A report by a Lloyd's working party set up in October 1996 under Sir Alan Hardcastle recommends bringing in the Securities and Investments Board and the Department of Trade and Industry to supervise the market. The Council of Lloyd's has thrown itself behind the proposals in the report, which was published yesterday.
Under self-regulation, Lloyd's suffered losses of pounds 8bn over the five- year period to 1992, culminating in a pounds 3bn rescue operation last year. Some 40 per cent of its investors sued the market claiming negligence and fraud contributed to their losses. While most of the lawsuits were settled in September when the market reorganised, the taint undermined confidence in Lloyd's.
The report by the Lloyd's regulatory review group aims to boost confidence by simplifying and opening out regulatory procedures and allowing the SIB and DTI to supervise the insurance market's Regulatory Council.
Sir David Rowland, Lloyd's chairman, said: "The Council fully supports the recommendation for further external regulatory oversight and the overall thrust of the report."
The report recommends that the regulatory board should be cut from 18 to 12 members, and remodelled to make Lloyd's regulation fit in with rest of financial services industry.
The working party stresses that Lloyd's is in a unique position as a market consisting of a raft of independent brokers and investors with a central fund, a structure it intends to leave unchanged. But it wants to slash red tape and the costs of supervising the market, while introducing charges for "users" of regulation. The report also proposes a unit to detect and monitor potentially damaging areas of risk in market.
The DTI was involved in the rescue of Lloyd's since it has powers under the Insurance Companies Act to intervene if Lloyd's threatened to go bankrupt. But the DTI can only act when Lloyd's is close to insolvency. The new proposals would mean a much more regular, hands-on approach, Sir Alan said.Reuse content