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Lloyd's: Trading Liability

Volume 530: debated on Thursday 27 June 1991

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3.25 p.m.

Whether they propose to introduce limited liability for members of Lloyd's.

My Lords, Lloyd's is a society of sole traders regulated by the Council of Lloyd's under the Lloyd's Act 1982, and any question of limited liability would be a matter for Lloyd's itself in the first instance.

My Lords, I am grateful to the noble and learned Lord the Lord Advocate for that Answer and delighted to welcome him answering DTI questions. I had no idea that a Scottish law officer of the Crown was such an expert on these matters. Is that perhaps because he is the only Minister of the Crown who is not a member of Lloyd's? I ask that question as a seeker after truth because the Government have refused to answer a Written Question of mine specifying which Ministers of the Crown in this House are members of Lloyd's.

Leaving that aside—and I am sure that the noble and learned Lord is a great expert on these matters —does he not agree that something has gone rather badly wrong with the Lloyd's market? Does he accept that many people who are otherwise wholly innocent and have no involvement in the management of Lloyd's find themselves suffering due to the incompetence not only of underwriters but also of regulation? Is it not time that the Government had a close look at the Lloyd's insurance market, which is very valuable to this country, made sure that it introduces limited liability, and comes under the Financial Services Act?

My Lords, it may be some small consolation to those of my colleagues who are members of Lloyd's that they do not have to answer a Question on this matter and that it is left to me—I am not a member of Lloyd's—to do so.

As I am sure the noble Lord appreciates, Lloyd's itself has established a task-force, set up by its council, to examine the capital base of the Lloyd's market. That exercise was begun in January and it is my understanding that it is anticipated that it will take until the end of the year to conclude that examination. In those circumstances it would be wholly premature to intervene in any way while Lloyd's is undertaking that careful consideration of the capital base of the market.

It will be appreciated that as recently as 1986 a committee of inquiry was established under the chairmanship of Sir Patrick Neill. Given that investigation, it seems to me that no further inquiry is required.

My Lords, in declaring myself a Lloyd's name, perhaps I may ask my noble and learned friend whether he agrees that, as the noble Lord, Lord Williams of Elvel, said, Lloyd's has historically made substantial foreign earnings for the balance of payments. Does he agree that we should take every opportunity to restore confidence to the insurance market, even if that means further consultations with the Inland Revenue and other interested parties?

My Lords, of course the Government fully recognise the contribution which has been made by Lloyd's and by the rest of our insurance industry to the United Kingdom's invisible earnings. Lloyd's is both a unique and an important institution. I am, of course, aware that suggestions have been put forward by Lloyd's that arrangements for new tax reliefs might be brought forward on its behalf. However, as the Financial Secretary explained in another place, the Government saw serious difficulties in the proposals and were not persuaded that they would solve Lloyd's longer term problems.

My Lords, as the noble and learned Lord said, it is clear that it is for Lloyd's itself to put its own house in order. Nonetheless, will he not accept, as was implied by the Question of the noble Lord, Lord Williams of Elvel, that the insurance sector is a very important part of the British economy? It was initiated over two centuries ago and Lloyd's has been right at the centre of that? Is this not therefore a matter of national importance and should the Government not give very close consideration to the future of that important institution?

My Lords, I can only reiterate that Lloyd's itself has decided to set up a task force to look at its accountable base. Of course, the value of the Lloyd's market is appreciated and that has been demonstrated, as the noble Lord knows. In supporting the United Kingdom insurance industry, we have sought to press for further liberalisation of insurance markets throughout Europe. It is well recognised how important it is, but the Government believe that Lloyd's should be left to see how it can best reorganise its affairs, if it so desires.

My Lords, does my noble and learned friend agree that some of the devaluation of the confidence in and reputation of Lloyd's, to which the noble Lord, Lord Williams, referred, has been generated by a considerable amount of hype and media coverage and perhaps by the views and opinions of some noble Lords opposite and their party? Does my noble and learned friend agree that Lloyd's is best able to get its own house in order when mistakes have been made so that lessons can be learnt and it can once again render a great contribution to our invisible exports, as it has done in the past?

My Lords, I certainly recognise that point. If my noble friend knows what the Opposition's policy on Lloyd's is, I should be grateful if he would inform me. If he cares to read Commons Hansard for last week and the week before, he will find that two wholly conflicting views are expressed.