QBE CEO Frank O’Halloran has described the Lloyd’s market as archaic, lacking transparency and exhibiting potential conflicts of interest after walking away from purchasing the remaining private investors in Lloyd’s Syndicate 386.

The insurer had planned to buy 30.4% of the Names on Syndicate 386, worth a combined £103.4 million ($245.25 million) of capacity, but rejected claims by the Names that the offer did not reflect true value.

QBE operates the non-marine syndicate and had raised its offer from £1.10 per £1 of capacity to £1.25. An alternative offer of 85p per £1, including a clause for the Names to stay on the Syndicate until 2009, was increased to £1.05.

The final proposal was almost 50% higher than an evaluation provided to QBE.

Under market rules QBE cannot communicate directly with the Names when discussing a buyout. Member agents representing the Names told QBE the deal was not high enough.

The offer, the highest ever made to Names on a Lloyd’s syndicate, would have increased QBE’s ownership in the syndicate to 90%, triggering a compulsory acquisition of the remaining investors.

QBE European Operations CEO Steven Burns says the company was not prepared to raise its offer a third time, and pressure from the agents to go higher was not based in reality.

Mr O’Halloran says the failed deal exposes the market’s agency and venture system as archaic and in need of urgent reform.

“I urge Lloyd’s to address this with the same vigour that it has applied to modernisation of the market’s business practices,” he told UK industry media.

“There is no other market where the established custom allows intermediaries to exercise such influence, including actual decision-making in respect of the pooled capacity, without reference to their principals.

“The system in our view also lacks proper transparency and contains far too many potential conflicts of interest.”