Michael Faulkner says the FSA should recruit more people from the insurance industry
I am told that in America books are available that explain to lawyers how to sabotage mediations (How to wreck a mediation in 10 easy steps could well be the title of one such handy guide).
Of course, these tales may be apocryphal, but it may only be a matter of time before similar works appear on the subject of FSA Arrow visits - whether on some underground insurance chat room or in the business section of Waterstones.
Having recently lunched with two former insurance company senior executives who had gone through the arrow process they were of the view that "sabotaging" an Arrow visit was not that difficult.
One of the executives said he had managed to limit the FSA supervisor to only three questions ("Ask an executive about his strategy and he can talk for days"). The other expressed considerable joy at having caught the questioner up in discussions about what he felt were irrelevant matters (in this case, how meetings were arranged).
Their main complaint centred on the experience and knowledge of the FSA supervisors who conducted the Arrow visits. The supervisors, they argued, did not know enough about the insurance industry to be able to ask the right questions of senior management, thus enabling a wily executive to run rings around them.
To some extent they have a point, but it also does the FSA a disservice. Compliance sources say the comments were probably fair during the first phase of the FSA's risk assessment visits - the Arrow 1 regime - but since the instigation of the broader Arrow 2 regime the quality control process has improved.
In research conducted by law firm Beachcrofts last year, 75% of financial services firms said that FSA staff conducting arrow visits had relevant experience of the firms' market sectors.
The FSA says it recruits people with relevant skills and experience to do the job, and although it will not give details of how many have insurance experience, compliance experts say it has significantly increased the number of people with insurance industry experience that it recruits.
The major problem for the regulator, however, is that once someone is recognised as being good, there is a fair chance they will be poached by firms looking for compliance people. The recent appointment of FSA manager Sarah Dalgarno to Arthur J Gallagher (UK) is a good example.
Of course, the risk that good employees will be snapped up by rival firms is one that all companies face. That's business life.
But that is not to say the FSA could not do more. There are strong arguments for the regulator using more experienced people from the industry to help supervisors better understand the sector.
That would benefit both the FSA and the insurance industry. IT
