Other proposals include changes to the market's historical capital structure, such as a move to annual accounting, designed to make public information improving the transparency of company operations .

"Everyone involved in this market, from investors to policyholders, wants to do business in a competitive and disciplined environment," said Lloyd's Chairman Sax Riley. "No one wants a repeat of the substantial losses we have had in recent years. So standing still has never been an option."

The proposals were contained in a 56-page consultation document, which begins a consultation period that will end on Aug. 16.

An extraordinary general meeting will be held by the market on Sept. 12 to vote on the proposals as a whole.

Market practitioners interviewed agreed that it is the franchise proposals that will have the most immediate effect on their operations and underwriting.

"The main objective of the franchise is to create and maintain a commercial environment at Lloyd's in which the long-term return to all capital providers is maximized," said the consultation document. "This can best be achieved by creating a disciplined marketplace of well-managed businesses."

Although the role of Lloyd's as franchisor would be to allow ease of operation, Lloyds could enact rules "and require change when a franchisee does not respond to the facilitative approach or where a franchisee's underperformance threatens the security and profitability of the Lloyd's market," the document said.

"Each franchisee will be free to decide which types of business it wishes to write. However, the franchisor will expect each franchisee to plan forward its business mix, resources, activities and financial results," it continued.

As a result, the document includes a proposal that each syndicate submit an annual business plan to the franchisor, "supported by robust statistical analysis with actuarial input where relevant."

A Franchise Board will be established later this year and key personnel will be recruited for the franchisor organization, including a performance director.

David Shipley, active underwriter at MAP, a Lloyd's managing agency, was concerned that the proposals allow maximum flexibility to the incoming franchise director. He said he was concerned that the franchise management process may be involved too much with managing reporting structures and "not enough about crash testing people's business plans."

"Until you get to a point where you've got a franchise board and franchise director that understand underwriting issues and are ruthless, then all the process and reporting and analysis won't take that risk away," he said.

"They're about to bring in a whole raft of additional regulation, which may well be needed. But they also need to conduct a ground-up review of existing regulation to see whether some rules may no longer be required, rather than simply adding another layer of bureaucracy," said John Hamblin, active underwriter at Cathedral Underwriting, a Lloyd's managing agency.

(For more details and reaction, see NU's July 22 print edition, page 6.)