Middleton backs outside regulation

Outside regulation would bring "terrific advantages" for Lloyd's of London, Peter Middleton, chief executive of the insurance market, said yesterday.

"I and everybody else would love to have a system where we produce the profits and run the market and somebody else had the responsibility of making sure that was done properly," he said on ITV's Goldring programme.

Mr Middleton said he would be perfectly happy with outside regulation. "What we want is a proper regulatory discipline in Lloyd's. If it's external fine, if it's internal fine, it has to be proper and it has to be effective and we don't care at all who does it as long as it's well done. We're not defending self-regulation at Lloyd's, not at all," he said.

Late last month the Treasury and Civil Service Committee called for the regulation of Lloyd's to be given to an external body under the aegis of the Treasury. It issued a report highly critical of Lloyd's system of self-regulation, saying it was discredited by the massive losses sustained by the insurance market in the late 1980s and early 1990s.

For trust to be restored to Lloyd's, there was no alternative to regulation by an outside body, the MPs said. They were particularly scathing about Sir Alan Hardcastle, head of the self-regulatory body at Lloyd's, saying he appeared more interested in drawing a veil over past events than probing the issues that had caused such concern.

Lloyd's is now negotiating with members - who back the market with unlimited liability - and other parties, to win agreement for a complex pounds 6bn restructuring package. It aims to end all litigation by members and clear the balance sheet liabilities by putting them into a separate reinsurance company called Equitas, allowing a "new Lloyd's" to begin trading next year unencumbered.

The MPs said the introduction of external regulation was an essential complement to this restructuring package. Introducing such changes would, however, require new legislation. Yesterday, Mr Middleton asked for more time before deciding on such radical change, saying that Lloyd's was currently at a delicate stage, and could not be burdened with doing everything at once.

If the Government did opt for outside regulation, then Lloyd's would prefer this to happen after next spring. "The need to be involved in parliamentary legislation and to manage the change of the business that we're going through would be very difficult... I want to get Lloyd's sorted out first and then have a debate," he said.