Letter from Inquiry Manager of the Committee to
HM Treasury: request for information
After an initial review of the LRO and accompanying
documents, the following is a list of preliminary questions relating
to the order. I shall be reviewing the consultation documents
in more detail over the course of the next weeks and will almost
certainly have more questions after that further review. However,
the initial questions are these:
- How does the Treasury justify the abolition of
the current restriction that only Lloyd's brokers can act as intermediaries
in the placing of business with underwriters, given that the financial
part of the cost-benefit analysis with respect to that proposal
has now effectively been removed as a result of criticisms made
during consultation? There is an assumption that review of the
implemented proposal after two or three years will show benefits,
but at least one consultee has challenged that assumption. What
is the concrete basis for it?
- How does the Treasury respond to the criticism
that the proposed means of managing conflicts of interest will
not adequately replace the divestment provisions that were a crucial
element of the 1982 Act and that the draft order should be modified
to attach a specific code for managing conflicts of interest?
In particular, how does the Treasury respond to criticisms in
consultation that the FSA will not be able properly to monitor
conflicts and that the proposed code is inadequate?
- Why have the governance and market reforms been
presented as a package that must stand or fall together, when
on the face of it the market reforms (which seem to be the more
controversial of the two classes of proposal) are self-standing
and could form part of a more extensive and fully debated private
bill for more wide-ranging reform of Lloyd's?
- Given the potential position of nominated members
in casting deciding votes in the Lloyd's Council, how does the
Treasury respond to the argument that the FSA should have more
than a mere rubber-stamping duty in relation to their appointment
if it replaces the Bank of England as the body with responsibility
for endorsing such appointments?
- How does the Treasury answer the criticism made
by some consultees that the proposed governance changes are merely
an expedient to extend the chairmanship of the current Chairman?
Will the Treasury confirm the origin of the proposals, whether
they have been amended since inception and, if so, in what way
and by whom?
- Please provide a comprehensive table indicating
the aims and functions of each of the various bodies representing
individuals, associations and organisations with an interest in
Lloyd's (including, for example, the major informal associations
of underwriters and names), to allow evaluation of whether the
consulted parties represent a proper cross-section of interested
- Please provide a detailed comparative explanation
setting out the equivalent divestment/conflict of interest provisions
and intermediary restrictions that apply to Lloyd's major competitor
bodies and jurisdictions and any current proposals for reform
- What are the powers of the Lloyd's Chairman compared
with the Deputy Chairman, and of each compared with the Council?
Can the Council overrule the Chairman and Deputy Chairman acting
together or separately and, if so, by what mechanism? Does either
the Chairman or Deputy Chairman have a casting vote in Council?
- What is the formal mechanism of delegation of
power to the Franchise Board and the precise reasons why the current
Committee could not be reconstituted as the Franchise Board.
In the interest of receiving full answers to the
above questions, and given that it is the vacation period, I suggest
Friday 8 August as the appropriate date for provisions of responses
to the above questions. I shall assume that that is acceptable
unless I hear from you.
22 July 2008