View more on these topics

PRA could introduce new wind up mechanism for insurance firms

The Prudential Regulation Authority could introduce a mandated winding up mechanism for insurance companies if it decides current arrangements are not adequate.

Since the financial crisis the Bank of England has introduced the Special Resolution Regime for winding down banks which forms a part of the new supervisory approach of the PRA to banks.

However, there is no equivalent regime for insurance firms.

Laying out the PRA approach to regulating insurance companies at a conference in London yesterday, FSA head of insurance Julian Adams said he was “broadly comfortable” with existing mechanisms but that they could have shortcomings.

He said: “There are numbers of long standing and well understood mechanisms, for instance solvent run off and schemes of arrangement, for seeking to resolve insurers which have either failed or closed to new business. As we are broadly comfortable with the way these can and do work in practice, understanding the extent to which these would be viable in the circumstances of individual firms will be crucial, as there may well be shortcomings in the way in which generally effective resolution mechanisms perform in the face of individual firm issues. If these short comings are widespread there could be room for the development of new and potentially mandated resolution mechanisms in the future.”

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There is one comment at the moment, we would love to hear your opinion too.

  1. About 90 insurance companies have shut up shop in the UK in the past 13 years. Some of these were household names having traded for over 100 years but have found to cost/benefit of doing business in the UK none profitable due to the cost and fast changing regulation.
    What the regulator needs to do is put into place a framework that makes if attractive for insurance companies to opperate in the UK because at the rate we are going there will be less than 10 insurance companies left with the majority of business being conducted by the 6 big names.

Leave a comment