Without such a device—fully
backed by insurance regulators in numerous jurisdictions including the United
Kingdom¹¹ and New York¹²—the presumably deeply insolvent Lloyd's enterprise
would have lost its corporate members, shut its doors to new business, and ruined
the City of London's reputation.

Consequences

It is believed that in its first 10 years of operation, Equitas Re has shortchanged
corporate U.S. EquitasRe-assureds-at-Lloyd's by around $20bn, and that many
substantial U.S. corporate EquitasRe-assureds-at-Lloyd's with substantial third-party
liabilities, have thus put themselves at risk of insolvency. This should alarm
insurance and securities regulators—from whom there continues to be deafening
silence—as well as the shareholders, investors, creditors and bankruptcy
trustees of the misguided corporations concerned. The bankruptcy trustee and
dispossessed creditors will have to start belatedly figuring it all out.

Meanwhile, Business as Usual at Lloyd's

The Lloyd's enterprise, for its part—regulatorily solvent, apparently
profitable overall¹³ for its current participants and with apparently ample
enterprise-level back-office funds—has shut its doors to creditor EquitasRe-assureds-at-Lloyd's
while continuing with full regulatory approval to do business as usual with
fresh creditor assureds-at-Lloyd's as if nothing were amiss. This is a perfect
example of the old trick of a debtor creating (often using a corporate veil)
a surreptitious underclass of creditors whom it will pay (fully or partly) only
reluctantly, while incurring fresh liabilities to a more favored class of later
creditor.¹⁴

Before an Equitas Shortchanging Deal

Given the chaotic state of both law and lawyering¹⁵ in relation to the 'Equitas'
construct, the presumption should be that the corporation does not understand
what it is doing, and has not been fully informed or soundly advised by its
own Lloyd's brokers or specialist outside insurance lawyers. It is to be hoped
that prudent shareholders, investors and creditors of a substantial U.S. corporate
EquitasRe-assured-at-Lloyd's substantially insured at Lloyd's will make the
necessary remonstrations before the corporation's CEO, CFO, in-house counsel
and their outside insurance lawyers give away the farm for relatively scant
cash-in-hand (to satisfy short-term revenue targets, not long-term liabilities)
in defiance of the corporation's legal rights against the Lloyd's enterprise.

After an Equitas Shortchanging Deal

Those corporations—personally or through their uninformed bankruptcy
trustees—already eviscerated of their insurance asset in settlement or
commutation negotiations with Equitas Re will presumably fully and expertly
audit the transaction and consider suing relevant lawyers for malpractice, and
the relevant local and or Lloyd's brokers for negligence. The more self-congratulatory
the tone of the corporation's and or Equitas Re's press releases and annual
reports unaccompanied by any independent corroboration of the deal's financial
wisdom and legal good sense, the more that investors and creditors should be
on their guard. In financial and presentational sleight-of-hand, the corporation
can turn to its advantage the same endemic ignorance that caused it to become
entrapped at Equitas Re in the first place.

Recourse Declaration

The recent New York injunction against Yukos is an interesting example of
timely anticipation and forestalling of unduly hasty asset disposals. Why not
an injunction to prevent self-impoverishment and the wanton destruction, at
Equitas Re, of creditor securities by an EquitasRe-assured-at-Lloyd's? To restrain
their corporation from cosily self-destructing at Equitas Re for a few brass
farthings in hand, the simplest, cheapest way may be (in a suitable case) to
apply for a recourse declaration to a judge in the Commercial Court¹⁶ of the
Queen's Bench Division¹⁷ of the High Court¹⁸ in London¹⁹ (notwithstanding the
lengths that the English and U.S. establishments may go to protect the Lloyd's
enterprise from its own largesse²⁰). The principles of recourse at Lloyd's are
the same whatever the governing law of the particular "Lloyd's" insurance
contract in issue, and could be considered in an English court as well as in
any other, and probably more authoritatively there than anywhere else.²¹

