ABI warns against “one size fits all” regulation

The Association of British Insurers (ABI) is calling on the Government to ensure that regulatory changes aimed at preventing a future crisis in the banking sector do not harm the insurance industry.

In a new report entitled “Restoring Market Confidence” the ABI cautions against a “one size fits all” set of remedies that could inhibit competition and add unnecessary costs to businesses.

The body’s areas of concern for insurers include a “lack of recognition for the advance, sophisticated prudential regulation of UK insurers” and “suggestions that remuneration structures designed for bank dealing rooms can be applied to other parts of the financial services sector”.

The ABI is also wary of the cross-subsidy element of the Financial Services Compensation Scheme, which it says has been used to compensate for banking failures while being paid for in part by other financial services, such as insurers.

Director General, Stephen Haddrill, comments: “Insurance is not banking and should not be regulated in the same way. We need targeted sector-specific changes, and not a lazy adoption of banking rules to other parts of the financial services sector.”

In related news, the House of Lords’ Economic Affairs Committee has this week issued its latest response to the financial crisis in which it criticises the UK’s tripartite system of regulation.

The Treasury, Bank of England and Financial Services Authority (FSA) were jointly responsible for averting a crisis but according to the Committee’s report, when disaster struck, it was not clear who was in charge.

The Lords are therefore suggesting that the Bank of England needs additional powers as “without a clear executive role, the Bank can do no more than talk about financial stability. This exposes it to reputational risk without generating any clear benefit”.

Tags: Association of British Insurers, Financial Services Authority, reform, regulation, regulatory, report, Restoring Market Confidence

Category: ABI News, Financial Services Authority News, Insurance News