View from City Road: Ghost of errors past at Lloyd's

As thousands of Lloyd's underwriting members rush to the courts to seek exemplary damages for the pounds 5.5bn worth of losses they face, the restructuring of the accident-prone insurance market is proceeding apace.

Companies were admitted to the market as investors at the beginning of this year. From nowhere, company money now commands significant market clout and wants more influence.

Against this background the old agency system, which runs insurance syndicates and introduces individual members to Lloyd's, is crumbling as disaffected members - the source of the agents' fees - leave the market.

Increasingly, the agents are relying on corporate capital vehicles to provide them with capacity. One agency, the once-influential Merrett Group, ran into deep trouble when no corporate capital was subscribed. The lesson became clear: there had to be fewer agencies (and many mergers have been taking place).

Now there is much talk of corporate capital vehicles taking over agencies, which would give them their own in-house management of syndicates. That would be a mistake. The attraction of joining Lloyd's through corporate capital vehicles is that for the first time investors can have a wide spread of investment, and not be pitched into a few syndicates by agents.

If these vehicles attempt to gain more of a stranglehold on the market they may ruin their own franchises by becoming little more than jumbo-sized underwriting agencies. That would take Lloyd's back to the bad old days.