The insurance industry has said it is “disappointed” by UK government proposals designed to boost the UK’s competitiveness in global financial services.
As part of a new review of the financial services regulatory regime post-Brexit, the Financial Conduct Authority (FCA) and the Prudential Regulatory Authority (PRA) would be given new mandates to include growth and international competitiveness, but only as secondary objectives rather than on equal footing with existing, primary objectives.
Huw Evans, director general of the Association of British Insurers (ABI), said the consultation has the “right intentions” but “could have gone further” and may not be enough to bring significant change.
“It’s disappointing to see that the consultation published today recommends a new growth and international competitiveness objective that will only be a secondary objective for the PRA and FCA. This does not go far enough as regulators will always put primary objectives above secondary ones,” Evans said.
“We have a unique opportunity to boost competitiveness, attract overseas capital and promote the UK as a world-leading financial services hub, but unless regulators have economic growth as a primary objective, we are not convinced anything major will change,” he said.
The London & International Insurance Brokers Association (LIIBA) was also cautious. “These proposals provide many of the right ingredients for a vibrant commercial insurance sector to flourish in global markets, but the proof will be in the pudding that government and regulators bake from these,” said Christopher Croft, CEO of the broker body.
LIIBA’s Croft said Lloyd’s brokers face significant and growing competition from other markets, and the UK’s regulation books add to the challenges. “The current regulatory framework has evolved into a disproportionate regime that has added unnecessary burden and cost to the commercial insurance sector, particularly for those serving large, complex and international clients,” Croft said.
Croft said annual reports from the FCA that measure its progress in meeting the growth and competitiveness mandates were important to ensure the objective has “teeth”.
For the FCA, with a strategic objective to ensure markets function well, the new growth and international competitiveness objective will sit as a secondary objective to its existing mandates of consumer protection, market integrity and competition. For the PRA, the new objective will sit with the PRA’s existing general objective to promote the safety and soundness of authorised persons and a secondary objective to facilitate competition in financial markets.
The existing regulatory principles will also be amended to link growth objectives with sustainability targets for a net-zero economy in the UK by 2050.
The government said its review is a “once-in-a-generation opportunity” to align regulation with its ambitions for financial services “as an engine of growth”, following the UK’s exit from the EU. It rejected alternative regulatory structures or changes to regulatory bodies. The consultation said: “We intend to return responsibility for designing and implementing regulatory requirements to the UK regulators – a break from the approach under EU law.” The UK’s financial services regulators will set many of the direct regulatory requirements currently in EU law retained after Brexit, but that will be transferred to regulators and their rulebooks.
The proposals are in a consultation phase, which is due to close to responses on 9 February 2022.