The House of Lords 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.
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.
Chair's comments
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.”
