Commission steps up Lloyd’s inquiry

Date: 26/10/00

By Peter Chapman

THE European Commission is intensifying its inquiry into the UK government's role in the near-collapse of the Lloyd's of London insurance market in the early 1990s.

Financial services chief Frits Bolkestein has given London just six weeks to respond to a request for further information about the case after failing to get satisfactory answers to his questions first time around.

The move signals an escalation of the investigation begun last year after a complaint by a group of investors in Lloyd's insurance syndicates who faced ruin when US courts began awarding massive compensation to workers suffering from asbestos-related diseases.

Their complaint focused on the UK government's alleged failure to ensure that Lloyd's was audited as required under Union insurance legislation. "We have asked for additional information concerning the way in which the first insurance directive has been applied in the UK in relation to Lloyd's," said a Bolkestein aide. But he refused to speculate on the chances of legal action against the UK, adding: "We will have to carefully analyse the reply."

John Pascoe, one of the Lloyd's investors - known as 'names' - who appealed to the Commission, welcomed the latest move. "While I am disappointed by the speed of its procedure, I am encouraged that the Commission takes this case very seriously," he said.

Pascoe says hundreds of names who joined Lloyd's during the 1980s and early 1990s would not have invested had a proper audit taken place in line with EU rules. The claims are likely to run into billions of euro.

The European Commission is intensifying its inquiry into the UK government's role in the near-collapse of the Lloyd's of London insurance market in the early 1990s.