rights reserved, for reprints of this article: Contact
the Electronic Telegraph, at http://www.electronictelegraph.com/
EC Starts Inquiry into Running of Lloyd's Market
The European Commission has launched an investigation into the British Government's alleged failure to oversee the Lloyd's insurance market, the first step in a process that could ultimately lead to legal action at the European Court of Justice and bolster the claims of injured Names in civil disputes.
A spokesman for Fritz Bolkenstein, the Financial Services Commissioner said: "We've sent a letter to the UK authorities to ask them to explain their procedures. They have got until the end of the month. If we're not satisfied with the response, we will have to think about formal infringement procedures, and if that doesn't do it, we'll go to court."
The probe stems from a complaint lodged by a group of Names who incurred huge losses on so-called "long-tail" syndicates that were exposed to billions of pounds of undisclosed liability on workers' compensation claims for asbestos-related diseases in the US.
John Pascoe, the group's co-ordinator, says that the Names would not have joined the Lloyd's market in the 1980s if they had been properly informed, as required by EU insurance legislation, of all outstanding liabilities.
Critics argue that Lloyd's agents aggressively recruited new Names in the 1980s and used them as buffers, frequently placed on the most vulnerable syndicates, to absorb future losses anticipated by the insiders.
The European Commission is examining whether the UK authorities are complying with the requirements of a 1973 insurance directive, incorporated into British law in the 1982 Insurance Act, that requires a proper audit to determine whether insurers have sufficient reserves to cover claims.
John Pascoe said: "The UK put in place the act implementing the directive but it was not properly applied."
Return to main News page