Can Lloyd's of London survive? the odds are looking better. Between 1991 and 1995 it reported more than $12 billion in insurance losses, and the Lutine bell on Lloyd's trading floor--whose one knell traditionally signaled a major loss by a client--seemed destined to toll for Lloyd's itself. But the 300-year-old insurance market has bounced back. Last week it reported a $1.7 billion profit for 1993 (Lloyd's accounts have a three-year lag), and, more important, Lloyd's investors voted overwhelmingly to support the first stage of a rescue plan designed to limit the damage from past losses and clean the slate for future business.

Support from these investors--the so-called Names who assume unlimited personal liability for the risks Lloyd's underwrites--is vital if Lloyd's is to attract new investors. As the tide of red ink crested in the 1990s, many Names balked at payments that would have ruined them, claim-ing that negligence, incompetence and even fraud on the part of Lloyd's market insiders had exposed them to unnecessary losses. Lloyd's at first tried to tough it out, but with 16,000 or so Names refusing to pay up and filing lawsuits, it eventually accepted the need for a recovery plan to clean up the mess and clear the decks for new investment.

That plan--put to a vote in London last week--offers Names individual settlements whereby in exchange for dropping their lawsuits they can pay a final reduced sum and end what is still for many an open-ended liability for past underwriting. The proceeds will go into a new reinsurance company called Equitas, which, with contributions from all sides at Lloyd's, will assume all the market's pre-1993 latent liabilities.

Last week most Names apparently decided to cut their losses. But Lloyd's must still reckon with up to 4,000 investors who say they will sign nothing, pay nothing and even continue to sue. These refuseniks probably include 800 to 1,000 American Names out of a total of about 2,600 in the U.S., where anger at Lloyd's boils particularly high. Lloyd's has offered an additional 20% reduction in the collective $850 million debt of U.S. Names if they settle.

But not everybody's taking the bait. Robert Flesvig, 55, a Chicago insurance salesman, vows to fight Lloyd's until he gets back every cent he has lost. Flesvig joined Lloyd's in 1979, using his Chicago home as collateral for his underwriting capital. "Lloyd's had a fabulous reputation," he recalls. "They told me that if a hurricane swept along the Eastern seaboard and took out 10 tankers, I might be in a little trouble, but not much, since the risk would be spread out." Since then his losses of about $1 million have forced him to sell his home. Flesvig claims he was deliberately kept in the dark by his syndicate about the vast asbestosis liabilities facing Lloyd's in the U.S. at the time he joined. But a Lloyd's spokesman rejects this. "Allegations of a concealment of asbestos risks known at the time have twice been fully investigated by Lloyd's regulators and lawyers," he says. "No prima facie evidence of nondisclosure has been found."

Flesvig is not alone in his suspicions. Many Names, like Traver and Margaret Van Epen-Smith of San Jose, California, believe Lloyd's recruitment drive of the '80s, which brought in thousands of middle-income investors, was directed at finding newcomers to help absorb losses that Lloyd's knew were in the pipeline. Says Philip Feigin, head of the Colorado State Securities Commission: "Lloyd's needed money, so they went out and found uninformed investors, whom they misinformed about the financial risks." Lloyd's refutes this too. "Expansion of Lloyd's membership in the '70s and '80s was made in response to the independent Cromer Report, which recommended growth if the market was to remain internationally competitive," a spokesman says. "And all would-be Names are, and have been for decades, made to affirm that they both fully understand and accept the nature of unlimited personal financial liability, with a visit to Lloyd's in London for this express purpose."

Lloyd's ability to deal with recalcitrant American Names suffered a setback two months ago when the U.S. Securities and Exchange Commission rejected its claim that disputes be heard in English courts and recommended that Names be able to challenge Lloyd's in the U.S. Although that setback was offset last week by a Texas federal court's ruling that a dispute be referred back to England, Lloyd's remains concerned that its recovery plan could yet come unstuck in the U.S. So the plan's carrot--more money for North American Names--has been matched by a stick: a warning that Names residing in states that are either planning or already in litigation against Lloyd's and who reject the rescue plan will forfeit any rebate. That approach seems to have worked. Most states have pledged to drop their actions, although a handful, including Illinois and Missouri, have declined.

Buoyed by predictions of $1.5 billion in profits next year, Lloyd's is now confident that later this year it can spring free of its anguished past into a golden future. But angry Americans could tarnish that glowing promise.

--With reporting by James L. Graff/Chicago, Thomas McCarroll/New York and Sylvester Monroe/Los Angeles