London - Disgruntled investors in Lloyd's of London said yesterday they would launch a legal claim against the British government for £1 billion (R13.2 billion) in compensation.
About 1 100 investors, who are known as the Names, are suing the government, claiming they made heavy losses at Lloyd's because the country's treasury failed to regulate the market properly.
The Names argue the treasury failed to implement key EU directives, including a measure that dictates how much insurers should hold in reserves when writing certain businesses.
A treasury spokesperson denied it had failed to regulate Lloyd's properly and said it would defend the case.
The Names, who use their personal wealth to provide capital for underwriters to insure risks, were hit hard by the billions of dollars of losses that Lloyd's racked up in the 1990s and early 2000s, when it was rocked by high-profile claims such as the Northridge earthquake and Piper Alpha oil platform disaster.
This court case, which is expected to last four weeks, will decide whether the Names are allowed to sue the government in a class action of this kind and whether their claim for compensation has expired.
If they were successful in this first legal stage, the group of litigants could potentially be swelled by thousands of other Names, pushing the claim for compensation well above the billion-pound mark, said Chris Stockwell, who is heading the group of litigants.
"If we win this procedural part of the case, I would anticipate a great many more Names would join the action, in which case the claim would go up correspondingly," Stockwell said. "If we win on all points, then there would be nothing to stop all other Names joining the action. They'd be nuts not to."
At the height of their participation in the market, about 34 000 people were individual investors in Lloyd's. Now fewer than 1 500 still actively participate in the market.
The Names fighting this first stage of the lawsuit included two members of the Conservative Party's shadow cabinet and prominent business figures, according to a report in the Financial Times. Stockwell declined to comment.
If they were defeated on these procedural points, the Names would appeal the decision to the UK court of appeal, said Stockwell.
If they failed there, they would take it to the European Court of Human Rights, he added.
But even if the Names won this first stage and the case continued, the trial was likely to last for years, a treasury spokesperson said.