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‘We have come a long way,’ says Tiner

Outgoing FSA chief executive John Tiner says the life insurance industry is unrecognisable compared with when he joined the regulator in 2001.

Addressing the ABI annual conference in his last speech before he steps down, Tiner examined the changes in the financial services landscape during his six years at the FSA.

He was frequently scathing about the standard of the life and general insurance sectors in 2001 but heaped praise on the industry for making dramatic improvements in areas ranging from transparency to risk-based reporting.

He described how in 2001 the equity market was in freefall, putting enormous strain on life offices. Equitable Life and its policyholders were in crisis and Independent Insurance collapsed “out of the blue”.

Tiner, then FSA managing director for consumer, investment and insurance directorate, was appointed in 2001 to lead a major review of insurance regulation, dubbed the Tiner project.

He said one of the first proposals emerging from the project was that life insurers’ balance sheets should be prepared on a realistic basis. This culminated in the realistic reporting regime in 2004.

He said: “Oddly, this introduced a novel concept to insurance – realism – or, to put it more technically, the principle of establishing liabilities for the amounts a company expects to pay out, a principle I recall learning during part one of my accountancy course in the 1970s.”

Hitting out at critics, he said: “There has been much uninformed comment during the last four years about how the new FSA solvency system caused life insurance firms to reduce their holdings of equities at the bottom of the market, causing detriment to policyholders as the market has risen. This is a fallacy.

“Of course, there were some companies whose weak capital position was severely exposed by a realistic assessment of their liabilities and they, quite rightly in the interest of protecting their policyholders, needed to adjust their portfolios. This was not the fault of regulation, it was a consequence of poor management at some point in the past.”

Turning to the general insurance sector, which he said was “hopelessly out of date” six years ago, he explained how the Tiner project tackled the solvency system and the regulation of Lloyd’s of London.

He slammed the insurance mediation directive, arguing that much of it is “excessive, unwarranted and would never pass a proper cost/benefit test”.

Tiner said there was also a critical need for the FSA to raise its own game when he joined in 2001 and it had made sweeping changes. He said the FSA had introduced world-leading risk-based supervision of insurance firms, strengthened its actuarial capabilities which are now integrated into supervision and taken enforcement action.

He said: “Both we and you have come a long way. The life insurance industry today is unrecognisable compared with 2001 and the general insurance


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