Regulatory issues causing severe headaches–Spain

Speaking at a roundtable organised by CRE and Igrea as part of our European Risk Frontiers survey, some of the country’s leading risk managers complained about insecurities caused by sector and insurance-related rules and regulations. A lack of homogenous European market rules is restricting the ability of telecommunication firms to adapt strategies to evolving technologies and the changing global competitive environment, according to Augusto Pérez, Director of Insurable Risks at telecommunications group Telefónica. “Regulatory risks are a worry for us,” he said. “In every country, telecommunications have regulated fees, there are strict rules on data privacy and tenders of spectrum concessions are heavily regulated. It creates a brutal level of business uncertainty. A company can make huge investments in a market, and the return of those investments could be compromised by a small regulatory change.”hide“We have here a European regulatory body, and then every country has its own regulator as well,” Mr Pérez pointed out. “All national regulators want to have four or five companies competing in their own countries, but this is incompatible with plans, for example, to have roaming available all across Europe. You cannot have a common European market with local tariffs.” “In Europe, for several years already there has been talk of a convergence of players in the telecommunications sector, but this has not happened thus far,” he continued. “In the US, during the 1980s and 1990s, as a result of regulation, the so called baby bells were created in a quest to increase competition. But soon afterwards companies started merging again, and now there are only five or six telecoms operating in the US, of which three are big operators. In Europe, for a market of a similar size, there are more than 150 operators. This is a huge problem. A lack of convergence is preventing European telecoms from remaining competitive in the global market. We cannot compete with the US players. As of today, the world’s largest telecom companies are either American or Chinese.” It is not only the telecommunication industry that is struggling to get to grips with regulatory risk. “Tax risks have become a priority in recent months,” said David Gonzáles, Director of Risk Management at construction group Sacyr. “Sometimes companies, in a rush to gain businesses abroad, neglect vital issues such as the tax rules of new markets. Then, when it is time to send profits back home, tax issues arise which can compromise the project.” Insurance programmes are complicated by a lack of international regulatory harmony. “Regulatory risks are a big issue from the point of view of risk managers,” said Daniel San Millán, President of Igrea and Risk Manager at construction group Ferrovial. “The situation regarding different insurance regulations around the world is one of absolute chaos. A lack of common criteria prevails, and it worries us because we cannot know to what extent our global programmes are compliant.” “It comes to a point where we simply cannot know whether our programmes are compliant or not. Compliance and efficiency are inversely correlated today. If you are compliant you are not efficient, and the same goes the other way around. I really wish that from an international point of view an effort is made to harmonise the rules. Some entities are trying to move in that direction, but it is in the end a political matter and that makes it more complicated,” he added. Companies would like to see more support from their risk transfer partners to deal with this risk. “In terms of regulatory risks linked to the insurance market, I would like the market to provide us follow-up services that are actually global,” said Lourdes Freiria, General Director of Risks and Insurance at construction company Grupo San José. “Many insurance companies today like to say that they are global players, but in practice that is not always the case. For us, it would be really helpful if when we go to a foreign market our insurer here in Spain is able to coordinate with my carrier out there, or with a regional insurance hub and is able to provide thorough information about the compliance requirements in that country for insurance programmes. Also I would like more advice about the better strategies to transferring risks that are very specific to a particular region. It would be appreciated if insurers and brokers made an actual effort to tackle global regulatory challenges.”

Regulatory issues causing severe headaches–Spain

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