Corporate investors at Lloyd's are likely to see the costs of underwriting rise as the insurance market is brought under the direct supervision of the Financial Services Authority (FSA).
The current draft of the Financial Services and Markets Bill gives extensive supervisory powers to the FSA over Lloyd's, and the City regulator is likely to push the Government's strategy of protecting insurance policy holders.
Leah Dunlop, a Lloyd's specialist at Lovell White Durrant, said that Lloyd's central fund could come under scrutiny as a result.
The central fund acts as a safeguard when claims come in that cannot be covered by the normal premiums charged by managing agents, and which then cannot be covered by the capital derived from the limited liability of corporate investors and unlimited liability of wealthy individual investors - or Names.
Over recent years the percentage of underwriting capacity in the hands of corporate investors has grown - only 40 per cent of capacity is now held by Names - and as corporate investors only have limited liability, the pool of capital available to cover claims has shrunk.
Dunlop believes that the FSA will require Lloyd's to increase the size of the central fund as more underwriting risk is taken on by corporate investors. These funds would come from the corporate investors themselves and so the cost of underwriting at Lloyd's will be driven up.
Dunlop also said the proposals would impact on managing and members agents. Under the new rules, they are likely to have to apply directly to the FSA, rather than Lloyd's, for authorisation to set up.
She also pointed out that the proposals do not provide a clear indication of where the FSA supervision will stop and Lloyd's own regulatory bodies, like the underwriting agents department or the general review department, will start.
"Managing agents know Lloyd's, but they do not come from a background of being regulated by another financial regulator," she said.
Lovells will be holding a seminar towards the end of January to advise managing agents on the details of the proposals. The FSA has set a 31 March deadline for responses.