Lloyd’s has begun an investigation into reserve deterioration at the IAG-owned Equity Syndicate 218, according to reports.

UK insurance publication Post Magazine says the Lloyd’s investigation is in addition to an inquiry started last year into the motor syndicate by the UK’s Financial Services Authority (FSA).

Lloyd’s declined to comment on the report.

A spokesman for IAG told insuranceNEWS.com.au: “We continue to work closely with both Lloyd’s and the FSA as we implement our program of remedial actions to restore profitability to our UK business. 

“This program involves aggressive repricing, exiting unprofitable broker relationships and strengthening of processes and management resources. We remain confident that this business can achieve a satisfactory return over the longer term.”

News of the investigation follows the formation of a pressure group of Lloyd’s Names, which is considering whether it has grounds to take legal action against the management of Equity Syndicate 218.

According to its website, www.218equity.co.uk, the investors are questioning why the losses at the syndicate have been so large compared to competitors’ and why action to boost reserves was delayed.

“Losses now amount to more than 100% of capacity and blame is laid on an explosion of claims fraud,” the group says. “Yet competitor Admiral’s profits continue to motor ahead.”

IAG injected $365 million into its prior-year claims reserves for Equity Red Star in June last year due to a “significant deterioration” in its UK claims experience.