The U.K.’s Financial Services Authority, which assumed regulatory control of the country’s insurers a year ago, issued a bulletin stating that its goals were to create more openness with regulators and consumers, increase responsibility and accountability for senior management, and make companies more aware of the impact of their actions have on consumers.
The bulletin indicated that over the past twelve months, the FSA has reorganized its insurance regulatory activities, strengthened its team of supervisors with specialists recruited from the market and elsewhere within the FSA, and started implementing a new pro- active and challenging relationship with firms.
The review, initiated by John Tiner, the FSA’s Managing Director, Consumer, Investment and Insurance, has led to a more “risked based” approach to supervision.
As reported by Dow Jones Newswire, Tiner noted that, “This is clearly a challenging time for the insurance industry worldwide. We are ensuring that the U.K.’s regulatory regime is sufficiently robust and flexible to cope with changes.”
“The industry needs to respond not only to market pressures, but also the changing regulatory environment,” he continued. “The effective implementation of the new insurance regime is an immediate priority for the FSA, and consistent with this, we are in the process of carrying out ‘risk assessments’ on the largest 200 insurance firms.
We are also continuing our work to improve the framework that sets capital requirements for insurance firms.”
The FSA report coincides with sharp falls in the U.K. and global equity markets, which have increased concerns about the capital adequacy of insurance firms, particularly in the U.K.’s life and pensions sector. Tiner promised a thorough monitoring of capital requirements in order to assure continued payments to policyholders.
He concluded on a positive note, stating that, “In practice, firms need to hold assets well in excess of these best estimate liabilities in order both to absorb unexpected losses and liabilities and to support future new business. The survey confirms that the insurance industry does indeed hold such excess assets.”
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