Build regulation, not more regulators, into London market process

Risk segmented and proportionate regulation should be designed into London insurance market processes under the UK revision of the EU insurance regulation, not treated as a separate operation. This is the message from Airmic to the government on the planned reform of Solvency II, post-Brexit, and the London insurance market.

Airmic presented its views to the inquiry by the House of Lords Industry and Regulators Committee into how revisions of the UK insurance regulation might affect customers and the global competitiveness of the London market. The committee sat between 25 January and 11 February.

Airmic told the House of Lords Committee that its members recognise the value of the London market, which has a global reputation built on the pillars of trust and regulation. “However, the London market has no historic right to be a leading market on the global insurance stage. It must modernise and encourage a shift towards digital systems powered by data.”

Agile competitors, with little affiliation to London or the UK, are waiting in the wings, the committee was warned. They will seize opportunities if the London market is held back by cumbersome regulation, said Airmic. 

“This direction offers an opportunity to segment and streamline the processes for regulation and the measurement of compliance. Consequently, segmented and proportionate regulation should be designed in as the London market addresses technology challenges and drives change.”

Airmic supports a proportionate approach to regulation. This means a system that reflects the nature and complexity of the risks members manage, their sophistication as buyers, and the differences between the London market and retail insurance markets. See also: A separate regulatory regime could make the UK an attractive captive domicile       

Issues in the London market for Airmic members

• Efficiency: Ranging from the production of documentation to obtaining quotations for the renewal of policies.
• Transparency: Airmic members are keen to see how regulations can play a greater role in enhancing transparency in the insurance sector. They would particularly welcome seeing a clear breakdown of the total premium paid, into fees and commissions for their brokers, tax and the net premium.
• Lack of innovation: Where organisations want alternative means of risk transfer,  the UK’s regulatory regime precludes their availability within the UK.

There is an overriding sense among Airmic members that conducting business in the London market is “cumbersome”. This relates to long-standing concerns over efficiency, transparency and the lack of innovation, both in the London market – and more broadly in the insurance market.