Bolkestein feels the heat over Lloyd’s decision

Date: 31/10/01

Financial services chief Frits Bolkestein must decide next month whether to begin legal action against the UK for the way it allowed the Lloyd's of London insurance market to rack up huge losses for asbestos-related claims.

If he opts to take such action, and fellow commissioners agree, the first step would be a 'letter of formal notice' setting out the executive's views and seeking a formal response.

This could be followed with a reasoned opinion, which sets out the case against a member state, and finally referral to the European Court of Justice.

Bolkestein's spokesman, Jonathan Todd, said the commissioner had not yet drawn up a draft decision on the case, which he described as "incredibly complex". But critics are warning that any further delays in the politically charged case would allow breaches of EU insurance rules to continue.

John Pascoe, the man whose complaint triggered the Lloyd's case in March 1999, said the Commission should stop prevaricating and take the UK to court. "It is pathetic that we have not reached the formal letter stage after two-and-a-half years. If this is the speed in which they act, there is no point in having a complaints procedure. In the meantime the breaches are still ongoing."

He said the asbestos case could not be compared to the huge losses Lloyd's faces after the terrorist attacks on the World Trade Center in New York. "With September 11, they underwrote a risk and lost," he said.

However investors who joined Lloyd's in the 1980s were unaware that they would be hit by large claims for asbestosis from policies dating back to the 1950s - something Pascoe claims key insiders knew full well.

He argues the UK government was negligent because it failed to ensure Lloyd's was properly audited in line with EU insurance rules. Had an audit revealed the risk, he believes many investors in Lloyd's syndicates - known as 'names' - would not have joined because it meant facing unlimited liability for claims.

Financial ervices chief Frits Bolkestein must decide whether to begin legal action against the UK for the way it allowed the Lloyd's of London insurance market to rack up huge losses for asbestos-related claims.