THE long battle between Lloyds of London - the worlds oldest insurance market - and its aggrieved investors (known as Names) appears close to resolution.
After sustaining losses of nearly 19 billion ($30.6 billion) over five years, the 300-year-old institution is offering a 2.8 billion rescue package to bail out 20,000 Names who at one point were threatened with total personal financial ruin.
The fight has put Lloyds' independence on the line. A powerful committee of members of Parliament wants to stop Lloyds from running its own affairs and impose some form of external regulation - either by the government or by an independent agency.
Lloyds chairman David Rowland says the huge rescue package, designed to pull back Names from the brink of disaster, is generous and final. It follows an earlier attempt last year to placate investors, who include leading members of Parliament and other prominent citizens, with an "olive branch" worth 900 million.
Initial reaction from the Names has been encouraging, Mr. Rowland says. Peter Middleton, Lloyds' chief executive officer, says he detects "a change of mood" among investors who, at one point, were threatening lawsuits if Lloyds refused to offset some of their huge potential losses.
Lloyds, like other large insurance institutions, was badly hit by a string of natural disasters in the mid-1980s, including typhoons, earthquakes, and destruction of North Sea drilling rigs.
In the past, Lloyds investors have subscribed funds on an unlimited liability basis. Most of their personal assets were at stake, including homes. Names invested in the hope of making large profits. But they had to agree in advance that they would accept full losses if things went wrong.
In the buoyant early 1980s, things went well. Later, according to thousands of Lloyds investors, underwriters and their agents took unacceptable insurance risks.
Adam Raphael, a financial journalist who himself invested in the Lloyds market, speaks of "a tragic breach of faith."
Rowland's rescue plan involves building what is being called a "fire break" between Lloyds' old and new business.
Rowland and Mr. Middleton want to write off existing debts and create a new company - Equitas - that will handle all underwriting liabilities up to the end of 1992. (Lloyds declares its profits and losses three years in arrears.) Names who have not sustained losses will be asked to help finance payouts to those who have. The "lucky" ones will stump up 200 million. About 1 billion will come from Lloyds central fund, and about 800 million from insurance companies associated with the Lloyds market, according to the plan.
If the scheme works, Lloyds will emerge as a new company for handling 1993 and subsequent business. The new Lloyds will have reduced reserves, but few if any debts.
Rowland says he hopes that the total package will persuade aggrieved Names to settle their lawsuits, clearing the way for setting up Equitas by the end of the year. On average, a Lloyds source says, Names who have suffered heavily can expect to avoid from half to two-thirds of their potential losses.
Sir Thomas Arnold, chairman of the cross-party House of Commons Treasury committee, says he is "encouraged" by the rescue plan. But in a report, the committee says the relationship between its governing council and its regulatory board is "too intimate." It recommends that powers exercised by Lloyds' board should be transferred to an external body.
Sources at Lloyds say Rowland and Middleton are hoping the Major government will not agree to external regulation. They are not so confident about the future if a Labour government comes to power at the next general election.
Many Names are reported to be still unhappy about settling on the terms Rowland and Middleton offer.
Tony Wilson, leader of a group of litigants, says he has a fund of 3 million to fight future court battles. Wilson argues that Lloyds broke European laws and that therefore Names would not be liable for its losses.
Mr. Raphael says: "The stakes are dangerously high." He points out that if Lloyds were to "melt down finally" more than 50,000 jobs in London's financial district would be lost or endangered. "The most crucial task facing Lloyds is settlement of the litigation," he adds.
Analysts tend to agree that much now depends on Equitas being able to take over Lloyds' old business and produce the 2.8 billion payoff.
John Kay of the London Business School says it is "unlikely" that Equitas would be unable to meet claims. Much, he says, will depend on whether the majority of Names will be ready to accept the deal, cut their losses, and avoid what could otherwise be a long and bruising legal battle.