UK Government Plans Legislation to Modernize Lloyd’s

The Treasury Department of the UK Government has undertaken an examination of the statutes currently governing the functioning of the Lloyd’s market with a view to modernizing them.

Last year the Chancellor, Gordon Brown, who’s slated to become Prime Minister when Tony Blair steps down, “established a High Level Group to consider issues related to the international competitiveness of the UK financial sector,” said a Department announcement.

The move was prompted by the government’s apparent recognition of challenges to London’s role in providing insurance services and the “opportunities presented by emerging markets.” Bermuda appears to be of particular concern. The island recently welcomed the redomicile of Hiscox, a major Lloyd’s insurer, and has seen the establishment of non-Lloyd’s ventures by some of Lloyd’s best-known companies, including Amlin and Kiln, as well as Catlin which has been domiciled there for over 10 years.

“The Chancellor named Lord Levene, Graham Millwater and Andrew Kendrick to review the business processes of the London Market,” the bulletin noted. “The Treasury too has been working closely with the Financial Services Authority and the wholesale general insurance market to identify market led reform and modernization that can enable the industry to remain competitive in a global market.”

Lord Levene commented: “”We warmly welcome this move by the Government. In the past two decades, Lloyd’s has undergone significant changes and the proposals to modernize the governance arrangements of Lloyd’s will bring us into line with today’s thinking in the wider corporate arena. We look forward to working with the Treasury.”

The select committee is scheduled to report on its conclusions and make recommendations this fall, after assessing the situation and “developing its understanding of the business environment for this sector.” The Treasury will then consider the proposals.

The review coincides with the ongoing reforms within the Lloyd’s market, particularly the initiatives to adopt electronic processing and assure contract certainty. Lloyd’s “has been working with the Treasury to identify areas where its corporate governance arrangements are out of step with modern practices,” the bulletin indicated.

Following the presentation of the conclusions and discussions, the Treasury “has decided to develop legislative proposals to modernize the governance arrangement for Lloyd’s,” it continued. “These proposals will take the form of a Legislative Reform Order to amend Lloyd’s Act 1982.

“The aim of the proposals will be to update the governance arrangements of the market to reduce costs and unnecessary bureaucracy. The Treasury will have extensive consultation with interested parties and intends to publish proposals in the New Year. Any proposals will meet the preconditions and restrictions of the Legislative and Regulatory Reform Act 2006.”