2009-11-09

By Editor, CIR

All UK financial services policies must clearly recognise that banking and insurance are different activities with different risk profiles, the International Underwriting Association has stated. In a new statement of policy positions the association also called for companies to be free to make the remuneration arrangements they see fit and warned against the introduction of a new pan-European insurance guarantee scheme.

A 16 point list of recommendations has been published by the IUA outlining its views on various issues affecting the regulation of international insurance and reinsurance business. The policies are a foundation for the association's work in representing the interests of London Market companies to government and regulators around the world.

"Our members have told us of the importance they attach to the IUA's role in lobbying for more efficient regulatory systems," said Dave Matcham, chief executive of the IUA. "This job has become particularly vital in the wake of the global financial crisis and a number of our policy statements highlight the need for regulators to fully understand the nature of the international insurance and reinsurance industry."

On insurance guarantee schemes the IUA states that these are useful for retail business. However, the association is against any pan-European scheme that would modify the existing UK arrangements, extend them to commercial and reinsurance business or introduce up-front levies. With the security provided by the new European solvency regime Solvency II there should be no need for such a system.

Meanwhile on the issue of remuneration the IUA claims that any regulation should permit incentives to attract and reward employees. Boards should be allowed to offer the benefits they wish as long they are proportionate to the added value brought by individuals and are aligned with results.

Mr Matcham added: "Earlier this year the IUA established a new Legal and Regulatory committee to promote cost-effective, proportionate regulation that encourages competition. It now plays an essential role in maintaining a productive dialogue between the London Market, the Financial Services Authority and other supervisory bodies.

"The Government needs to fully understand the London Market and UK insurance industry -- what they do, how they do it and what is required for them to function effectively -- so that it can give proper direction to the supervisory structure.

"The financial crisis should not be used by the UK or European authorities to justify increasing the regulatory requirements imposed on insurance and reinsurance companies. Insurance regulations must be recognised as being quite different from banking regulations."

A full copy of the IUA's policy positions can be viewed on the legal and regulatory briefings page of the IUA website: www.iua.co.uk

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