Under the Act, Lloyd's managing agents are generally only
allowed to do business through a registered Lloyd's broker, who
will have gone through a special admissions process. Admission also
entitles the broker's employees to be working members of Lloyd's
and participate in its governance.
The Treasury suggests the rule is overly restrictive and a
potential barrier to further development. Opening up the market
could lead to a more competitive environment and bring in new
business.
The restriction also gives rise to a lot of unnecessary red
tape. Since the Act came into force, the FSA has taken over
responsibility for the regulation of brokers, yet Lloyd's still has
to process every broker application for admission.
The Treasury proposes to amend the Act to allow managing agents
to deal with any intermediary, whether a Lloyd's broker or not, or
even deal directly with insureds. Lloyd's would be able to draw up
bylaws governing the conditions in which this could take place.
The class of 'Lloyd's broker' would be retained and would bring
with it all existing rights and obligations, except exclusive
access to the Lloyd's market.
A further proposal would remove the 'divestment' rules, which
prevent Lloyd's brokers and Lloyd's managing agents from owning
interests in each other. The Treasury believes that any potential
conflicts of interest in such relationships could be dealt with by
the FSA's high-level requirement to manage conflicts of interests
fairly, backed up by some specific conflict management provisions
drawn up by Lloyd's.
The consultation period ends on 30th May 2008.
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