The book will critically, freshly evaluate various assumptions, presumptions, propositions, postulates and predicates — hypotheses until conclusively evidenced otherwise one way or another.
I especially like the idea of reenacting, reconstructing, revisiting what really happened in the Room, LOL inner-office offices and committee rooms, LPSO (which surely did keep records), chez placing and claims brokers, Names at home and with their lawyers, US corporate assureds-at-Lloyd's with their in-house and outside lawyers, etc., and self-professedly specialist Lloyd's lawyers in their own offices — with a grand dashboard showing numbers, figures, assets, liabilities, reserves, taxable income, trust fund balances, etc. What was everyone really thinking and doing? All this can now be done at a highly specific particularised detailed technical level using modeling and simulation software, AI and contemporaneous primary and subsidiary data.
Here are a few specific points of interest. Each is presently merely posited — however trenchantly — pending astorised examination (to be set out in extenso, forensically, with results, in the book). If you consider any point or issue well- or ill-founded, your assistance would be appreciated in ensuring accuracy and avoiding error:-
the broker in all his relations with his customer, the Room, regulators, self-regulators, managing agencies, members' agencies, run-off agencies, LOL. The practical, procedural, substantive, financial, social dynamics of placing broking and claims broking. Was he selling lemons to both sides or to only one (and how contemporaneously, concurrently, consecutively)?
iterations and reinventions of successive generations of lawyers — their supply to their customers of substance (including information, interpretation, evaluation, opinion, advice):-
the fact that the entire LOL enterprise depended not only on brokers but on (1) the victims' own lawyers (2) the victims and their stupidity, ignorance, grandiosity, pretentiousness, credulity, simplicity, naïvete etc.
how that substance differed between customers, lawyers, generations of lawyers, propaganda, mythology; sources of the parrotted and not-parrotted substance
in the back office: (1) the lawyers who signed off on Names joining LOL, the various agreements, trust deeds, SYA participations, lines, etc. (2) the lawyers who represented Names when things went wrong, including in arbitration and litigation. Exactly what did they get right and wrong, and why, and how lucratively for themselves and deleteriously for their customers? Exactly what substance did the customer and or his subsequent lawyers ever evaluate, and when, how, where, why, with whose help, using what sources and source material? Why no malpractice claims?
in the front office: (1) the lawyers who signed off on assureds-at-Lloyd's buying LOL products; (2) the lawyers who represented assureds-at-Lloyd's when things went wrong, including in arbitration and litigation. Exactly what did they get right and wrong, and why, and how lucratively for themselves and deleteriously for their customers? Exactly what substance did the customer and or his subsequent lawyers ever evaluate, and when, how, where, why, with whose help, using what sources and source material? Why no malpractice claims?
the disposition, mentality, intellect, methodologies, systems, working practices etc. of the (1) back-office customer, the Name (2) front-office customer, the assured-at-Lloyd's and his equipage
Lloyd's of London was never properly understood, described, disclosured, capitalised, reserved, managed, self-regulated, regulated or supervised
LOL hid, camouflaged and disguised its finances, liabilities and inner workings from judges, regulators, politicians, lawyers, investors and policyholders. When disaster struck, apparently no-one anywhere outside LOL knew how to handle it. Almost no-one who tried was able to describe LOL's workings accurately, intelligibly or credibly. Criminal law enforcement — police and prosecutors — understood LOL even less
in the 1950s, 1960s and 1970s, LOL wrote, for no particular financial advantage, insurance coverage blank cheques for American corporations and local and state governments, especially for asbestos, pollution and other health hazards, and failed to keep records, accounts and sufficient reserves. These so-called 'long-tail' liabilities, gestating at LOL by long-term insurance and reinsurance, were infiltrated from one generation of incubating LOL investors to the next, including by a poorly understood, imperfectly disclosed, barely self-regulated liability conveyor belt called 'reinsurance to close' — a most unsatisfactory way to inadequately reserve
in the early 1990s, having recruited and while still recruiting unsuspecting, misinformed, badly advised unlimited-liability investors, and sticking those old, increasingly toxic underwriting liabilities to them using 'reinsurance to close', LOL perforce admitted, incrementally, an apparent epiphany that (as it had known for decades) those old liabilities were 'unquantifiable' and that the entire Lloyd's enterprise was illiquid and insolvent, unable to ever pay all of its insurance and reinsurance claims in full
in a carefully calibrated, calculated series of ruses, LOL then went about:-
in the back office, squeezing cash (including by a scheme called 'Reconstruction and Renewal') from its now stunned and in some cases ruined 'reinsurance to close' investors, some suicidal at having been tricked by their own lawyers, accountants and agents, as well as by LOL, into playing a macabre version of Pass the Parcel: those ticking blank-cheque no-date unquantifiable-liability insurance time bombs of the 1950s, 1960s and 1970s. The inundation of hard-fought English investor litigation against LOL in the 1990s for the most elementary clarity and justice merely sought to apply — as English judges consistently did apply (to LOL's surprise? did English judges welch on a secret deal?) — to LOL ordinary English law of agency, as delusional LOL wasted time and a small fortune fighting surreally, up to the highest English court (why so far?), to disapply them to its own investors. (Why?) Those cases — Henderson v Merrett etc. — exposed how little had been and was known about LOL, its operations and applicable English law, and how thoroughly LOL had chronically, consistently and comprehensively obfuscated, distorted, mythologised and misrepresented itself. (Why?) Judicial review litigation against LOL was less successful. (Why?) Very few US state securities regulators had the faintest idea how LOL worked (or was it actually a case of W4?)
