The Claims Standards Council (CSC) is the front runner to become the claims management company regulator, the government has confirmed.
A spokesman for the Department for Constitutional Affairs (DCA) said: "Obviously it would be preferable to have a regulator which is already established rather than creating a new body."
The DCA has commissioned an independent body to assess the CSC's suitability for the role.
The spokesman said: "It is looking at what kind of shape [the CSC] is in, and what it would need to do to become the regulator."
Parliamentary under secretary of state Baroness Ashton is expected to present the final report to the House of Lords before the end of the month.
Andy Wigmore, CSC policy advisor, said: "We were really pleased with what was said to us, but we are not aware of what the final report has concluded.
"The CSC has the momentum to become the regulator, but it doesn't have the money or the infrastructure.
"We are waiting to see what is said about that."
Negligence clause stays in Bill
The House of Lords has rejected calls to remove the controversial clause from the Compensation Bill that attempts to add a statutory definition of negligence.
A report by the All- Party Group on Insurance and Financial Services said the legal definition of negligence "should be dropped" from the Bill.
Meanwhile, the Constitutional Affairs Committee will continue its work on the compensation culture with three further evidence sessions.