The General Insurance Standards Council received a fillip this week when Lloyd's said all UK and overseas brokers must belong to the regulatory body if they want to trade in the 300-year-old market.
The move will enable Lloyd's to ditch much of its own regulatory practice as it introduces new rules opening up the market to a wider number of brokers.
All existing Lloyd's brokers will be required to become members of the GISC from July 3, while other brokers wishing to trade in the market after the rules are changed, will also have to join.
Chairman Max Taylor said: "The GISC has our full backing. Relying on regulation of our brokers shows the degree of faith we are putting in the organisation."
The news comes a severe blow to attempts by the Institute of Insurance brokers to set up a rival regulatory regime by continuing the current statutory body, the IBRC, after it is repealed by the Government on April 30 2001.
IIB director general Andrew Paddick said Lloyd's decision may raise serious competition issues.
He added that there a number of independent Lloyd's brokers that have told him they were unhappy with GISC regulation.
"There is a cash incentive for some of the big Lloyd's brokers to join GISC regulation as the fee will be capped at £100,000," he said.
"But it is not the case for other smaller brokers who are wary of the proposed standard of GISC regulation.
"I expect them to be expressing their concerns publicly in the near future."
But David Hough, chief executive of the Lloyd's Insurance Brokers' Committee, said the GISC fees were comparable with Lloyd's fees for regulation.
"I do not know of any brokers who are about to upset the applecart."
Andrew Duguid, director of development at Lloyd's, said he could not see the stipulation as a restraint on trade for those brokers that do not wish to be part of the GISC.
He comments: "The GISC has fitted in well with our plans as we wanted to put distribution on a commercial basis not on a regulatory basis and David Gittings, our head of regulation is on its board. We are confident that the GISC will receive critical mass and will not just be joined by Lloyd's brokers.
"The distribution changes are not intended as an hostile act against our existing brokers," said Duguid.
"But they are intended as a means of extending the market to keep up with the changing world."
