The Lloyd’s Market Association (LMA) has backed the need for strong regulation in the UK financial services sector but argues that the proposed regulatory system for the UK is being created around the banks which will make it over-engineered, unsuitable and unjustifiably costly for the general insurance industry.
In its official submission to H.M. Treasury’s consultation on the future of UK financial regulation, the LMA also argued that the proposed Prudential Regulatory Authority (PRA) and the Consumer Protection and Markets Authority (CPMA) will have overlapping roles which could see managing and members’ agents within Lloyd’s face triple regulation from the PRA, the CPMA and Lloyd’s itself.
The LMA has also expressed concern that the proposed changes are coming at a critical point with three major EU regulatory initiatives also underway. Solvency II, which is already taking up a considerable amount of resources within managing agents, the Intermediaries Directive Review and the new EU super regulator EIOPA are all at various stages of implementation and the UK regulatory review could be a distraction from these EU changes at a critical time.
Commenting on the proposed changes David Gittings, the LMA’s Chief Executive, said: “We are fully supportive of the need for an effective regulatory system in the financial services sector but are concerned that a model which is primarily designed to fix the banking system will be unsuitable for the general insurance industry.
“The duplication between the PRA, the CPMA and Lloyd’s itself runs the risk of creating inefficiencies and confusion with overlapping powers and rule books. Our view is that as much as possible of Lloyd’s market regulation should be kept in one place and, given that most of the Lloyd’s expertise from the FSA is, we believe, to be transferred to the PRA, then this makes it the obvious regulatory body for Lloyd’s and agents alike. In addition we believe that proper prudential regulation of Lloyd’s brokers is also necessary, in view of the reliance placed upon them by managing agents to handle significant premium and claims monies.” The government is due to consult the market in 2011 on a new act to replace the Financial Services and Markets Act with the aim of putting the new regulatory architecture in place for 2012.
Source : Lloyd’s Market Association Press Release