The Prudential Regulatory Authority has proposed to raise its industry charge for ongoing regulatory activities by an average of 4.7%, but the cost to general insurance companies is set to jump by 7.7%. This follows a similar rise for such firms of 1% in 2014/15 when almost all other fees were reduced, 20% in 2013/14 and 32.5% imposed by the Financial Services Authority in 2012/13.
IUA Director of Market Services Chris Jones, said: “Substantial increases of this size are a major concern for London Market companies. Regulatory costs in the UK are already high in comparison to other European countries and this further rise will affect our industry’s ability to attract inward investment.
“The costs of funding a more pre-emptive and intrusive regulatory regime need to be balanced with the Government’s commitment to making the UK insurance industry one of the most competitive marketplaces globally.”
Responding to a PRA consultation paper on regulatory fees, the IUA noted the supervisor’s requirement for more staff to prepare for the start of the new Solvency II regime on 1 January 2016. Nevertheless, the PRA’s minimum fee remains unchanged and it does not, therefore, seem proportionate or reasonable that only medium and large firms bear the brunt of rising costs.
“Ultimately the costs of regulation are an important factor in determining the type and price at which insurance products are available, ” added Mr Jones. “Care has to be taken to ensure that fees and levies remain in proportion to the expense of managing any potential risks to consumers.”
The IUA has also responded to a consultation paper on regulatory fees charged by the Financial Conduct Authority. The association acknowledged that an 8.5% increase for general insurers is in line with that for other sectors of the industry. This does, however follow significant above average rises in recent years.
Over the past four years, the overall fee increases imposed on general insurers for conduct regulation have been in excess of 50%. Such a trend is of particular concern for companies in the current economic climate.
About the IUA
The International Underwriting Association of London (IUA) represents international and wholesale insurance and reinsurance companies operating in or through London. It exists to promote and enhance the business environment for its members.
The IUA’s London Company Market Statistics Report shows that premium income for the company market in 2013 was £17.445bn with a further £6.831bn controlled by London but written elsewhere. These results are based on a comprehensive survey of 57 companies and combined give an overall intellectual and economic premium total of £24.276bn for the London company market.