The insurance market Lloyd's of London has put forward plans for radical reforms aimed at boosting profits and at attracting fresh investment.

Proposed reforms:

Set up a franchise board to improve underwriting standards Change accounting practices to improve transparency and meet international standards Expel badly run businesses which threaten the insurance market's security and profitability End unlimited liability for new individual members Encourage existing individual members to transfer to limited liability

The plans have been drawn up in an effort to pull away from a record �3bn ($4.7bn) loss last year, caused in part by �2bn worth of insurance claims linked to the terror attacks on 11 September last year.

Lloyd's is expected to clock up a profit this year for the first time since 1996 thanks to a surge in insurance premiums in the wake of the attacks.

Yet many companies are loath to invest in Lloyds because of the power yielded by rich individual underwriters known as Names.

Running a business

The 314-year-old insurance market's efforts to modernise its arcane structure should go some way to sort this out.

"At the heart of these steep changes is the creation of a franchise, a new partnership between the businesses in the market and Lloyd�s, which runs the market," said chief executive Nick Prettejohn.

At long last, the Lloyd's of London management has realised that they have to run a business, and that I'm one of their customers

Robert Hiscox Chairman Lloyd's insurer Hiscox

"Equally important are our proposals on annual accounting which seek to improve our transparency by increasing the ability of clients and investors to compare our financial performance with that of our peers.

"And where business failure threatens the market's security and profitability, our responsibility must be to intervene decisively. In extreme cases, we will have powers ultimately to eject those failing businesses," Mr Prettejohn said.

"The proposals we are formally consulting on now are radical but sensible," chairman Sax Riley said.

"They represent the best opportunity of transforming Lloyd's into a modern, transparent and profitable market."

Those involved in the insurance market welcomed the move.

"At long last, the Lloyd's of London management has realised that they have to run a business, and that I'm one of their customers," said chairman of Lloyd's insurer Hiscox, Robert Hiscox.

Power and responsibility

Lloyd's modernisation push would also include further steps away from its reliance on the Names who put up their entire wealth as security against insurance claims.

Mr Riley believes the changes make sense

Currently these individual members enjoy healthy tax benefits linked to their unlimited liability.

The Names outnumber the market's corporate members, but their importance to Lloyd's is no longer crucial to its survival since they only represent a minority of its capital base.

But they remain powerful because Lloyd's operates on a one member, one vote basis.

The Names are expected to back the Lloyd's modernisation plan when a vote is held in September, although they will lobby the government to try to cling onto some tax benefits.

Not ousted

Analysts say Lloyd's had wanted to squeeze out the Names but failed to do so due to their tough resistance.

Mr Prettejohn wants to weed out bad performers

Lloyd's is expected to try to persuade the Names to make a shift from the unlimited liability system to one where they will only be faced with pre-set liabilities which would be linked to the amounts they put up to underwrite insurance risk.

Lloyd's also wants to end unlimited liability for any new members joining after next year.

Over time, this would naturally reduce the number of unlimited liability Names.

Their numbers have already dwindled after many Names were hit by a wave of asbestos related claims during the 1980s and early 1990s.

"In the past, poor performers have run up damaging losses, and we all paid a heavy price," said Mr Prettejohn.

The proposed reforms would require parliamentary approval.