Bogus Caribbean-registered reinsurance companies with suspected organised crime links have caused fresh embarrassment for Lloyd's of London.

And it is not yet clear whether any of the companies involved in the insurance scam have ties with Bermuda.

The world's oldest and largest insurance market, Lloyd's, released a statement yesterday saying it did not expect any losses to result from the investigation into the alleged fraud.

But an employee at an unnamed Lloyd's broker was arrested after 50 British detectives raided offices in and outside of London in an operation code-named Operation Chain.

A British Police spokesman said their investigation into reinsurance companies which had tried to use the Lloyd's market to insure legitimate risks, followed arrests by the Internal Revenue Service in America.

"Some 50 detectives of the City of London fraud squad supported by officers from Kent, Norfolk and Suffolk took part in Operation Chain,'' he said.

"This is the culmination of a protracted investigation with possible links to organised crime, into the activities of a number of reinsurance companies, some registered offshore in the Caribbean.'' The companies were alleged to have used cut-price insurance to tempt innocent firms and developing countries into paying premiums.

And the customers were duped into believing the companies had the resources to pay out multi-million-dollar claims because their balance sheets were bolstered by rentals of property or shares from legitimate firms.

Some reports in London suggested US mafia drug and money-laundering syndicates were behind the swindles.

City of London fraud squad Detective Superintendent Ken Farrow said substantial amounts of premium income were believed to have been generated before being siphoned to offshore bank accounts.

"There have been several instances of catastrophe where claims have not been fully settled because the rented assets could not be used to cover the claims.'' He said small claims were settled to give the bogus firms credibility but as soon as there was a big claim the offshore insurance firm was put into liquidation and other insurance firms were then left to pay the bills. The controversy follows disastrous losses in the mid-1990s which wiped out many of Lloyd's previously rich "names'' -- individuals who form syndicates which underwrite insurance written in the market.

Lloyd's director of regulation David Gittings yesterday played down the chance of any negative repercussions.

Lloyd's: No losses from fraud "Lloyd's brand name is one of the strongest in the international insurance industry,'' he said.

"We are constantly vigilant to ensure that it is not fraudulently misused by third parties.'' He said Lloyd's regulators had helped IRS and City of London Police for several months to "put a stop to the abuse'' of their good name. "The nature of this case is that third parties have established bogus insurance companies in the USA and may have sought to reinsure legitimate risks into Lloyd's.

"There is no evidence that American crime syndicates have infiltrated the market; indeed the timely action by authorities in the USA and the UK and ourselves has prevented this happening. It is not anticipated that there will be any losses sustained arising from fraud, which has been stopped at an early stage.'' But insurance analysts said the situation looked bad for Lloyd's, despite the apparent snuffing out of the fraud early on.

Lloyd's relies on the honesty of its hundreds of member brokers and would continue the face the threat of any rogue broker conducting business via criminally-backed agents or reinsurers, the analysts said.

Bermuda's Registrar of Companies Kymn Astwood was not able to comment yesterday.