* FCA appoints Clifford Chance lawyer to lead inquiry
* Inquiry to be overseen by non-exec FCA committee
* Insurance industry says inquiry must be independent (Adds lawyer appointment, ABI, Tyrie comment)
By Jemima Kelly and Huw Jones
LONDON, April 8 (Reuters) - Britain's financial regulatorhas appointed an independent lawyer to lead an inquiry into howit prematurely disclosed details of a review of the insuranceindustry, sending shares in insurance firms plunging last month.
The move follows complaints from the insurance industrybody, which called on the Financial Conduct Authority (FCA) tolearn lessons from the incident, but stopped short of demandingthe removal of senior staff.
When some of the review's details were published in anewspaper last month, shares in insurers including Aviva,Prudential and Legal & General fell sharply.Insurance bosses were angered as they waited several hours forthe regulator to outline its full intentions.
The incident was described by Martin Wheatley, head of theFCA, as "not our finest hour".
On Tuesday, the regulator said it had appointed Simon Davis,a partner at law firm Clifford Chance, to conduct an inquiryinto the affair, which it added would be overseen by a committeeof non-executive FCA board members.
The FCA set out "terms of reference" for the inquiry whichfollowed closely what British finance minister George Osbornelaid out in a letter to the regulator last week.
It was not immediately clear, however, whether the inquirywould satisfy the regulator's critics.
In a letter to the FCA sent on April 1 and released to themedia on Tuesday, the Association of British Insurers (ABI) saidthe regulator "cannot be permitted to investigate itself".
It declined to comment when asked if it was satisfied withthe framework of the inquiry announced by the FCA on Tuesday.
"This is very much a situation in which even the perceptionof a lack of objectivity or thoroughness could be damaging tothe FCA and its aims," ABI Director General Otto Thoresen saidin the letter.
Thoresen told a committee of lawmakers on Tuesday that hewas not seeking Wheatley's removal over the incident butstressed "the importance of learning lessons" and was criticalof the FCA's slowness in clarifying its position.
"We didn't have a press release, we didn't have a reportagainst which we could compare what was being said," he told theTreasury Select Committee. "And until we did ... it was very,very difficult to give people confidence."
The committee's chairman, Andrew Tyrie, said it wouldshortly be meeting the lawyer leading the FCA inquiry.
"It is vital that this investigation is wholly independentof the regulator," Tyrie said in a statement.
Asked whether investors would have grounds for taking legalaction against the FCA over the incident, Thoresen said that was"a definite question" but it would have to await the outcome ofthe internal review of the FCA. (Editing by Chris Vellacott and Mark Potter)