New insurance body outlined
THE UK’s new insurance regulator will treat the sector differently to the banks, but will be heavily focused on enforcing new Solvency II capital requirements, authorities said yesterday.
The Prudential Regulation Authority, due to launch by the end of 2012, will supervise firms’ business models and financial strength using a forward-looking, judgement-based approach.
To be headed by current FSA chief executive Hector Sants (pictured), the PRA will regulate 636 general insurers, 123 life insurers and 132 London market firms, the Financial Services Authority and Bank of England said in a paper on its role.
“While insurers are not systemic in the same way as banks, their behaviour or failure nevertheless has the potential to pose risk to the stability of the financial system,” it said.
Firms deemed highest risk will be required to provide detailed data and accept external audits of their systems.
However, experts warned the PRA’s model was too close to that of the banks. “The PRA blueprint for each sector looks very similar which is worrying,” said Paul Edmondson, a partner at CMS Cameron McKenna.