Buoyed by its success in the life market, the FSA is now planning an attack on general insurance. And, as its strategy unfolds, it is clear that the theme running through its regulatory mind is that it is the man in the street who needs protection. But here's the crunch. Lloyd's and the London Market now have to relate to the FSA's machinations in this direction and see themselves as being considered part of the same 'man in the street' problem.

The FSA imagines that a UK client paying £50 per month for car or house insurance as a similar and equally-considered risk as a sheikh in Saudi Arabia with ten oils wells who comes to Lloyd's year in and year out.

Wrong conclusions
The comparison is ludicrous. If general insurance is riding a bicycle, Lloyd's is travelling Concorde.

Without any apparent understanding of the difference between the London Market and the high street , the FSA will force the London Market into deciding what is required to carry on Lloyd's business. And it will probably come to the wrong conclusions.

The London subscription market provides the global lead underwriter, who negotiates a thought-through rate for a multi-million pound premium. This is quite different from Joe Bloggs brokers, which can get a rate for a ten-year-old Astra owned by a local pensioner, from his computer screen with no debate or negotiation involved.

The FSA requirements of general insurance and, therefore, Lloyd's, will not only make London Market Principles (LMP) redundant but, if implemented, will change many of the nuances by which London, for all its perceived faults, manages to provide its unique service.

Alternative solutions
As an example, the timing of a claims payment for general insurance will be reduced to seven days from the date of the agreement. In Lloyd's this would result in underwriters funding the payment.

In other areas, policy wordings would be required at the time of slip agreement. And broker payments would be dramatically reduced.

Other requirements are for any insurance company or broker to have alternative solutions when they outsource business.

This is all happening now and all players must have their plans submitted when the European Directive on insurance takes effect. By January 2005 all UK brokers and companies have to be registered and to have ticked the relevant boxes. They must also be able to substantiate their answers.

The FSA is also consulting on a proposal to bring Lloyd's under the Financial Services Compensation Scheme (FSCS) - it would be treated like an insurance company and have its funds controlled outside Lloyd's.

FSA managing director John Tiner says: "As both the Society of Lloyd's and managing agents at Lloyd's manage significant risks, we propose to develop appropriate rules and guidance to apply directly to each."

In reply, Lloyd's chairman Lord Levene issued a 'hands off our funds' message to the FSA.

He said: "In its long history, Lloyd's has always sought to ensure valid policyholder claims are paid in full."

As the FSA regulators and staff get to grips with the regulation of our sector, one thing is certain, there is unlikely to be much spare office space in London's Docklands over the next few years.