Word: lloyds
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Dates: during 1970-1979
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...even these losses would pale beside a far less publicized jolt that the insurance group is suffering. It involves the labyrinthine world of computer leasing, a honey-tongued Texas hustler, the big gest and most prestigious U.S. banks and IBM. As a result of many forces, the Lloyd's insurance group faces the biggest loss in its 291-year history - up to $225 million, vs. the present record of $100 million paid to cover damages from Hurricane Betsy...
Eager to expand his business, Christopher met in 1974 with Lloyd's Broker Peter Nottage and persuasively proposed an idea for a computer-leasing policy that the underwriters eventually accepted. Under it, if corporations or government agencies broke a lease after the obligatory noncancellation period, Lloyd's underwriters would pay the leasing company any balance due to the bank on the purchase price of the computer. With this magical policy, Christopher found it easy to persuade banks to lend him the huge sums that he needed to buy computers. The company or agency that leased the equipment agreed...
Executives of other leasing companies were soon rushing to London to buy the new policy. San Francisco-based Itel became the biggest user, taking out 48% of all the computer policies that Lloyd's underwriters issued. The leasing companies owned by Citicorp, Chase Manhattan and Bank of America, among many other big firms, got similiar policies. In all, the 57 Lloyd's underwriting syndicates and 17 individual insurance companies that were involved in the deal wrote more than 14,000 policies covering potential claims of more than $ 1 billion...
Early on, when Lloyd's underwriters offered only a limited number of policies, competition for them grew rough. Christopher, suspecting that Lloyd's members might be ready to cut off his coverage in favor of another leasing company, arranged for the electronic bugging of a Manhattan meeting between Nottage and representatives of the Chemical Bank. Unluckily for Christopher, the expert he hired to do the job was an FBI informer. Christopher was indicted in 1976 by a federal grand jury in Manhattan and wound up pleading guilty to illegal electronic eavesdropping. He was fined...
Last January the unexpected happened: IBM announced its new 4300 series of computers, which are faster and more powerful than anything else on the market-and cost 30% less to lease. Immediately, some firms began switching to the new computers and canceling their leases of other models. Lloyd's underwriters stopped issuing their policy, as claims began to flow in from leasing companies. Last month one of them, Federal Leasing Inc. of McLean, Va., filed a $627 million damage suit against the London insurance group. Itel, though badly shaken by the new IBM machines, is more patient. Says...