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Sants: ‘Supervision of insurers will be more intense than for banks’

The Prudential Regulation Authority’s new insurance objective to provide an appropriate degree of protection for policyholders is likely to mean supervision of insurers will be more intense than banking supervision, according to PRA chief executive designate Hector Sants.

The objective was announced by Chancellor George Osborne last week. Laying out the PRA’s approach to regulating insurers at a conference in London this morning, Sants said the extra responsibility could lead to more intense supervision.

He said: “The PRA will engage in baseline supervision of all insurance companies. Relative to their size and complexity it is likely this oversight will be more intense than that of an equivalent bank, given the need to address the obligation to look after policy holders forward looking expectations.”

The discussion paper on the new approach, also released this morning, says: “The PRA’s role will be to ensure there is a reasonably high chance that an insurer is able to meet claims from, and material obligations to, policyholders as they fall due. And to make sure that where an insurer is unable to meet such claims and obligations, the adverse consequences for policyholders are minimized by ensuring the insurer fails in an orderly manner.”

The objective was introduced to address concerns the regulator may be too focused on banking regulation. Responding to a question from Association of British Insurers director of financial regulation and taxation Peter Vipond, Sants said the objective was a “first step” and not an end product.

He stressed however that terms like “reasonable expectation of policyholders” had been avoided in framing the objective and that an “objective framework” would be developed.

Sants said the objective is only intended to deliver protection to policyholders in terms of the damage that a firm’s failure could do rather than dealing with issues around the point of sale, which would be the responsibility of the Financial Conduct Authority.


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There are 22 comments at the moment, we would love to hear your opinion too.

  1. Appalling. The number of complaints regarding the banks far exceed those of insurance companies ref policyholders. Sants mates at the banks are getting away with it again.

  2. Enhanced supervision, accountability, threats, increased fines, bullying and general intimidation.

    Yet when will we see the FSA become accountable

  3. Went into Barclays and Lloyds last week to pay some monies in. Whilst standing in the queue I over heard counter staff talking to a completely confused customer about ISA’s and in the the other bank a cheesy ‘adviser’ intercepted the counter clerk as it was apparent there were significant monies on deposit.

    In both cases it was like lambs to the slaughter and in the blink of an eye they were invited (escorted) into an interview room. Day in and day out this happens.

    Bank ‘advisers’, you have got to be kidding, more like executioners. Mind you they must be doing a good job as the FSA think us muppet IFA’s could learn a thing or two from such quality bank advice.

  4. Many of the largest Insurers are owened by the banks!
    They won’t have to sell products through other distributors, as they will be keeping all the trail and renewal that they are taking from the IFA’s, who go out of business due to the regulators. Sants you are either stupid or just do not have a clue. the only people to suffer are IFA’s and their clients.

  5. by ensuring the insurer fails in an orderly manner !!
    How civilised.

  6. Supervision of insurers will be more intense than banking supervision, according to Hector Sants!

    Hang on wasn’t the FSA failure to suprevise the banks that caused part of the earlier problems?

    When will there be and end to this regulator displaying partiality without substance especially when so many senior regulators are former bankers and even more especially when the FSA sees banks as the beneficiary of RDR.

  7. Or put another way – “we have unequivocally proven that we are incapable of supervising the banks and the failures of the last decade only happened in the mind of the cynics so we will pick a new target that we think is a little easier. That way I may be able to quieten all those who complain about my bonus, my travel and hotel bills, our parties and our biscuit bill, as protecting the couple of hundred thousand investors in a company has to be so much easier than the millions at risk at the banks. And finally for the doubters the cow did jump over the moon and my sanity is not in doubt!!”

    Keep going Hector – a record of achievement only a mother could be proud of.

  8. Steven Farrall (Adviser Alliance) 20th June 2011 at 2:36 pm

    More desperate attempts to shore up the failed and instutionally corrupt State/Regulator/Banking nexus.

    This is classic treating the symptom not the disease. The disease is the aforementioned nexus, made toxic by State money monopoly and fractional reserve banking which is nothing less than a fraud. Insurers – who are the chief businesses engaged in providing long term wealth preservation for their clients – are utterly hamstrung by short termist regulation and the inflation machine which is FRB and the State.

  9. So we have a French banker running the UK financial services industry.Is the really the best UK plc can come up with.The guy has no clue whatsover and no regard for the UK business future either.A bit like the England football manger I guess.
    Can we not do anything on our own any more.

  10. That’ll be another few hundred thousand in Mr Sants’ retirement swiss bank account courtesy of his former cronies – the banks.

  11. Its about time there was a review into the nature and money v benefits of the current system.

    How Mr Sants is still in a job is beyond me along with his mate Mr King.They failed in miserably in 2008.

    If they were advisers they would have been fined and banned for life.No accountability whatsoever,just ‘sorry we missed that’.And thats it.

    The FSA needs to be faced down.Don’t forget WE actually pay for all this nonsense.

  12. If the ‘MacDonalds’ man applies the same level of diligence and care to a perfectly functioning insurance industry that he has shown towards the banks, with the same results. God help us all !!!

