FSA sets out Lloyd’s regulation proposals

The U.K.’s regulator, the Financial Services Authority (FSA) has set out proposals for the regulation of Lloyd’s, including capital requirements for managing agents.
The FSA says the capital requirements will be similar to those set out for other general insurers. Senior management of the Society of Lloyd’s will continue to be responsible for the capital adequacy of members.
Among the elements of the proposal is an “enhanced capital requirement”, which is higher and more risk-sensitive than the current European Union directive minimum. As well, there are new requirements for managing agents to assess financial resources based on risks faced by the insurance operation (individual capital assessment) as well as individual capital guidance from the FSA for each managing agent. Capital resources will also be classified into different tiers, versus the old system of taking capital as simply admissible assets less foreseeable liabilities.
“The new arrangements involve a step change from previous practice and are due to come into effect from the beginning of 2005,” says David Strachan, leader of the insurance sector for FSA. “Given this timescale it is vital that senior management engage with our proposals positively and quickly, and take responsibility for implementation planning which should already by underway.