The court would be asked to declare—and there is presently no legal basis
on which it could avoid declaring—that Equitas Re as a reinsurer principal²²
is not an appropriate recourse object for any EquitasRe-assured-at-Lloyd's and
is otherwise irrelevant to him, at least for as long as the Lloyd's enterprise
is regulatorily solvent. The declaration will dispose of any assertion by or
on behalf of Equitas Re that the EquitasRe-assured-at-Lloyd's is now obliged
to deal with it rather than with the Lloyd's enterprise; will counter attempts
to undermine the claimant's legal rights; will reopen the claimant's access
to the Lloyd's enterprise for 100 percent of his valid claim when it falls due;
will stop the misconceived rush to commute unmatured cover; and will flush into
public consciousness a decade of misinformation.

Wording of the Declaration

Rather than perplex an English court by asking it to make a negative declaration,
and to spare everyone theoretical inquiry into precisely who or what at Lloyd's
does pay a valid claim on an insurance contract sold at Lloyd's, the declaration
could be framed, in an uncomplicated case, on the lines of 'that no instrument
has effected any transfer of liability from any EquitasRe-reinsured SYA participant
[subscribing to the particular insurance contract in issue] to Equitas Re, Equitas
Ltd., Equitas Holdings Ltd., Equitas Management Services Ltd., Equitas Policyholders
Trustee Limited, or to any other corporate or natural person, body, entity or
thing.' That, more or less, ought to stop further shortchanging at Equitas Re.

A declaration as to exactly where the money is buried to pay a valid insurance
claim, or commutation, is ordinarily superfluous. An insurer will usually be
one readily understandable, standard-form entity with a clear set of assets,
however convolutedly distributed in trust funds, letters of credit and other
collateralisation. It will not be a nebulous, poorly understood composite of
debtors and claims payment securitisation trust and other funds such as at the
Lloyd's enterprise, as unconventional as it is misunderstood.

No Recent "Lloyd's" Recourse Case

How the Lloyd's enterprise marshals money in the back office to pay a valid
claim on an insurance contract made at Lloyd's is and has long been its own
affair, into which no assured-at-Lloyd's ever needed to inquire before the 'Equitas'
construct went operational in September 1996 and started deploying its peculiar
mythology. So far as the author is aware, no court in recent²³ times has adjudicated
financial recourse on an insurance contract sold at Lloyd's. Nor is there any
established body of legal treatises²⁴ readily available to rebut the notion
that Equitas Re is not a legal transferee of liabilities contracted at
Lloyd's. Few specialist insurance lawyers have shown willingness to touch the
enterprise's intimate recourse complexities, for good reason. It takes time
to master them, it cannot be done without acknowledging existing ignorance,
and the result may be the exposing of the lawyer's prior malpractice.

The Solus Judicially Considered

The court may also find itself considering the irresistible argument that the
EquitasRe-assured's-at-Lloyd's front-office recourse is not to any natural²⁵
solus—including any EquitasRe-reinsured SYA participant solus—and
that the only recourse function of any SYA participant, including a long-dead
originalis, is to act as the assured's-at-Lloyd's conduit to such funds
as the Lloyd's enterprise is able to marshall in its own back office. The natural
solus at best supplies cash to the Lloyd's enterprise's back-office cash
conveyor belt, including cash which ends up in a variety of back- and mid-office
claims payment securitisation trust funds.²⁶ No solus ever
pays any claim direct to any assured-at-Lloyd's. What his premium trust fund
trustees chose to do with PTF and other relevant back-office funds is their
affair outside his immediate control. When the court finally addresses²⁷
and understands the cash conveyor belt at Lloyd's, conceptual solus-level
recourse errors in the Chancery Division's Re Yorke jurisprudence²⁸
will then hopefully be corrected. Some FO-MO-BO^TM29 and other subtle
recourse issues and distinctions³⁰ have already been outlined.³¹

