In its new report, Restoring Market Confidence, the ABI says any changes should tackle the problems that arose in the banking sector but should not apply to the rest of financial services.
It argues that it is not fair for regulators and governments to harm other sectors in its bid to clean up banking.
The ABI report also says regulation must not inhibit the ability of firms to offer competitive products for consumers or add unnecessary costs to businesses.
Director general Stephen Haddrill says: “Insurance is not banking and should not be regulated in the same way. We need targeted, sector-specific changes and not a lazy adoption of banking rules to other parts of the financial services sector.
“If this happens, UK-based insurance companies will suffer the damage to profitability, prosperity and innovation for a generation. As a global leader and major UK employer, the consequences of this would be felt throughout the British econ-omy and beyond.”
The report comes ahead of the deadline for consultations to the Turner review on June 15.
Aegon head of corporate affairs Francis McGee says: “The ABI is dead right that any new system of regulation has to respect the differences between different kinds of firms. Insurers and IFAs are not banks.
“The other thing politicians and regulators need to remember is that global, EU and nat-ional regulation all need to work together or there will be gaps and customers will lose out.”
Institute of Financial Planning chief executive Nick Cann says it is important that the regulator has a high-level understanding of all sectors. He says: “They must be prepared to challenge individual participants as well as a clear understanding of the sector. Nobody wants unnecessary regulation but similarly we do not want to see any similar collapse elsewhere because of regulatory failure.”
Addidi Wealth director Anna Sofat says: “I cannot possibly see how you can compare what banks did on the corporate side with the advisory sector, especially when the advisers are not handling client money. They are two totally different animals.
“The FSA has to be careful with what problem they are trying to address. I would be very wary of having one solution to address problems on the banking side and applying it to the advice sector.”
The ABI says an area of concern to insurers is the lack of recognition for the prudential regulation of UK insurers and the developments under Solvency II of risk assessment modelling across the EU.
The report also finds a case for a macro-prudential committee based at the Bank of England. The ABI says this would identify and act on systemic threats to the economy and should be chaired by the Governor of the Bank of England. It says it would focus on the build up of long- term risks and could help set capital requirements for the whole financial system.