Changes to UK and European regulatory structures are increasing compliance costs for firms and risk causing serious damage to the insurance industry, acc-ording to the Association of British Insurers.
Giving evidence to the Treasury select committee last week, ABI director of financial regulation and taxation Peter Vipond said although harmonisation of European markets will be good for larger players, the costs of being a regulated business keep growing.
He said: “It is becoming har-der and harder to meet the business costs and insolvency costs. I think it is a brave group that comes into that market alth-ough, of course, we continue to see new authorisations, new insurance firms and new banks.”
Vipond told the committee, which is looking into proposed changes to the UK regulatory structure, that the Consumer Protection and Markets Authority should not have retrospective powers.
He said: “When the FSA tries to rewrite the rules after the event, it can do a great deal of capital and prudential damage to insurance companies and it can very quickly take out whole areas of products.” He cited a collapse in with-profits savings product sales after retrospective FSA regulation as an example. He said: “It would be damag-ing to some of our firms.”