My Lords, I support the amendments of the noble Earl, Lord Kinnoull. I do not have any direct interest in Lloyd’s, but I endeavour to keep my eyes and ears open to things that come through Parliament which may be acutely damaging to our financial services industry and the City of London. As many noble Lords will know, I raised precisely the same point at Second Reading.
It is important also to note, as the noble Earl, Lord Kinnoull, pointed out, that the whole of the Lloyd’s industry is behind him on these points. The various trade bodies and organisational bodies, several of whom are here today, are as concerned as he and I—he more particularly—about the risks here. My understanding is that the Minister has taken on board pretty much the Lloyd’s reinsurance situation, which is covered by paragraph (b) of Amendment 52C, but certainly wants more evidence relating to Amendment 52C, which is the potential risk of damaging the large risks market. Amendment 52C spells out what the large risks market is and its definition under the 2009 EU directive.
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Although the definition of large markets goes down to £6 million or £7 million, which is not that large, it needs to be made clear that the business that occurs in the large markets is a small number of very large amounts of premium income. As the noble Earl has pointed out, this has increased substantially to £60 billion per annum, with at least £8 billion of that potentially directly affected by the Government’s proposals in the Bill. I was amazed to learn that this large premium income has grown to 21% of the City’s GDP and is up from 8% in 2013. This has been a really good business area for the UK.
The main point, which the noble Earl, Lord Kinnoull, made extremely politely, is that the Government would be mad to put at risk such a valuable area of business. It might not be affected by the provisions of this Bill but if it is I would not want to be the Minister who had pushed through the legislation that wrecked London’s large premium insurance business. What is the risk? The risk is that settlement gets bogged down with legal processes, that people can go to law if they want merely potentially to delay what they are going to have to pay and, instead of it being a well-oiled, smoothly operating market, it will get affected by legal hiccups. If that were to occur, the temptation is simply for the business to move elsewhere, a move potentially even to New York, where there are not such problems.
It is crucial that the industry produces the evidence for which the Government have asked but that the Government pay heed to what the whole of the Lloyd’s industry is saying. In essence, it is the same point raised at the time of the Insurance Bill in 2014. It is the point that the Law Commission warned on at the time and got a similar proposal taken out of the 2014 Bill. I was really rather surprised that we see it back here in this legislation and that the Government have not taken heed of what the Law Commission said, to which I referred at Second Reading.
However, anyone who has any involvement in risk simply would not deem it appropriate to put at risk the loss of such an extremely good market for London over a point that is not causing trouble. There is no evidence of late-payment problems in the large insurance market. It is FCA-regulated and, unlike other areas, particularly large organisations late-paying small supplier organisations, that sort of point is completely irrelevant to this market. I hope that the Government will take heed of the arguments behind these amendments and potentially produce their own amendments on Report.