EU Ruling Dashes Hopes for Lloyd’s Names
By Geoff Meade, Europe Editor, PA News in Brussels
The Government was cleared by the European Commission today after a major investigation into the handling of the Lloyd’s insurance market.
The inquiry was launched into accusations that the Government failed to comply with EU insurance rules — rules which, it was alleged, could have prevented the scandal in which hundreds of Lloyd’s “names” lost fortunes.
Now investors hoping for massive compensation over the Lloyd’s scandal have been told by Brussels that the EU inquiry has now been dropped because the Commission is now “œsatisfied” that rules governing the running of Lloyd’s are now in line with EU law.
The outcome is a blow to the “names” because their compensation claims would have been bolstered by an EU finding that the Government broke the rules in the way it supervised the Lloyd’s insurance market.
Under a 1973 European insurance directive, national regulators must guarantee that insurers have adequate reserves to cover potential liabilities.
But the rules were only applied in the UK in 1982, and a European Parliament inquiry has been investigating whether they were correctly applied even then.
The Commission issued a formal warning to the Government in April 2002 that it could face legal action for failing to implement the rules.
That was at about the same time that the new Financial Services and Markets Act (FSMA)2000 came into force, establishing tighter controls overseeing the running of Lloyd’s.
The Commission later acknowledged the improvements brought in by the FSMA but said it was continuing its probe.
Now officials have decided there is insufficient evidence of lax controls, arguing that the launching of the inquiry itself helped ensure that the Lloyd’s supervisory arrangements met EU standards.
Announcing the formal closure of its “infringement proceedings”, the Commissioner responsible for the internal market, Frits Bolkestein, said: “I believe the infringement proceedings have had a strong influence in the development of a new legal framework in the UK for the regulation and supervision of Lloyd’s that is in line with the requirements of the EU insurances directives.”
He added: “As regards the situation before the introduction of the FSMA 200 legislation, we have repeatedly made clear to complainants that any action seeking damages for alleged incompatibility under the former regime must be undertaken exclusively before the UK courts.”
A Government spokesman said: “We are very pleased that the Commission has given Lloyd’s a clean bill of health. We were always confident that it would do so because we believe that the regulatory system in place fully meets European and international standards.”