Inquiry condemns laxity at Lloyd's

WORKING STANDARDS in the troubled Lloyd's insurance market came under attack yesterday in a report prepared by Sir David Walker, one of the City's most senior figures.

Sir David said standards of professionalism, care and diligence on the part of a number of members' and managing agents, who look after the affairs of Lloyd's members, fell 'materially below best practice'. Several members' agencies, which he did not name, were lax in discharging their legal responsibilities to the members for whom they acted.

Sir David, former head of the Securities and Investments Board, the City's main regulatory body, was asked by Lloyd's in February to examine aspects of its affairs after allegations by many members that the market was structurally rotten. Lloyd's has just reported losses of more than pounds 2bn and more than 2,000 underwriting members face financial ruin.

Sir David also found evidence that professionals in the market had received preferential treatment at the expense of the wider membership, a fact which he regarded as 'unattractive'.

But he and his inquiry committee did not believe that there was any fraud or conspiracy to disadvantage particular groups of members or to advantage others.

Nor did Sir David regard the system of insurance trading between one syndicate and another at Lloyd's, which has led to a 'spiral' of insurance claims and the bulk of of the losses, as improper 'or to have been distorted by conspiracy or misfeasance'.

But he called for a range of reforms at Lloyd's, including more intervention by the market's regulators in underwriting activities.

Another report published yesterday, by Sir Jeremy Morse, chairman of Lloyds Bank, on the market's future government and management, called for a big shake-up in its management hierarchy and a more businesslike approach.

Marjorie Mowlam, Labour's City spokeswoman, said: 'What we need to hear from Lloyd's council is what disciplinary action it intends to take in the light of the Walker report.'

Alfred Doll-Steinberg, an underwriting member fighting for financial relief for the hardest-hit members, said the Walker report 'is a fine piece of work. We can use this in evidence in whatever proceedings we choose'.

Further reports, page 21

Leading article, page 18