INSURANCE contracts could become transferable between providers in the event of a major insurer going bust, top regulator Andrew Bailey argued yesterday, calling for the watchdog to be given more powers over resolution.
Insurers do not face the same risk of a run that banks do, because customers cannot simply move to another firm.
Instead, customers take out specific products.
That means insurers are more protected in normal times – their customers cannot leave at a moment’s notice – but poses problems when a provider fails.
“Work is under way to determine whether insurance would benefit from a special resolution regime that overrides normal insolvency rules in order to enhance the ability to ensure continuity of critical contacts through, say, the transfer to business to another firm,” said the head of the new Prudential Regulation Authority.
“The policyholder protection objective for insurance points to the need for a resolution regime for insurers, but the important issue is to be clear on what sort of regime.”