As part of the market reform being undertaken to improve the competitiveness of Lloyd’s the Government has set out proposals to update governance arrangements through a Legislative Reform Order which amends the Lloyd’s Act 1982 (the Act). The changes take into account some of the significant changes in legislation as well as the market since the Act was introduced.
Many of the provisions of the Act are seen by the market to be over-restrictive and out-dated and present Lloyd’s with barriers to greater development. The reforms fall into two broad categories: changes to governance and administration; and market reforms.
The proposals aim to remove measures in the Act which may place unnecessary administrative burdens upon the market and restrict its competitiveness. Many supervisory requirements under the Act do not anticipate the FSA supervisory regime.
The Government is proposing to:
- Relax the rules requiring the Chairman and Deputy Chairman being working members so that these roles may be filled by any member of the Council (provided that one of these roles is filled by a working member of Lloyd’s).
- Remove the restrictions on elections to the Council affecting working members, to permit more flexibility and greater alignment with the Combined Code.
- Remove the requirement for the Governor of the Bank of England to approve appointments of nominated members of Council as this is an unnecessary requirement in view of the application of the FSA’s approved person regime.
- Remove the provisions relating to the Committee of Lloyd’s.
- Modernise the Council’s delegation powers (whilst retaining the reserved powers of the Council). Remove the restrictions whereby business can only be accepted by a managing agent from a Lloyd’s broker. At the same time, the class “Lloyd’s broker” will be retained as a title for those that wish.
- The current divestment provisions will be removed in favour of a regime which is compatible with the FSA’s requirements. The current rules prohibit associations between Lloyd’s brokers and managing agents with the intention of avoiding conflicts of interest. It is viewed by the Government that the FSA now imposes enough obligations through its Principles for Business for firms to manage their conflicts of interest fairly.
Any responses to HM Treasury’s proposals should be sent by 30 May 2008.
For further information: Proposals for a Legislative Reform Order to amend Lloyd’s Act 1982