Brussels condemns regulation of Lloyd's

The Government was yesterday condemned by a European parliamentary report for failing to properly regulate the Lloyd's of London insurance market.

Roy Perry, the Conservative MEP, was asked to investigate the Government's handling of the market after several names filed complaints that it had failed to implement EU laws quickly enough and allowed Lloyd's to produce inadequate accounts. Mr Perry yesterday presented his findings to the European Commission.

The report may now pave the way for investors who provided funds to underwrite the insurance claims to sue the Government.

Mr Perry wants an inquiry to be set up into how Lloyd's has been regulated and is now waiting for the EU to decide whether to pursue legal action against the Government. A decision is unlikely until January next year.

The report raises questions over the accounts of Lloyd's and how they were audited at a time when syndicates were known to be facing potentially huge asbestos-related claims.

Lloyd's suffered losses of around £8bn between 1988 and 1992 from hefty insurance claims, bankrupting many names. Governments are required by an EU directive to make sure that insurers have enough funds to cover their liabilities. Mr Perry's report said the Government was slow to write the directive into UK law and then failed to enforce it.

A spokesman for the Treasury said the Government was adamant it had not breached any of its obligations in relation to Lloyd's. "The Commission asked us for information on our regulation of the Lloyd's market. We provided that information and are now waiting for a reply."

A spokeswoman for Lloyd's said Mr Perry's report was "inaccurate and unbalanced".