High Stakes

A declaration from the English High Court that Equitas Re is not a relevant
principal, and that the money to pay a claimant EquitasRe-assured-at-Lloyd's
is all buried at Lloyd's, will resound at Lloyd's, insurance regulators, legislatures,
Lloyd's brokers, self-proclaimed expert insurance lawyers, corporate boardrooms,
shareholders and bankruptcy trustees. The stakes in a recourse declaration application
are nothing less than the viability of the 'Equitas' construct as the Lloyd's
enterprise's front to shortchange corporate America, the continuing viability
of some major U.S. corporate EquitasRe-assureds-at-Lloyd's, and the professional
reputations of some U.S. insurance lawyers who have counseled or are counseling
questionably cheap deals at Equitas Re.

A recourse declaration will recalibrate values at Lloyd's and enable corporate
America to fully recover on valid claims from the Lloyd's enterprise. The enterprise's
regulatory and actual solvency will come under renewed attack from the very
APH liabilities—such of them as have not been legitimately³² picked off
by Equitas Re—that caused the enterprise to create Equitas Re as a diversion
in the first place. No Financial Services Authority-orchestrated juggling of
balance-sheet liabilities between the Lloyd's enterprise and Equitas Re will
be able to hide the enterprise's true liability and financial position any further,
including from the U.S. Congress (which seems to be under the wholly false impression,
or is playing along with the idea, that the enterprise has transferred asbestos-related
liabilities to Equitas Re).

One immediate consequence of a correct recourse declaration may be the enterprise's
regulatory insolvency. If the enterprise cannot afford to pay its EquitasRe-reinsured
liabilities in full as and when they fall due—the apprehension of which
gave rise to Equitas Re in the first place—the fairest solution is an
express, overt, enterprise-level insolvency process at Lloyd's (such as liquidation,
administration or scheme of arrangement³³) in which all relevant creditors participate
formally, openly and effectively.

At Least a Negotiating Tactic

Perhaps the prospect of the valid-claimant EquitasRe-assured-at-Lloyd's having
a day in a properly informed English court will persuade Equitas Re to settle
a valid claim at 100 percent without further nonsense, and to offer rational
sums for commutation buy-backs. The negotiating advantage to be gained from
a credible threat to make a credible recourse declaration application could
translate into a very significant sum of money. After all, Equitas Re will be
no less mindful than the court that, '[w]here a person insures, I think that
he is contracting for the certainty of payment in specified events, and
not merely for the certainty of proper consideration being given to his claim
that a discretion to make a payment in those events should be exercised in his
favour.'³⁴ And it is a given that no fully and accurately informed
EquitasRe-assured-at-Lloyd's will do a pre-claim commutation at all absent the
assured's (not Equitas Re's) most exceptional cashflow crisis, a pretext which
its bankruptcy trustee will want to revisit.

Open Season in the Courts; General Recalibration

Having been shortchanged at Equitas Re, the U.S. corporation—and/or its
bankruptcy trustee and creditors—may wish to revisit the information and
advice it received at the time from its Lloyd's brokers³⁵ and its specialist
outside insurance advisers. U.S. federal and state securities regulators may
wish to examine all angles of the 'Equitas' construct. Shareholders of eviscerated
U.S. corporations may wish to consider class actions against appropriate corporate
officers and advisers who presided over, failed to model, and then camouflaged
the bad deal at Equitas Re.

Conclusion

Insurance used to be a way to maximise a corporation's protection from relevant
liabilities, and thus maintain investor value. But something has changed since
Sept. 3, 1996, when Equitas Re went operational. CFOs in some major U.S. corporations
have been selling insurance back to the insurer at a fraction of its value,
without taking genuinely expert advice and without appreciating—or else
concealing—the harm it will do to the corporation, its shareholders, investors
and creditors. The popularity among conventional U.K. insurance companies³⁶
of Companies Act 1985, s.425 schemes of arrangement—and the bizarre notion
that a 'solvent' scheme pays 100 percent of the true value of a future unvalued,
estimated claim—are not coincidental.

