The House of Lords has published a letter from Lord Hollick, Chair of the Industry and Regulators Committee, to John Glen MP, Secretary to the Treasury. The letter concerns the inquiry into the regulation of the commercial insurance (and reinsurance) sector in the UK.
During the inquiry the Committee heard evidence from the insurance industry that the regulator takes a ‘one-size fits all’ approach to supervising firms with the result that the UK regulatory regime is too burdensome for commercial firms, putting them at a disadvantage. Commercial insurers are expected to comply with rules designed for consumer protection. This lack of proportionality is hindering innovation, for example in the insurance-linked securities market.
Witnesses to the inquiry described a very demanding regulatory regime compared to other jurisdictions. They also called the regulators in the UK risk-averse compared to other jurisdictions such as Singapore or Bermuda.
Some of the witnesses to the inquiry provided evidence that adding a competitiveness objective would not be enough to change the mind-set of the regulators. A review of existing regulation would also be needed.
The letter includes certain statements in bold to emphasise the importance of the points being made. Included in these statements are the following points:
- The primary regulatory objective should continue to be the safety and soundness of firms and the rigorous regulatory framework in the UK was important for the reputation of the London Market.
- A secondary objective to require the regulators to consider competitiveness might be insufficient to change the supervisory culture. The existing rules should be applied more proportionately and efficiently.
- There should be greater communication between the insurance industry and the regulators, enabling a regular two-way dialogue. Constructive challenge should be possible.
- The regulators should have clear performance objectives.
View: Letter from Lord Hollick, Chair of the Industry and Regulators Committee, to John Glen MP, Economic Secretary to the Treasury, following the House of Lords inquiry into commercial insurance regulation