Competing regulation systems set to burden Lloyd's businesses

Lloyd's insurers are facing the danger of double regulation under the FSA's consultation paper CP190, which ushers in tough proposals on solvency requirements.

The paper proposes rules that could be costly in terms of expensive management time.

Neil Coulson, a partner with Lloyd's specialist accountants Littlejohn Frazer, said: "There's a real danger of double regulation here."

As Lloyd's already operates a risk-based capital model, it could unwittingly end up with two competing systems causing a burden for its businesses.

Coulson's concerns centred on requirements for insurers to check with both the FSA and Lloyd's franchise performance board before embarking on plans to change the nature of their business, or their reinsurance arrangements.

Many Lloyd's syndicates change the proportions of their business lines in response to market forces. They pull back on classes experiencing falling rates and increase their writing in classes where prices are rising.

The paper proposes measures of capital requirements based on risk and assets which, particularly for risks, will probably be different to those which the franchise board may use for commercial objectives.

Coulson asked: "How will the FSA requirements dovetail into the Lloyd's franchise board requirements? Will the syndicates have to crunch their numbers twice?

"For anyone doing a business plan it would be very helpful if they had just one capital requirement to work with."

Coulson also asked: "Will you have to sit down and chat it all through with the franchise board about them accepting it? And will you then have to sit down and do the same thing with the FSA?"