British order to Lloyd's: don't pay any Argentine claims
The Falkland Islands crisis has spread to Lloyd's of London, the famous British insurance institution.
As part of the British economic blockade of Argentina, insurers have been given direct orders from the British government not to make payments on any Argentine claims. The result, said Peter Dugdale, managing director of Guardian Royal Exchange Assurance P.L.C. and chairman of the British Insurance Association, is like telling insurers, ''You can make an omelet, but you can't use any eggs.'' In other words, the insurers can write policies, but not pay them off.
Thus, British insurance executives interviewed here at the World Insurance Congress indicated that government rules would effectively dampen the insurers' ability to do business with Argentina. About $54 million of insurance premiums from Argentina currently are placed with the Lloyd's insurance syndicates. Although the Argentine business is only a small percentage of each firm's business, Mr. Dugdale said, ''It is an old, established connection,'' and he indicated the government rules put the insurers in a bind since they felt they had to do what they considered ''the most honorable.''
Because the insurers cannot make payments on any claims, Peter Green, chairman of Lloyd's, urged insurers last week when he was in Sydney, Australia, to cancel existing policies and not to take new business.
David Larner, a spokesman for Lloyd's in London, told the Monitor that since Mr. Green's advice, it's likely that ''some underwriters who have cancellation notices in their policies have canceled them.'' Since April 2, he points out, no new policies have been signed by any underwriters - as part of a self-imposed ban. Furthermore, since Argentina has likewise blocked all funds destined for England, no premiums have arrived at Lloyd's since the crisis began. Even though the government has left several loopholes in its regulations, Mr. Larner said it is the intent of Lloyd's to obey the regulations to the ''letter and spirit.''
As part of the financial embargo, the British government has set up a special account at the Bank of England to receive funds that will be used to pay Argentinian insurance claims. Once hostilities end, Mr. Larner said, funds deposited in this account would be sent on to Argentina.
However, keeping track of claims and analyzing risk is certain to become more difficult since insurance executives expect information flows between the two countries will be halted. Peter J. Smith, an information specialist with the Commercial Union Assurance Company Ltd., said, ''As part of the intelligence operations, I would expect a complete blackout of information.'' The insurance industry is a large user of data, and limitations on this information would make business analysis difficult.
Insurance executives here speculated that business that normally would go to Lloyd's might be transferred to insurers in the United States. However, no US insurance company indicated it has picked up any business at the expense of Lloyd's. Still, Mr. Larner said ''it wouldn't surprise me if they did.'' A report in Lloyd's List, a London insurance publication, indicated that British insurers expected Aerolinas Argentinas, the national airline, to transfer its insurance to the US because of the sanctions.
US insurers for the most part expressed their concern over the crisis. Harold Christensen, vice-chairman of AFIA Worldwide Insurance Company, said his company had two offices in Argentina and viewed the crisis with ''great concern.'' And John Cox, the president of INA Corporation, referred to the ''shocking suddenness of events as they develop in the Falkland Islands.''
The Lloyd's insurers also have some risk at stake because they have insured the P&O fleet which has been commandeered by Britain to haul troops to the Falklands. Mr. Dugdale pointed out the insurers' risk is purely for marine purposes. The government would be responsible for insuring the fleet for any war damages. Also, if war is officially declared, any insurance in force in Argentina would be automatically canceled, insurers indicated.
Insurance executives, dining this week on the ocean liner QE2, which had docked in Philadelphia, speculated that the liner might be enlisted into service. ''I wonder what the insurers would think of that?'' asked one South African insurance executive. However, Alice Marshall, a representative for Cunard Lines in New York, said that so far rumors that the vessel was destined for the chilly South Atlantic are not true. However, she added, ''nothing is carved in stone. . . .''