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The Industry and Regulators Committee has written to the Economic Secretary to the Treasury, John Glen MP, following its inquiry into commercial insurance and reinsurance regulation. The Minister gave evidence to the Committee as part of its inquiry on Thursday 31 March. A copy of the letter can be found here.
The Committee outlined the concerns it heard from the industry about a lack of proportionality in the regulation of the London Market by the Financial Conduct Authority and the Prudential Regulation Authority, which was described as overly demanding and burdensome.
The Committee also outlined the evidence it heard that an overly inflexible culture within the regulators may have inhibited the development of new forms of business within the UK commercial insurance and reinsurance industry, such as insurance-linked securities and captives. The Committee emphasised the need for the Government’s proposal to introduce a secondary competitiveness and growth objective for the financial regulators to be reinforced with clear criteria and appropriate performance measures for the regulators to report on, ensuring they reflect on their performance against this objective and allowing scrutiny by stakeholders, including the Committee.
Lord Hollick, Chair of the Industry and Regulators Committee, commented:
“While the Committee welcomes the continued success of the London Market, we are concerned that the UK may lose out on new and fast growing areas of business because of an overly inflexible and bureaucratic regulatory framework. There is a need for regulators to consider whether current rules could be applied more proportionately and regulators should ensure that their rulebooks are achieving their objectives in the most efficient way possible.
“The Committee agrees that there are strong arguments in favour of the Government’s proposal of a secondary competitiveness and growth objective for the financial regulators, enabling them to consider to a greater extent their impact on the industry in addition to their impact on the safety and soundness of firms. However, to ensure that regulators’ behaviour is genuinely responsive to the secondary objective the Government and regulators must formulate clear performance measures that will be reported on annually, ensuring that this Committee and others can hold the regulators to account for their performance.”