Regulation tops London market agenda

Speaking after the annual meeting of the International Underwriting Association, chairman Stephen Riley said expectations of a lighter touch approach to regulation have receded.

Reviewing plans to replace the Financial Services Authority with two new regulatory bodies he said steps have been taken to assure the market that the new system will operate efficiently with minimal overlap.

But, he warned: “We remain concerned that the FSA can live up to these promises given their apparently overstretched resources and the need to be prepared for Solvency II.

“The FSA has also warned firms to expect a more intrusive and active regulator when the 'twin peaks' approach is implemented. We expect this to mean that the future regulator will have a greater focus on conduct in the wholesale markets than now.”

Speaking at the meeting held in the London Underwriting Centre on 29 June, he also highlighted an increased focus by global regulators and governmental bodies, such as the G20, on the perceived systemic risks of the insurance industry.

“Terms such as ‘systemically important financial institutions’ and ‘internationally active insurance groups’ are becoming recognisable jargon when discussing global regulatory developments. Many companies who might fit into either of these categories are nervous that by being classed as such they will attract additional regulatory requirements.”

“The industry’s mantra that insurers operate differently to banks and do not present systemic issues has resonated with regulators, but has not entirely persuaded them of the need to draw a line under the discussions. The global and interdependent nature of many of our members leaves them exposed to further regulation at a group level.”

The IUA annual meeting also saw the formal election of four new company market leaders to the association’s board: Frank Buchsteiner, managing director of Munich Re (UK), James Shea, managing director of Chartis Insurance, Russell Higginbotham, managing director of Swiss Re Europe (UK) and Jeremy Miles, London branch manager of Chubb Insurance Company of Europe.