in the front office, imposing "Why don't we just share?" deals — involving various accomplices such as Equitas Re — on its alarmed, bewildered, uninformed, misinformed, badly advised, credulous, clueless, tongue-tied American corporate and government policyholders. Only a very few of their self-professedly specialist lawyers had any idea what was going on, could articulate what was really going on, could properly handle LOL's bad-faith claims handling or — the acid test of competence — could realise (if the US state was right) the triple-damages litigation opportunities. Of course very few American insurance specialist lawyers knew about LOL trust funds and other sources of claims payment. (How come?) How much detailed knowledge of LOL underlay the strategy of taking Equitas' 'present value of money' shortchanging vs. potentially years of collection and bad-faith claims-handling litigation against LOL? There was little American claims litigation, some of it — predictably — misconceived and mishandled, and still less American bad-faith claims-handling litigation. (Why?) Very few of the US state insurance regulators who needed to know really knew or understood how LOL worked (or was it actually a case of W4?)
strong-arming in claims settlement negotiations those American specialist policyholder-side insurance lawyers (a minority? a majority?) who lacked sufficient intimate knowledge and experience of LOL, trust and other funds and who were not able to credibly, sustainably, successfully face up to LOL. Does any of what happened at Equitas make any sense to a genuine specialist?
In the full LOL-Equitas context, 'Take what you can get from us now', 'present value of money', 'See you in court' etc. were not necessarily good-faith claims-handling propositions:-
Actually, they appear to the author to patently be stale, irrelevant, inherently bad-faith claims-handling arguments, if they have anything at all to do with legitimate claims handling in the first place, and should have made only a bad impression, or no impression at all, on genuinely fully informed specialist coverage lawyers fully aware of general and particular chronic and acute financial and other data defects and deficiencies at LOL (check out in this context article #16 in this book of the author's collected articles)
Apparently some suggestible policyholder-side lawyers,
not genuinely fully informed or otherwise prepared
having done little or no homework of their own (it takes years to figure LOL out, much of which must be devoted to deciphering, decoding, demystifying and purging, and who has the time or the need?)
entirely lacking cogent sustainable arguments in rebuttal
were reduced, ostensibly by a form of mesmerism, to espousing word for word, and earnestly recited back to Equitas and their corporate clients parrot style, LOL's own propaganda and Equitas' own 'negotiating' ploys submissively, gratefully and wholly uncritically as wholly unrebuttable uncontentious substance (all no doubt to LOL's intense gratification)
What steps did each policyholder-side lawyer take, if not embalmed in his own compromising elaborate error and pretense, to verify or refute Equitas' contentions before and during settlement discussions (and to what extent were they really negotiations, and on what issues)? How did they do it? Did cadres and conclaves of competing policyholder-side lawyers try to arrive at a common position based on comprehensive comprehension? Is it really the case that every American lawyer who settled at Equitas was genuinely fully informed and intellectually equipped?
What material original credible sustainable contrary and or concurrent arguments of their own did those lawyers — paid not for their plumage but for their skill in obtaining, apprehending, comprehending, utilising and monetising notoriously manufactured and mythologised (and sometimes outright fabricated and falsified) recondite domestic and foreign data — develop and deploy, from their own endeavours, not based on misinformation, misconception and misunderstanding? How did Equitas counter those arguments?
What information, opinion and advice did those lawyers give their corporate clients to enable them to evaluate all relevant aspects of the situation in detail? Did the corporate clients have independent sources of their own? For what, exactly, did these lawyers bill their clients? Did corporate counsel really care about any of it?
to what extent were American self-professedly specialist London market coverage lawyers (or was it actually a case of W4?) on a knife edge of being exposed to their already nonplussed, confused corporate clients by LOL-side lawyers?