Remember Cuthbert Heath's grandiosity after the 1906 San Francisco earthquake?
A leading claims handling agent at Lloyd's, he is said to have instructed U.S.
local insurance agents to 'pay all our policy-holders in full irrespective of
the terms of their policies.'³⁷ The Lloyd's enterprise's reputation in the United
States continues to owe much to that stunt (which if true was almost certainly
in deliberate breach of his back-office claims handling contractual authority³⁸).
Members of Lloyd's continue to be licensed to sell a variety of insurance products
in the surplus lines and reinsurance markets throughout the United States and
have to deposit cash in trust as security for full payment. So why are CFOs
busy selling potentially hugely valuable insurance cover back to Lloyd's for
a fraction of its value? What has changed at Lloyd's? Virtually nothing has
structurally changed at Lloyd's, but a lot of bizarre things seem to have gone
wrong with the decision-making processes of corporate American EquitasRe-assureds-at-Lloyd's.

Footnotes

1 The Corporation's deferred share entitles it to appoint a so-called "Lloyd's
director": see generally Equitas Holdings Ltd.'s articles of association,
Art. 61. See generally Equitas Holdings Ltd.'s RA fye March 31, 2005,
p.18 ("Lloyd's Appointed Director"); Astor's Equitas Re Handbook,
pp. 20-23.

2 See for example RRC 4, §3.7 ('It is hereby acknowledged by each
of the parties to this Agreement that...this Agreement is not intended to and
does not create any obligations to, or confer any rights upon, Insurance Creditors
or any other persons not parties to this Agreement. It is hereby further acknowledged...that
this Agreement is not intended to and does not create any third-party beneficiary
status in, or confer third-party beneficiary rights upon, Insurance Creditors...');
similarly RRC 5, §2.6. And see also RRC 4, recital (J) ('This Agreement
is to take effect as a contract of reinsurance and shall have no effect on the
liability of any Name...under any original contract of insurance...').

3 See generally Insolvency Act 1986, Parts IV-VI.

4 See generally Insolvency Act 1986, s.8 and ibid., Sch. B1.

5 See generally Insolvency Act 1986, Part III.

6 See generally Companies Act 1985, s.425.

7 For back-office insolvency of Equitas Re, see for example RRC 4, Sch.
3 and RRC 7. Such matters have no legally binding effect whatever on any EquitasRe-assured-at-Lloyd's.

8 See for example Equitas NLs 1-5, R&Rs 1-14, SOD, etc.

9 See for example SOD, pp.123-4: 'The Society has a number of contingent
liabilities in respect of risks under policies allocated to 1992 or prior years
of account. If Equitas is unable to pay the 1992 and prior liabilities in full,
the Society will be liable to meet any shortfall arising in respect of these
policies', etc. The Lloyd's enterprise has since tried to resile from this position
with various small print (especially in connection with the so-called 'chain
of security') and double talk (especially in relation to the Central Fund; the
Council of Lloyd's purported division of the Central Fund into 'Old' and 'New'—see
for example Old Central Fund Byelaw and New Central Fund Byelaw—is wholly
without legal merit).

10 See the first article in the present series. Those ploys' plausibility
is proportional to the enterprise's chronic mystique, the absence before R&R
of any need in recent times to ascertain exactly who was actually liable in
the front office on an insurance contract made at Lloyd's, and the technical
substantive and procedural expertise of the EquitasRe-assured's-at-Lloyd's own
lawyers. Plausibility is enhanced by regulator approval, the unhelpfulness of
Lloyd's brokers, and such pious trappings at Equitas Re as Equitas Holdings
Ltd.'s fancy audited annual report and accounts, and an annual meeting for EquitasRe-reinsured
SYA participants (who suppose, intellectually erratically, that their interests
are opposed to those of creditor EquitasRe-assureds-at-Lloyd's).

