View from City Road: Lloyd's overdue for an overhaul

David Rowland, chairman of Lloyd's, assured his stricken investors yesterday: 'We will trade forward just as we have for the past 300 odd years,' as he announced cumulative losses above the pounds 7bn mark.

No company could sustain that level of deficit and hope to survive; to most names, Mr Rowland's comments must sound like crass and monumental complacency. He is cleverer than that, however. The best form of defence is often attack and Mr Rowland's plan is to change the agenda, to try to get everyone to believe that the problems of the past are being isolated so the market can get back to business.

It's a hard task which every piece of bad news makes that much harder; the market's long-term future is intimately bound up with whether it can attract new investors - the old ones are leaving in droves.

A series of legal actions is now reaching the courts, and it is widely acknowledged that Gooda Walker names have a strong case. Some form of new settlement offer is possible in the summer or autumn, and the cost may ultimately be borne by the market as a whole.

Losses on pollution insurance underwritten in past years are seemingly unstoppable unless the US government steps in. And new corporate investors are having second throughts about whether they are truly isolated from the costs of past losses.

With such a stream of bad news how can the market expect to keep enough members on the books to carry on?

The official position is that Lloyd's will muddle through, picking up extra corporate and private underwriting capacity as prospects improve. It's possible, but not nearly as likely as Mr Rowland would like to pretend.

Even if he is right, however, and there are enough sincerely rich private investors and corporate names to plug the gaps left by the impoverished middle classes - which are sensibly finding other homes for their money - should Lloyd's be allowed to get away with so little change in the way it is run?

Compared with the securities and banking industries, Lloyd's is still woefully under-regulated and under- supervised. Minor reforms so far in place are not enough to assure potential backers.

The Department of Trade and Industry should use the annual review of Lloyd's solvency in September to insist on further changes. After all, Lloyd's cannot trade without its certificate.