The General Insurance Standards Council (GISC) has stopped making widespread on-site visits after slashing its monitoring budget.
PricewaterhouseCoopers (PWC) and Ernst & Young have contracts, worth about £800,000 each per year, to act as monitors for GISC.
However, PWC has started making redundancies among its monitoring staff and Ernst & Young has reduced its GISC monitoring activities to a "core team" after the GISC cut the amount of work it provided them to the minimum level allowed by the contracts.
PWC general manager of monitoring Ray Stibbard said the redundancy process, believed to include four senior staff, would be finalised on 31 March.
It is understood two junior PWC staff will continue working on GISC monitoring.
"This was not a problem with PWC, it was because the GISC's budget has been reduced," Stibbard said.
Ernst & Young partner in charge of monitoring James Dean said his firm had originally used its eight-strong core team plus wider firm resources to work for GISC, but had now stopped using the wider resources.
"GISC is looking to refine the way monitoring is done," Dean said.
"Looking toward 2004, Ernst & Young will be looking to redeploy the professional resources within the core team to our fast-growing regulatory practice."
GISC chief executive Chris Woodburn would not reveal the GISC's original monitoring budget or the level to which it had been cut, nor rule out further changes.
"The budget is not set in stone but we, the board, and the finance and audit committee keep a very careful watch on it," he said.
He also said there was no certainty that current monitoring projections would not change again, either up or down.
However, Woodburn said the GISC had begun using more focused "desk-based" monitoring, using information contained in application forms, financial returns and business documents.
He said the GISC's dispute resolution facility obtained information on compliance levels.
"We also get information from complaints and the investigations this prompts and we do some mystery shopping," he said.
Woodburn denied the budget cut was due to wider financial difficulties and said some targeted on-site monitoring would continue.
To date, GISC monitors have made 1,200 site visits.
