In the 1980’s, spurred on by Superfund and other tort changes, a new theory of liability was conceived which, in due course, would result in over $200 billion of unanticipated old years’ environmental, asbestos, and product/practices liabilities - at a time when the entire capital base of the US commercial insurance business was less than $100 billion.

Once this theory of ‘general liability’ was endorsed by liberal US courts, in subsequent years billions of dollars of old year claims crossed the Atlantic to Lloyd’s, incentivized by the 1/3rd success fee system for US lawyer and, in effect, draining Lloyd’s reserves until capital calls on the Names were requried. There was in effect a massive, unexpected trans-Atlantic transfer from wealthy (or not so wealthy) British ‘Names’ (underwriters, at Lloyd’s) to US claimants of billions of dollars.

Equitas was therefore brilliantly conceived as the vehicle which would ‘ring fence’ Lloyd’s old years losses. During the establishment of Equitas, Martin Dolan worked with the brokers (Aon, Marsh McLennan, Johnson & Higgins, among others), future capital providers (many private equity firms) and the Society of Lloyd’s to help pinpoint the optimal ‘firebreak’ year for Equitas to assume the old years’ losses.

The debate surrounding where the ‘ring fence’ should be placed ranged from 1983 to 1986 to 1992: earlier years would result in more reserves and therefore higher investment income for new Syndicates but higher risk of old year deterioration, a later year ring fence would be safer yet allow little to no investment income. The placement of the ring fence was essentially the centerpiece of the restructuring of Lloyd’s.

Once Equitas was established, however, the real work began with the negotiations with US claimants who had won billions of dollars of court-mandated settlements. Martin Dolan worked with Equitas’ management to assist in evaluating not only the nature of the claims but to see the broader picture of the claimants’ need for cash and their corporate finance sensitivities to settlement structures, helping assist Equitas’ management to settle claims with insight to their claimants’ overall corporate finance sensitivities.

In due course, Equitas settled billions of dollars of claims, was sold to Berkshire Hathaway, and helped become the model for the modern, private legacy run-off sector.

Equitas dared to move the needle and change the future of the industry.