Government in the dock over Lloyd's

THE European Parliament has launched an inquiry into regulation of the Lloyd's insurance market in the Nineties, amid claims from senior MEPs that the Government is seeking a 'behind closed doors' settlement with Brussels.

The European Commission has accused the Government of failing to ensure that the market was properly audited - a lapse that could have allowed underwriters to trade without sufficient reserves to cover claims.

This, the Commission says, would mean that the UK Government breached European insurance rules. It could expose the Government to lawsuits from Lloyd's investors, known as Names, who lost fortunes when the market clocked up £8bn of asbestos-related losses in the early Nineties.

Conservative MEP Roy Perry said: 'It is questionable that a Government which says it believes in openness should refuse to reveal all its responses to the Commission.'

The Treasury, which will respond to the Commission's charges by the end of April, denied that it was refusing to hand over its reply unless secrecy was guaranteed. It also dismissed allegations that it was trying to cut a deal.