The FSA has set out changes which it hopes will help consumers to get a fair deal through strengthening the disclosure regime.
Other changes include; a tightening up of existing requirements on solvency and on the responsibilities of insurers’ senior management; ‘Smarter’ insurance regulation; And more proactive and challenging regulation than in the past for companies.
John Tiner, managing director of consumer, investment and insurance matters at the FSA, has been asked by the FSA Board to lead a major project, known as the Tiner Project, to strengthen insurance regulation.
Tiner said: "We are developing a proactive, risk-based approach to insurance regulation that reflects the objectives given to us by Parliament: maintaining market confidence; ‘appropriate’ protection for consumers; raising consumer awareness of financial matters; and fighting financial crime. Regulations that need to change will change. Those that are no longer required will go. We will be reviewing, for example, insurance firms’ public and regulatory reporting, the nature and extent to which insurance companies use reinsurance, the role of Appointed Actuaries, and more technical issues such as the use of future profits to bolster solvency.
"Our new approach will include a more effective relationship with the insurance industry, particularly with higher impact firms. We will place more emphasis on on-site visits, focus more on the competence and responsibilities of management and their corporate governance arrangements, and will make greater use of external experts such as accountants and IT specialists to assess insurance companies. In addition, we are developing our use of former senior industry executives, known as ‘grey panthers’, as advisers to the insurance supervisors."
"A full report on progress made under the Tiner Project will be completed by September 2002. As with all regulatory reforms, the FSA will base its proposals on a thorough analysis of the risk to its statutory objectives posed by any aspects of the insurance industry. We will not just railroad changes through. We will make regulatory changes only after consulting widely and taking account of the likely impact on competition and innovation. We must also take account in our work of the impact of any European legislation and any issues raised in external reviews currently underway."
"All this will amount to a major and radical overhaul of insurance regulation. The insurance industry is itself going through a period of change from which it should emerge stronger and fitter on the other side, and I hope that our new regulatory approach will contribute to that. Our new approach will, among other things, boost the regulator’s ability to identify possible issues earlier on and proactively nip problems in the bud. But it will not – and should not – mean that nothing ever goes wrong again with any insurance company. As we have made clear, it is the responsibility of firms’ management – not the FSA – to ensure that they comply with regulatory requirements, and not all of them will always succeed in doing this. It is not Parliament’s intention that there should be no failures."
