The IUA has welcomed the launch of a new regulatory regime for the UK insurance industry, but warned against over-intervention in the commercial market.
On 1 April the Financial Services Authority was replaced by two new supervisors, the Prudential Regulatory Authority (PRA) and the Financial Conduct Authority (FCA).
The IUA has published for its members a series of guides to the new organisations outlining areas of responsibility and issues of concern.
The PRA will be the main supervisor for insurance companies, regulating solvency and governance. Its principal objective is the stability of the financial system as a whole, which means it will place great importance on the stability of reinsurance companies.
The FCA will supervise the marketing of insurance by insurers and brokers, with its primary focus on the protection of customers, particular in retail insurance.
Nick Lowe, the IUA’s Director of Government Affairs (pictured), commented: “Our members are all in favour of an open competitive market that puts the client first. Poor customer care and practices are bad for business. They damage the reputation of the market and affect the returns of the responsible insurers.
“We approve of the risk- and judgement- based approach the new regulators will adopt. This will enable effective use of resources and a reasoned approach to problems. However, we do have some concerns. There is a danger that the FCA will seek to intrude too much into the commercial sphere at the expense of efficiency and innovation. Moreover, there are risks that it will be too subjective in enforcement, but also too dogmatic in the application of abstract market theory to its analysis of market behaviour.
“We are also concerned that the need for liaison between the FCA and the PRA in processes such as approvals and authorisations will cause delays and blockages which will impair efficiency in the companies concerned. Nevertheless, the high calibre and genuine commitment of the senior management will get the authority off to a good start.”