A very interesting piece in Reactions, the sister title to InsuranceCapitalRisk.
As first mentioned in a Twitter posting by InsuranceCapitalRisk, the political – and rather messy – deconstruction of the UK’s Financial Services Authority (FSA) leaves a hole in insurance supervision in the UK at just about the worst time: Solvency II is looming large and the market is still reeling from the regulatory over-reaction to the financial crisis.
The government is giving the Bank of England full control of UK financial regulation. It will create two new regulators: a Prudential Regulation Authority, which will be charged with regulating banks and other financial institutions (including insurers); and the Consumer Protection and Markets Authority, focused on consumer affairs.
Talking to veteran journalist Garry Booth for Reactions, Sean McGovern, director and general counsel at Lloyd’s, said the timing of the decision was bad for insurers.
“Right now the insurance industry is keen to emphasise the differences between the business models and the risks faced by banks and insurers in the context of capital and the regulatory framework,” he says. “So the fact that the insurance industry is going to be regulated by the Bank of England is not ideal from that perspective, in terms of its ability to draw a distinction between the two sectors.”
“From a timing perspective, for the market to have to deal with fundamental change to the regulatory structure on a scale that is proposed is far from ideal,” McGovern said.
He added: “The fact that Hector Sants is staying on
On some of the key questions on insurance supervision, the FSA itself is none the wiser. An FSA spokesman told Booth: “I regret that there is currently nothing more definitive than the speech made by the Chancellor