Major London Market brokers such as Aon, Marsh and Willis will be regulated as wholesale financial institutions under changes at the FSA.

In a proposed re-structuring at the FSA, it is planned that the Firms Division of the new Wholesale and Markets Business Unit will oversee all firms operating in Lloyd's and the London Market insurers.

Brokers whose business is mainly retail will be supervised under the new Retail Markets Business Unit.

A market source said: "It seems only reasonable that brokers such as Aon and Marsh are regulated like banks or major insurers because of their size and global status.

"It will make it easier for the FSA to deal with the smaller brokers and focus resources."

Marsh compliance manager David Goodley said: "The majority of our business is in commercial lines, not personal lines, which means the regulatory emphasis differs from that applying to most high street brokers.

"We are happy that the proposed classification represents the most appropriate approach for regulation of the major London Market firms".

An FSA spokesman said: "These plans are at a very early stage and there is little detail yet as the structure is still being formulated.

However, Senior Managers of London Market brokers were told of our intention to supervise all London Market firms together in this way at a presentation on Senior Management responsibilities under FSA regulation by David Strachan (Director, Insurance Firms Division) on Monday 24 November."

This new strategy will be implemented once the FSA authorisation period for brokers is over.

According to sources close to the FSA, around 2,000 applications have been received so far. The regulator had expected between 15,000 and 20,000.

In accordance with FSA chief executive John Tiner's organisation from April 2004, announced last month, most insurers will be classed under the retail markets division, while Lloyd's and London Market will fall in the remit of
wholesale and institutional markets.