A European Supervisory Authority has questioned the wisdom of moving to a twin peaks regulatory model, saying it would not work at a European level.
The Government plans to split the FSA into the Prudential Regulation Authority and the Financial Conduct Authority by December 2012.
Speaking during a panel debate at the Association of British Insurers’ biennial conference in London last week, the European Insurance and Occupational Pensions Authority questioned whether protection for policyholders should be divided between two regulators. Eiopa is one of the ESAs created in January to ensure consistent financial regulation across Europe.
Eiopa executive director Carlos Montalvo Rebuelta said: “The UK is finalising its move to twin peaks and I hope this will not be the case for Europe. I am of the opinion that on a European level, not a national level, a twin-peak or single supervisor will not give us the possibility to express the diversity of insurers sufficiently.”
KPMG financial services risk and regulatory centre of excellence director Rob Curtis said: “Moving to a twin peaks model raises the spectre of additional costs for the industry. We will have to be aware of how that plays out and whether we actually get the benefits along with increased costs.”
Curtis also raised concerns about how the PRA and the FCA would effectively represent the UK in Europe and globally.
Aviva operational and regulatory risk director Angus Eaton said he is worried how prepared insurers will be for the new structure, given they are taken up with Solvency II.
He said: “My fear is we get distracted by Solvency II at the expense of overlooking the regulatory environment we face once twin peaks is in place and Eiopa gets involved.
“That places an emphasis on us as the industry right now to ensure we influence and engage on what that looks like because if we miss that opportunity we have got to live with it for many years.”
FSA director of insurance Julian Adams said: “The move to twin peaks is a matter for the Government a question of public policy. It is right that you can organise your supervisory activity in a number of ways but the Government has chosen to do it through a system of twin peaks and our job is to make that work in practice.”
He added that twin peaks will mean supervisors can be more focused on the specific sectors they regulate.