11 The UK Financial Services Authority, which does not know as much as it should
about the Lloyd's enterprise, authorises Equitas Re and Equitas Ltd.: see
generally www.fsa.gov.uk.

12 See for example then New York State Insurance Commissioner Edward
Muhl's address to New York Law School's Center for International Law, Implications
of the Reconstruction of Lloyd's of London Symposium, Nov. 6, 1996 (www.nyls.edu/content.php?ID=713):

I was handed a report and it was the [New York Insurance] department's review
of the adequacy of the Lloyd's of London U.S. trust fund. Along with this report
was an order that the insurance department counsel had put together. If I had
signed that order, it would have de-accredited Lloyd's of London as an accredited
reinsurer and an accredited excess and surplus lines rendered in New York, basically
for their failure to maintain adequate monies in trust. New York is basically
a port of entry of Lloyd's for the United States because we oversee all the
U.S. trusts. We also control its status as an eligible writer in the United
States market as well as in the excess and surplus lines. I asked my senior
management if they realized what would happen if I signed the order. The general
answer was very simply that Lloyd's would be de-accredited. I responded by saying,
"If I sign this order, the insurance world as we know it would change."

13 On the consolidated trading results of underwriting members of Lloyd's—cf.
the corporation incorporated by Lloyd's Act 1871, s3 by the name of Lloyd's,
which is entirely different—see recently for example Corporation
RA fye Dec. 31, 2004.

14 Whereas the usual insolvency scam is for the debtor to hide behind a new
company—see classically Broderip v Salomon [1895] 2 Ch.
323, rev'd., Salomon v Salomon and Co. [1897] AC 22 (HL) et al.—the
Lloyd's enterprise has set up Equitas Re as a front company to attempt to buy
off one class of creditors on the cheap while itself continuing openly, and
with full regulatory approval in a number of jurisdictions, to do business as
usual and incur fresh debts with another class of creditors whom it supposedly
pays in full.

15 For an example of highly defective secondary literature, emanating from
the Lloyd's enterprise's own lawyers (whom one would expect to know and convey
the full truth), see J. B. Haarlow and H. C. Griffin, Equitas Under English
Law, 38 Tort & Ins. L.J. 1 (2003). The author's summary, non-exhaustive
reply, "Equitas Under English Law": An English Lawyer Replies, is
posted at www.astorlaw.com.

16 See www.courtservice.gov.uk.

17 See www.courtservice.gov.uk.

18 See www.courtservice.gov.uk.

19 On relevant English (there is no such thing as British) civil procedure,
see generally Civil Procedure Rules 1998 as amended ('CPR'), a thoroughly
unwholesome, badly crafted and drafted, deplorably dumbed-down version of the
previously pellucid, perfectly well understood, universally intelligible Rules
of the Supreme Court (on which see for example, latterly, Supreme Court Practice
1999 (Sweet & Maxwell, 1998)). CPR, Rule 40.20 envisages, almost incoherently,
English courts making binding declarations whether or not any other remedy is
applied for: 'The court may make binding declarations whether or not any other
remedy is claimed.' Is the provision prescriptive or indicative?

20 The curious result at trial and on appeal in the back-office Lloyd's
v Jaffray {2a} [2000] CLC 725 (Cresswell J); appeal dismissed Lloyd's
v Jaffray {2b} [2002] EWCA Civ. 1101 (CA) may have engendered assured-side
front-office foreboding that English courts' patriotism will overwhelm objectivity,
however monumental the Lloyd's enterprise's misbehaviour. The front-office legal
technicalia in a recourse declaration application appear so cut and dried, and
black and white, that no English court, however reliable, could credibly or
creditably subvert them.

