A leading banker has described the way the London Market operates as “completely crackers”.

Speaking at the International Underwriting Association in Gleneagles, Sir Laurie Magnus, managing director of Lexicon Partners, also expressed amazement at the slow claims payment process.

Magnus, also vice-chairman of Insurance Services, an internet company launched this week, said: “We could never commit a bank's balance sheet to risk without having tied up every single detail and the wording agreed. That struck me as completely crackers.”

He added banks were constantly under criticism for taking three days to process some transactions, but was astounded how claims payout in the London Market frequently took up to 90 days.

“People have been taking risks for internet companies that have only been around for three to four years. That strikes me as complete madness.”

Magnus added that if banks and insurance companies were ever to work closely together in the future, they would need to change the way they communicate.

“The jargon is going to have to converge,” he said.