There appears to have been a lot of money to be made in forcing LOL to pay 100% of a valid claim and evincing zero tolerance to its bad-faith claims handling. If American specialist coverage lawyers knew how to do it, as they claimed, why not do it while the money you had ascertained was there was still there, rather than:-
refrain from sticking an unarguable claim to LOL in full along with a credible threat, in the right state, of a triple-damages bad-faith claims-handling claim
wilfully advise and grandiosely agree your own client's haircut? To what extent were Equitas claims discussions foregone conclusions subject only to pseudo-sagacious quibbling — a charade fully transparent to Equitas — over the depth of the haircut?
magnanimously abandon a sizeable chunk of due claim money for the next competing claimant's competing lawyers, in LOL's own informal peculiarly serial scheme of arrangement, where it was every policyholder for himself? Did policyholder-side lawyers in the same firm and in competing firms apportion Equitas funds among their corporate clients? Did the corporate policyholder client give its genuinely fully informed prior consent to this generosity?
How many long-tail old-years APH direct and reinsurance claims could LOL afford to pay 100% and when? How did LOL manipulate and game the odds of imposing buzz-cuts on specialist American coverage lawyers who really were intimately knowledgeable about LOL (including its 'chain of security') with irrefutable claims to be paid 100% and irresistible triple-damages claims?
Was there a whiff of blackmail in the air to the extent that these fancy expensive specialist American coverage lawyers, or some of them, in curiously uniform, apparently wholly derivative behavior:-
had voraciously ingested misinformation and mythology from LOL, its lawyers, judges, arbitrators, regulators, specialist London solicitors and barristers, textbook writers and others about how LOL worked, as their sole source of relevant data
had never for themselves studied or ascertained the first thing about LOL including its 'chain of security'
could not have accurately explained, and never did explain, to LOL or to a genuine specialist how LOL worked in any material particular and would have balked at the invitation
were participants in a surreality of ignorance, misunderstanding and collaboration with each other and with LOL
were going through some elaborately preposterous (and highly lucrative) negotiating charade at LOL fully transparently to LOL and its lawyers?
Where among American specialist coverage lawyers was the genuine heavy-duty expertise about LOL and why wasn't more of it deployed? Why and how did LOL manage to shortchange so many policyholders? Is there any whole truth in the notion that the overwhelming majority of American specialist coverage lawyers who negotiated deals with Equitas had no idea what they were doing?
deceiving judges, investment regulators, insurance regulators, politicians, legislators and others already lying to the public that they knew what was going on and what to do about it
in a spectacular piece of Establishment chicanery, LOL:-
evaded formal insolvency process and legal accountability. Upset investors did sue LOL for civil fraud and lost (the Jaffray trial court judgment is here; the appeal court judgment is here)
successfully bilked English and American investors ('Reconstruction and Renewal' etc.) and American blank-cheque policyholders (Equitas Re, the 2009 portfolio transfer, etc.) out of billions of dollars (where exactly was the famous 'chain of security'?)
by judicial sleight of hand — the 2009 'portfolio transfer' — relieved itself and its investors (represented by Equitas Ltd.).of its old-year blank-cheque American insurance liabilities. Affected American policyholders and their specialist lawyers were little or none the wiser (can you work out what's really going on?)
manipulated W4 syndromees, including their own lawyers and insurance regulators, into making patently false, fictitious, fabricated, fanciful, misleading statements — on their face, in relation to the maker, in relation to the situation, and in relation to the underlying context and circumstances of the making — about exactly what was going on, and similarly doing and not doing things, contrary to their full knowledge and understanding of the facts, inconsistently with their private and public legal duties, and otherwise incomprehensibly
contained an unprecedented global insurance and reinsurance crisis that its own chronic greed, stupidity, irresponsibility, incompetence and dishonesty had created and sustained
saved its own face and the faces of politicians and regulators who had let it, and who let it, all happen.
Explored afresh: the hypothesis — all of this is presently conjecture, more or less — that:-
LOL and all W4 insurance regulators must have known and knew, before and certainly during 1970s US tort 'reform' (Borel etc.), that it would eventually be terminally insolvent from its own reckless American underwriting, record-keeping, under-reserving and fundamentally defective self-regulation; that it would have no financial margin of error for old and or fresh insured calamities, and that it would turn into a monumental indefinite pyramid Ponzi scheme and be an outright back-office and front-office fraud UNLESS…
LOL insider self-regulators were to have adopted certain policies, and were to have already put in place, modelled and rehearsed back-office and front-office extrication strategies and tactics, especially including:-
in the back office, the recruitment of unwitting uninformed misinformed (remember the Rota Committee?) cupiditous investors and a systematic policy of non-disclosure, misrepresentation and disinformation to them, their advisers and others
in the front office, the systematic misleading of American specialist international policyholder-side coverage lawyers about how LOL worked, especially the 'chain of security', by Lloyd's centrally, placing brokers, claims brokers, coverholders, underwriters, claims managers, run-off agents and others
special relationships with relevant governments, insurance regulators, accountants, lawyers and other facilitators
though vociferous in its contemporaneous professions of hapless drift, incompetence and ineptitude, LOL was actually thoroughly prepared and ready in every fundamental detail to save itself at crunch time. The appearance of reactive improvisation was an act.