The word from the IUA;
A planned change to rules governing the operation of third country branches in the London insurance market has been dropped after its value was questioned by the International Underwriting Association (IUA). The corporate structure, whereby international companies set up branch offices in the UK is a common model for many members of the trade body.
Last year, the Prudential Regulation Authority (PRA) proposed a reform of its Modification by Consent process, which allows firms to benefit from changes to regulatory reporting rules and reduces the burden for smaller branches. This would have required the largest companies to transition to full reporting. Responding to the proposal, the IUA questioned the cost-benefit analysis of some of the reforms for affected branches and stated that it could be costlier than envisaged.
Following further analysis, the PRA has now declared that ‘quarterly reporting from larger branches delivers limited additional supervisory value relative to the costs that would be incurred’. As a result, it is dropping quarterly reporting for all branches.
The IUA further argued that those branches required to switch to full reporting would incur a significant operational burden with major information technology upgrades required to collect, process, and submit several new regulatory reporting templates.
Nafisah Hussain, Director of Public Policy at the IUA, said: “I am delighted that the PRA has taken on board our comments and agreed not to unnecessarily increase the reporting burden for our members. This move clearly demonstrates the value of an effective consultation process and the importance of regulators and industry working together to develop a robust but proportionate and efficient supervisory regime.
“In addition to promoting the safety and soundness of the firms it regulates, the PRA also has a statutory objective to enhance competitiveness and growth. This decision will help ensure that the London Market remains an attractive location for international insurers.”
In its new policy statement (PS13/26 – Insurance third-country branches: policy implementation and other updates), the PRA noted that it has updated its cost-benefit analysis. It stated that the change will not materially impact its primary objectives and will ‘advance its secondary competitiveness and growth objective by reducing the operational burden for affected branches’.
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