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Lloyd's of London Loses on Viatical Investments

Goshawk, one of Lloyd's of London's top insurers, reported losses of more than $51 million USD due to viatical settlements investments.

Goshawk, which had additional losses due to exposure from providing insurance for the Columbia space shuttle and the collapsed UK claims venture Accident Group, but considered the greatest problem its high loss ratio from its US viatical business.

As reported in newspapers throughout Europe, Goshawk said "there was
'material uncertainty' related to the reserves at the viatical business in particular."

Goshawk admitted that it entered the viatical business without adequate research and proper reinsurance cover.

Insurers who accept high risks, such as people who do deep sea diving or pilot airplanes, usually buy insurance to help them pay these claims. This back-up insurance is known as reinsurance. Goshawk's report indicates it bore the full financial risk without any back-up.

After a review of its underwriting procedures by KPMG, Goshawk said it would put in place structural changes to the way it underwrites and it plans to exit the satellite market to concentrate on property, personal accident, professional indemnity, kidnap and ransom, marine and non-marine insurance.

 Report dated Sept. 26, 2003