Conservative peer Lord Ashton has attacked the FSA’s approach to implementing Solvency II, accusing the regulator “losing its sense of proportion”.
Speaking in a debate in the House of Lords yesterday, Ashton, who also works in the insurance industry said Solvency II has created a “tidal wave of bureaucracy and expense” for firms. He added that Lloyds of London, the Council of which he sits on as an external member, expects to spend around £300m to meet the new rules, not including ongoing compliance costs.
He said he does not advocate a return to light touch regulation but called on the Government to ensure financial services regulation is “implemented at a company level in a proportionate way”. He said the insurance industry did not need any financial support during the crisis and slammed the increasing regulatory burden for leading to “whopping” increases in levies paid by insurers.
Under the Solvency II directive, companies will be able to use a standard model to calculate the amount of capital they have to hold or develop their own internal models which must be approved by the regulator.
Ashton said: “The Lloyds internal model application pack alone will be 6,000 to 7,000 pages long. It is estimated the insurance industry is going to produce 500,000 pieces of paper to support Solvency II applications to the FSA.
“There is a strong feeling the FSA has lost its sense of proportion in implementing Solvency II. It is very sensitive to the charge of gold-plating regulation but many in the industry feel that in its insistence on more and more documents it has lost its perspective in regulating the process rather than the outcome.”