21 RRCs 1, 4, 5, 7 and 17 are governed by English law: §§13.1, 25.1,
13, 16 and 14 respectively.

22 See generally RRC 4, §3.

23 The Lloyd's enterprise had a narrow escape—on fraudulent misrepresentation
and the Corporation's personal liability—in Industrial Guarantee Corp.
v Lloyd's (1924) 19 Lloyd's List Law Reports 78 (Bailhache J).

24 The essential facts are at Astor's Equitas Re Handbook (2002).

25 Cf. the substantial-line corporate solus, to which different front-office
recourse dynamics may apply in the particular case.

26 Annotated extracts of key funds are at R. J. Astor, Astor's Equitas Re
Handbook (2002).

27 The most recent (and wholly unsuccessful) attempt to get an English court
to investigate the cash conveyor belt at Lloyd's appears to be R v Lloyd's
ex parte Briggs [1993] 1 Lloyd s Rep. 176 (QB Div. Ct.). (QB Div. Ct.);
and see ibid., unreported, May 22, 1992 (QB Div. Ct.).

28 See Re Yorke (deceased); Stone and another v Chataway [1997]
4 All ER 907.

29 See R.J. Astor, "Liability on an Insurance Contract Made at
Lloyd's" (New York State Bar Association's Torts, Insurance & Compensation
Law Section Journal, Winter 2004, vol. 33, no. 1, p.18).

30 Between, for example, in relation to a particular insurance contract sold
at Lloyd's, the original contracting insurer, the present active insurer, the
jurisdictionally proper defendant to a particular coverage claim, and the collection-judgment
debtor. These roles are not synonymous. The assured-at-Lloyd's working this
stuff out for himself, and having to recourse to each relevant solus individually,
was and is not part of the deal of buying or (with insurance regulators' approval)
selling insurance at Lloyd's, and, not surprisingly, there is no established,
well informed or accurate body of knowledge on the subject.

31 See the first article in the present series, under the discussion
of Equitas Re's negotiating ploy number five.

32 An interesting question is the undoing of settlements made in bad faith
at Equitas Re.

33 English law on enterprise-level financial meltdown at Lloyd's is highly
unsatisfactory: see R. J. Astor, "Meltdown at Lloyd's: New Law,
Old Problems" (Tolley's Insolvency Law & Practice, December
2005, vol. 21, no. 6, p.191). On relevant European Union law supposedly covering
such meltdown, see European Parliament and Council Directive 2001/17/EC
(March 19, 2001) on the reorganisation and winding-up of insurance undertakings.

34 Medical Defence Union Ltd. v Department of Trade [1979] 1 Lloyd's
Rep. 499, 506 (Megarry V-C). Italics added.

35 It is curious that so few cases have been brought by EquitasRe-assureds-at-Lloyd's
against their Lloyd's brokers for negligent claims broking at Equitas Re, including
failure to tell the deluded EquitasRe-assured-at-Lloyd's exactly what his recourse
really is. At least one major Lloyd's broker—one of the Big Three (Aon,
Marsh, Willis)—is on record as advising its U.S. corporate client EquitasRe-assured-at-Lloyd's
to 'take what you can get before Equitas goes bust'. This raises interesting
issues of fraud and conspiracy.

36 See generally R. J. Astor, Astor's Principles of Insurance Insolvency
Law (2006; ISBN 1 873994 61 3) and R. J. Astor, "UK Solvent Schemes
of Arrangement: Insurance Creditors and the Court Finally Bite Back" (ABI
Journal, vol. 24, no. 7, September 2005).

37 A. Brown, Cuthbert Heath—Maker of the Modern Lloyd's of London
(C.E. Heath plc, 1993), p.95. Ibid.: 'Even today American insurance men
will tell you that Lloyd's owes its reputation in the United States to that
historic gesture.'

38 On non-standard underwriting agency agreements, see for example Hambro
v Burnand [1904] 2 KB 10 (CA); Henderson v Merrett Syndicates Ltd.
{1c} [1995] 2 AC 145, 171 (Lord Goff).