Category: Insurance history · Reviewed by Matt Bartlett, Director · Founder · Last reviewed 2026-06-05
The Reconstruction and Renewal Plan, approved by the Council of Lloyd’s and accepted by members in 1996, was a comprehensive settlement of the long-tail asbestos, pollution and US casualty liabilities arising from the Lloyd’s pre-1993 underwriting years. It created Equitas Reinsurance Limited, transferred the legacy liabilities into Equitas, and saved Lloyd’s of London from a market-wide insolvency.
Category: Insurance history Also known as: R&R Plan, Lloyd’s R&R 1996 Implemented: 4 September 1996 (settlement effective date) Related concepts: Equitas Reinsurance, Lloyd’s of London, Lloyd’s Act 1982
The R&R Plan was a binding compromise between the Society of Lloyd’s, its members (both individual Names and corporate members), the Lloyd’s Central Fund, and the body of plaintiffs in the various Names’ litigation. Its principal mechanisms were: (1) reinsurance to close of all pre-1993 underwriting years into Equitas Reinsurance Limited, a UK-authorised reinsurer; (2) a contribution by Lloyd’s central resources of approximately £6 billion to capitalise Equitas; (3) settlement payments to Names in exchange for releases of claims against the market, agents, and auditors; (4) modernisation of Lloyd’s governance, capital structure (admission of corporate members), and underwriting controls.
The Plan operated through individual settlement contracts between Names and Equitas, supported by byelaws of the Council of Lloyd’s made under the Lloyd’s Act 1982. Litigation challenges by Names — notably in Society of Lloyd’s v Leighs [1997] 6 Re LR 289 and subsequent appeals — confirmed the validity of the compulsory features of the Plan. The Part VII transfer of the principal reinsurance arrangement to National Indemnity Company in 2006 was approved under section 111 of the Financial Services and Markets Act 2000.
The crisis that necessitated R&R arose from the combination of US asbestos litigation, environmental claims under historic general liability policies, and a series of natural and man-made catastrophes (Piper Alpha 1988, Hurricane Hugo 1989, Exxon Valdez 1989, Hurricane Andrew 1992). The losses fell disproportionately on the open underwriting years of 1985-1992, and could not be reinsured to close on commercial terms. Without R&R, individual Names — many of whom had unlimited liability — faced bankruptcy, and the market faced terminal loss of credit standing.
R&R is generally regarded as the most successful insurance market workout in history. The Equitas reserves have proved adequate; the Berkshire Hathaway / National Indemnity reinsurance has provided certainty to claimants; the modernisation of Lloyd’s governance has produced a sustained period of profitable underwriting; and the market’s credit rating (A+ from S&P, A from A.M. Best at various points since 1996) has recovered fully. The lessons of R&R — early recognition, ring-fencing, central capital, and contractual compromise — continue to influence insurance restructuring globally.
A Name underwriting on the 1985 year of account who participated in R&R paid a single settlement premium calculated by reference to the Names’ Litigation settlement formula, in exchange for which their pre-1993 liabilities were reinsured by Equitas and the Name was released from further claims. The settlement was substantial — many Names lost the bulk of their underwriting deposits and ancillary assets — but it provided finality.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-05. Next review: 2026-12-05.
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