HISTORIC PRESS RELEASE : Stronger Powers for the Financial Services Authority [January 1998]

The press release issued by HM Treasury on 21 January 1998.

The Financial Services Authority (FSA) is to be given extensive supervisory powers over Lloyd’s the Economic Secretary, Helen Liddell announced today.

The FSA will have intervention and authorisation powers to ensure a greater independent element in the regulation of Lloyd’s.

In response to a Parliamentary Question from Jackie Lawrence [Preseli Pembrokeshire], Mrs Liddell said:

“In her statement of 23 July 1997, my right hon friend the President of the Board of Trade announced that the supervision of insurance business, including that carried on at Lloyd’s, would ultimately become a responsibility of the proposed Financial Services Authority (FSA).  Since then, I have been considering the options for the future regulatory arrangements for Lloyd’s in the context of the comprehensive reforms which we will implement in the forthcoming financial services reform bill.  As we have already made clear, we intend to publish a draft Bill for consultation in the Summer.

“Holders of insurance policies underwritten at Lloyd’s should enjoy the benefits of  the same kind of supervisory regime as those with policies issued by other insurers.  I intend as part of the modernisation of the prudential supervision powers currently available to the Treasury under the Insurance Companies Act 1982, that the FSA will have much more extensive supervisory powers in relation to Lloyd’s.  I intend that these should include enhanced powers of intervention and a requirement for authorisation by the FSA of managing agents, who are responsible in practice for running underwriting syndicates.  I also intend that the FSA should have reserve power to undertake direct authorisation and supervision of Members of Lloyd’s, should that prove to be appropriate in due course.

“Certain activities at Lloyd’s are similar to business which is currently regulated by the Financial Services Authority under the Financial Services Act 1986. Members’ agents advise Members of Lloyd’s about which syndicates they should participate in  and I intend that their activities should be subject to authorisation by the FSA.  In addition, the emerging secondary market in syndicate capacity  resembles markets subject to control under the 1986 Act.  I intend that the FSA should oversee the operation of the market under a regime similar to that currently in place for recognised investment exchanges.

“These arrangements will continue to allow scope for a major role by the Council of Lloyd’s in ensuring that Lloyd’s continues be a well-regulated, successful and important part of the UK financial services industry. They will however provide, for the first time in many areas, a major element of external regulatory accountability.”

In a speech to the Life Insurance Association tomorrow, Mrs Liddell will say:

“Lloyd’s itself has recognised the need for a greater independent element in its regulation. It rightly believes that businesses which are well regulated – and are perceived to be so – will be in a better position to compete in global markets.”