Catalogue description Department of Trade and Industry: Committee of Inquiry into Regulatory Arrangements at Lloyd's: Report and Papers

The intention to establish a committee of inquiry into regulatory arrangements at Lloyd's was announced by the Secretary of State for Trade and Industry on 10 January 1986.

Lloyd's is an incorporated society of private insurers in London which provides a world-wide market for the transaction of all types of insurance business. The business is transacted by elected underwriters on their own account, in competition with one another, and with unlimited liability. As well as those professionally involved in insurance business, there are also underwriters, the external names, whose involvement is as investors.

The Society is regulated by a series of private Acts of parliament, the Lloyd's Acts 1871 to 1982, which provide for the making of byelaws by those responsible under the Acts for the management of the Society's affairs.

During the 1985/86 session of parliament the government introduced a Financial Services Bill, which among other things provided for a new regulatory framework for the securities and investment industry and also gave the Secretary of State power to transfer his regulatory functions under the bill to a Delegated Authority. The bill nominated the Securities and Investments Board (SIB), a private company established in 1986 to act as the regulatory authority at the head of the new regulatory framework, as the Delegated Authority if it fulfilled certain specified conditions. Lloyd's, among other institutions, was specifically exempted from the terms of the bill, and discussion of the possible need for protection of Lloyd's investors, comparable to that to be provided by the SIB, was a factor in the setting up of the Committee during the passage of the bill.

The Committee, under the chairmanship of Sir Patrick Neill QC, vice-chancellor of Oxford University, had as its terms of reference to consider whether the regulatory arrangements being established at Lloyd's under the 1982 Lloyd's Act provided protection for the interests of members of Lloyd's comparable to that proposed for investors under the Financial Services Bill. It looked at nine particular areas of Lloyd's regulatory arrangements, seeking from the public comment or evidence as to whether:

• satisfactory arrangements had been established for judging the fitness of Lloyd's underwriting agents
• the amount of information supplied to prospective Names was sufficient to enable them to make informed judgments about the consequences of membership of Lloyd's and about the performance of different syndicates
• in advising prospective Names about the consequences of membership sufficient account was taken of their personal circumstances
• all problems of potential or actual conflict of interest were adequately covered by the existing arrangements
• the accounting and record-keeping requirements for Lloyd's syndicates were sufficiently stringent
• it was necessary or desirable to establish some means of compensating Names in the event of serious underwriting losses which arise otherwise than from the normally accepted risks of the business
• proper arrangements existed and were duly implemented to ensure that action was, where necessary, initiated and pursued against offenders within the community of Lloyd's
• the byelaws, regulations and codes of practice so far published were adequate
• the present constitution of Lloyd's was, in principle and practice, adequate and effective in overseeing the operation of the Lloyd's market and in protecting the interests of Names

The Committee reported in December of the same year with recommendations involving changes in Lloyd's rules or the constitutional framework within which they were made. The Report was published in January 1987.