ULTIMATE RISK

An intelligible and generally absorbing rundown on how one of the world's best known but least understood financial institutions came to possibly terminal grief. In telling what he stresses is a story whose conclusion may not be known for some years, Economist correspondent Raphael makes a fine job of recounting how the underwriting collective known as Lloyd's of London became a major force in international insurance markets. He goes on to delineate the crucial role played by so- called Namesindividuals who put up capital in hopes of realizing handsome, tax-sheltered returns and assume unlimited personal liability for losses incurred by their syndicates. The author also inventories the financial wreckage left in the wake of epic storms (Andrew, Betsy, Hugo, et al.) and such man-made disasters as fire aboard an offshore oil rig. Withal, nothing prepared Names or their brokers for the havoc wreaked by obligations resulting from asbestosis and pollution-abatement claims in the US. These multibillion-dollar liabilities bankrupted hundreds of once affluent individuals. While the resultant litigation exposed a wealth of sleazy deficiencies at Lloyd's (inadequate or nonexistent disclosure of risks, overly venturesome underwriting, lack of accountability, self-dealing, and in some cases outright fraud), Crown courts have done precious little to provide surcease for Names whose lives are in ruins. Nor, despite a belated effort to professionalize a freewheeling enterprise based on trust or at least confidence, is there any assurance that Lloyd's can survive in anything like its present form. In chronicling the unresolved juridical conflicts between those with nothing left to lose and an institution whose blunders have made it an embarrassment to the UK establishment, Raphael offers more detail than may suit the taste of North American readers. On the whole, however, he provides a clear briefing on a financial fiasco whose consequences could prove earthshaking for insurers and insured alike. (12-page photo insert)