The review will be led by Sir Alan Hardcastle, chairman of the Lloyd's regulatory board, but it includes John Kennedy, a director of the Securities and Investments Board, and other outsiders.
Sir Alan said the review would recommend how regulation would develop in the future and added: "It is imperative to ensure that the sharp lessons of the past have been learnt."
Lloyd's has recently made clear that it is prepared to consider removal of the regulatory function from the market, though David Rowland, chairman, has also said that recent changes have made the internal regulatory department into a much more independent body than in the past.
The terms of reference of the review say it will consider "whether organisations other than Lloyd's should undertake or supervise any regulatory activities".
The role of the council, the existing regulatory board and the relationship with the market board would be among the issues examined.
Sir Alan said the direct involvement in the review of the SIB and people involved in providing capital to Lloyd's would ensure a high degree of independence.
He plans to report to the council of Lloyd's by mid-1997, but that is likely to be after an election and Lloyd's could find itself dealing with a new Labour government intent on sweeping reform of City regulation.
In 1995, following a Commons Treasury Committee report, the Government said it would undertake a long-term review of the statutory framework for Lloyd's regulations.
The start of this review was delayed for two years until next summer to allow the future shape of the market to clarify. With pounds 8bn of losses and a vast reconstruction programme just completed, the market is in a state of flux.
Other members of the review team include Jonathan Agnew, a corporate member of the council of Lloyd's, and Rodney Galpin, a former executive director of the Bank of England.Reuse content