Franchise board threatens capital loadings and higher central fund contributions

Lloyd's will punish under-performing businesses by imposing higher business costs on them.

Rolf Tolle, Lloyd's franchise performance director this week warned insurers failing to meet minimum franchise standards as set out in its three-year strategic plan would be penalised.

Speaking at a conference, Tolle said achieving a clear and transparent performance framework and a secure, highly-rated market were at the very top of his "to do" list.

"To achieve this, we will reward better performing businesses through lower capital or central fund contributions, and take action against those that under-perform," he said.

A series of minimum franchise standards, which will be launched in January, will show firms exactly what is required of Lloyd's franchisees.

Tolle said: "At Lloyd's, market performance has in the past varied too much from one business to another. Some have excelled, while others have struggled to achieve what was needed."

The performance rewards will be in addition to expected cuts to the central fund contribution, which Lloyd's hopes to implement in 2008.

The corporation hopes to cut the contribution rate to below 1% of capacity one year earlier than planned, if events over the next 12 to 15 months pan out in line with its latest assumptions.

' Lloyd's will increase pressure on the government for a more favourable tax regime, to bring it in line with global competitors.

Chairman Lord Levene will set out Lloyd's case through his membership at a high level group chaired by Chancellor Gordon Brown.

Meanwhile, the Institute for Fiscal Studies, a leading public finance think-tank, has launched a 'thorough' review of the tax system in response to advances in economics and new challenges facing government.