Lloyd's Names to sue government

INVESTORS in Lloyd's of London - thought to include two members of the Conservative shadow cabinet and a number of prominent business figures - have launched a legal claim against the government for over £1 billion in compensation.

Around 1,100 investors, known as Names, are suing the government, claiming they made heavy losses at Lloyd's because the Treasury, the market's watchdog before the Financial Services Authority, failed to regulate the market properly.

The Names argue that the Treasury failed to implement key European Union directives including a measure that dictates how much insurers should hold in reserves when writing certain types of business. The Treasury strongly denied it had failed to regulate Lloyd's properly, a spokesman said, and would defend the case.

Names have sued Lloyd's before, alleging that senior figures in the market concealed the extent of the losses, but their claims were rejected. This initial court case, which is expected to last around four weeks, will decide whether the Names are allowed to sue the government in a class action of this kind and whether their claim for compensation has expired.

If they are successful in this first legal stage, the group of litigants could potentially be swelled by thousands of other Names, pushing the claim for compensation well above the billion-pound mark, said Chris Stockwell, who is heading the group of litigants.

"If we win this procedural part of the case, I would anticipate a great many more Names would join the action. In which case the claim would go up correspondingly," Stockwell said.

At the height of their participation in the market, around 34,000 people were individual investors in Lloyd's. Now fewer than 1,500 actively participate in the market.