  13. suggest that the suggested new regulation costs is spent increasing the supervison and regulation of the Banks as this is the area where all the past and present troubles are.
    yet again another oportunity missed or has it been deliberatley missed to avoid conflict with the Banks

  14. And when did the jow many insurance company’s fail? vs banks (and in this context Pants is talking about long term life business)

    Life companies do not fail as companies, even good old Equitable life is still with us. What happens is they close to new business because the standards of the Actuarial profession and the reserving regulations means that there is always enough put by to meet obligations.

    On the banks side we have JMB, NMB, BCCI, British and Commonwealth and Barings before we get to Northern Crock, Lloyds etc..

    ……Or does Pants know something about an impending fail the rest of us do not?

  15. I don’t know what you are all worrying about. The whole blinking mess of finance, etc. is probably going to melt-down like it is doing in Greece because of corrupt politicians and greedy bankers.

    I’d suggest that investment in a hill-top fort with a good water supply, large stockpiles of preserved food and some high-power ordinance – or a remote island – could be a good idea.

    Seriously, people like Sant, as well as all our great and good politicians and bankers seem a little like Nero playing music while Rome went up in flames, while trying to conceal the jerry-cans of petrol and matches that they were playing with just a short while ago.

  16. Will this cosy relationship between banks and the FSA/PRA never end?

    I dont recall insurers bringing the country to the edge of bankruptcy?

    The sooner this scandal makes it to the front pages of the broadsheets the better

  17. Very naughty article, designed to get people in a tizzy, based on a speech about the supervision to be taken by a very specific area.
    A supervisory department looking at the long term risks of failure would need to look more at insurers because that’s where long term policy holder risk because of the nature of the products. The prudential and actuarial risks to consumers are further reaching than the sale bank product push.

    Banks have poor record on point of sale, they will need increased supervision where they sell products, by the relevant supervisory area.

    And the macro side of banks is whole other ball game with its own supervision.

  18. The whole thing stinks.

  19. Dear Mr Sants,

    Please note; it isn’t manufacturing which has kept up our nation’s balance of payments, it’s invisibles; i.e. financial services. This has been the situation since Queen Victoria was alive.

    Your organisation has so far presided over the banking crisis, bank mis-selling and refused to grasp those nettles until too late if at all. Still apparently your body refuses to address them adequately and we now have a major recession, for which you among others must surely be responsible.

    While still letting banking off the hook you now want to turn your attention on insurers. Yes, there are things wrong with the way insurers run their businesses: a softer book of business for new business than for renewals (not TCF), running motor account at a loss for more than 20 years, etc; but there’s far more wrong with banking than with insurance companies.

    You have to address these issues in a more measured, appropriate and cost-effective manner than has been evidenced in the FSA’s dealings so far. Should you fail on this there is a very high risk that our economy will go down the tubes.

  20. Banking Club - are you in or out? 24th June 2011 at 2:05 pm

    RDR is all about handing over IFA distribution by the FSA to the banks. Consider the RDR implementation committee.

    Big Mac Hoban MP controls the exit switch for thousands IFAs who would remain bank competitors if allowed to stay in practice post RDR. Paul Selly of HBOS that said of RDR: “Bancassurers where set to benefit”.

    It gets even more worrying when you look at the full membership on the RDR implementation committee. Big Mac Hoban MP (Grand Order of Sesame Seed Bap) takes advice from a string of bankers, advisers to bankers and former FSA officials (all part of the problem and should be excluded from any proposed solution). His nine strong team includes:

    Michael Foot, former FSA managing director;

    Carol Sergeant, chief risk director at Lloyds Banking Group; and

    Nick Prettejohn, former Prudential UK chief executive.

    Davide Taliente, partner at Oliver Wyman – advisers to banks,

    Simon McGuire, former vice chairman of UBS’s investment banking division,

    Jonathan Herbert, former head of European law at the FSA

    Amanda Harvie former chief executive of Scottish Financial Enterprise (professional consumerist),

    Teresa Perchard, director of public policy for Citizens Advice; (professional consumerist) and

    John Tattersall former chairman of financial services regulatory practice at PwC.

    NB: Foot, Sergeant and Herbert are all ex FSA, Tattershall is the former boss at PWC when Hoban and Chris Cummings were both there, Sergent, Taliente and McGuire either bankers or advise bankers.

    Davide Taliente in an article arguing that rebuilding public faith in the banking sector was something regulators and the banks had to achieve together.

    Taliente says:

    “Clearly, the regulators can do a fair amount to help this and put focus on it. This is something the industry, culturally and as part of its business conduct generally, really needs to take on board.”

    Here we now see clear evidence of Sants pro banking stance – regulate those not in need of regulation and don’t regulate our pals at the banks, beneficiaries of RDR.

    This is a small club and the guess who’s not in it –the IFA! The sum total of this groups reads to me like a pro RDR, FSA and banking club.

  21. @bankers club

    This is very old news. The Oliver Wyman chap is listed as £££ in Hobans register of interests thus proving that you can buy influence in this country.

    How Third World.

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