The Association of British Insurers has warned the Prudential Regulation Authority’s judgement-based approach to regulation could be unfairly retrospective and clash with European directives.
ABI assistant director for regulation and taxation John Breckenridge also suggests the current raft of regulatory changes, including the new regulatory regime, retail distribution review and Solvency II, may require the FSA to be more flexible with transitional timetables.
He says: “The danger is regulators use judgements to overrule commercial decisions that are within the rules, which would effectively mean they are retrospectively changing the rules.
“They need to set out the framework under which the judgement-based approach would work, so firms know what to expect and decisions do not become arbitrary or vary between firms.
“With Solvency II, the regulatory switch, the RDR and everything else, they have to be thinking of slowing down the timetable or transitioning into things, or there is a danger that the industry and regulators will not be able to achieve it all in time.”
The PRA is scheduled to begin operating in 2013 and the supporting legislation has yet to go through Parliament.
Setting out the PRA’s approach to insurance regulation at a London conference this week, chief executive designate Hector Sants stressed the Bank of England and the PRA realises insurers are different from banks.