Under the Act, Lloyd's managing agents are generally only allowed to do business through a registered Lloyd's broker, who will have gone through a special admissions process. Admission also entitles the broker's employees to be working members of Lloyd's and participate in its governance.
The Treasury suggests the rule is overly restrictive and a potential barrier to further development. Opening up the market could lead to a more competitive environment and bring in new business.
The restriction also gives rise to a lot of unnecessary red tape. Since the Act came into force, the FSA has taken over responsibility for the regulation of brokers, yet Lloyd's still has to process every broker application for admission.
The Treasury proposes to amend the Act to allow managing agents to deal with any intermediary, whether a Lloyd's broker or not, or even deal directly with insureds. Lloyd's would be able to draw up bylaws governing the conditions in which this could take place.
The class of 'Lloyd's broker' would be retained and would bring with it all existing rights and obligations, except exclusive access to the Lloyd's market.
A further proposal would remove the 'divestment' rules, which prevent Lloyd's brokers and Lloyd's managing agents from owning interests in each other. The Treasury believes that any potential conflicts of interest in such relationships could be dealt with by the FSA's high-level requirement to manage conflicts of interests fairly, backed up by some specific conflict management provisions drawn up by Lloyd's.
The consultation period ends on 30th May 2008.