FSA to regulate Lloyd's

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FINANCIAL regulators yesterday set out proposals for the Lloyd's of London insurance market to be regulated externally for the first time in its 300-year history, writes Andrew Verity.

The Financial Services Authority published plans to use new powers under the Financial Services and Markets Bill to avoid a repeat of huge losses in the early 1990s which nearly caused Lloyd's to collapse.

All managing agents - the companies that run the syndicates underwriting business at Lloyd's - will now have to be authorised as "fit and proper" by the FSA.

Members' agents, who liaise between the market and individual Names, will also have to be authorised, and the FSA will have powers to intervene directly when the agents break its rules.

The proposals, which are subject to consultation until March 31, seek to avert a crisis arising from big concentrations of risk and poor underwriting.

The FSA retreated from handling the day-to-day monitoring of the market - a possibility that alarmed insiders. Instead, Lloyd's will discipline wayward members while the FSA will be able to fine Lloyd's as a whole.