Britain’s Financial Service Authority (FSA), which officially took on broad new regulatory powers over the insurance industry on Dec.1, plans to increase its surveillance, not only by requiring enhanced and more frequent reporting from insurers, but also by increasing the number of regulators who review the reports and recommend action when a problem is identified.
The FSA was highly criticized for its failure to properly monitor the U.K.’s Equitable Life, which is still being reorganized, and Independent Insurance, which collapsed last June. Its new powers are designed to assure that it has enough authority to properly investigate the financial condition of insurance companies, as well as the banks and investment companies it also oversees, and enough authority to step in at an early stage when problems are uncovered.
It plans to hire up to 35 experts, mostly former executives and accountants with expertise in the operations of firms in the City of London. They’ve been dubbed “grey panthers” by the news media, as many are retired businessmen.
The FSA’s plan calls for more on site inspection by its regulators, greater disclosure to customers concerning the insurance products they buy, and enhanced reporting of insurers’ loss reserves to maintain their adequacy.
The Association of British Insurers has generally welcomed the changes, which will benefit larger and better capitalized insurers by providing a more consistent regulatory framework and promoting higher standards within the industry.
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