The FSA's hands are tied over the introduction of statutory regulation of general insurance because the Treasury failed to enter into negotiations with the European Union over the Insurance Mediation Directive early enough, said FSA chairman Howard Davies last week.
Speaking at the first annual ABI conference last week in London, Davies said the cost-benefit analysis that the FSA is required to carry out is likely to show that the benefits of introducing regulation will not outweigh the costs of regulation borne by the industry.
Davies said the EU is not required to carry out a CBA before acting while the FSA is required to do so.
He said: “We will do our best to produce a CBA but we are required to bring in regulation. Our Government was not enthusiastic about the EU directive in its early stages. The regime from the EU was largely introduced without a CBA, which restricts what the FSA can do.”
ABI spokesman Malcolm Tarling says: “At the time of the Treasury announcement in December 2001, we argued that we did not feel the regulation of general insurance was necessary but we are stuck with it so we will just have to get on with it.”