The trade body outlines ‘six priority initiatives’ through which the insurance industry’s ‘competitiveness agenda can start to be established and measured’

Trade body the London Market Group (LMG) has published a report today (26 May 2022) detailing the “six priority initiatives” it believes the UK government and industry regulators need to action in order for the London insurance market to retain its global competitiveness and “keep pace with other emerging regional hubs”.

The report, Making the UK more competitive: Metrics for success, aims to provide practical milestones and targets to support the implementation of a competitiveness objective for the sector’s regulators, which is set to be included within the upcoming Financial Services and Markets Bill.

Within the report, the LMG stated: “Creating a competitiveness objective for the regulators in the UK is a core part of maintaining the UK as the leading global (re)insurance market.

“But words are not enough. For us, the success of this development hinges on establishing an approach to regulation that genuinely focuses on risk and sets the right rules for the right firms in the right way.

“Our proposed approach is based on the premise that regulators can immediately start setting the tone for the future.

“The main body of this report sets out the detail of our six priority initiatives through which this competitiveness agenda can start to be established and measured.”

Boosting competitiveness

The six metrics outlined by the LMG are:

  1. Create a one-stop-shop for regulatory information.
  2. Helping operational efficiency, including reviewing authorisation and application time frames.
  3. Responding to market opportunities.
  4. Attracting new market entrants, in part by adopting a “more proportionate approach to approvals”.
  5. Reducing the cost of doing business, for example simultaneous reporting templates for the FCA and PRA.
  6. The right regulation for the right firm, to eliminate unintended consequences of new regulations being enforced on firms that are “in practice at arm’s length from affected customers”.

In terms of its responding to market opportunities metric, the LMG cited the difficulties firms have experienced due to delays in the regulator assigning a case officer – Insurance Times reported on this issue earlier this month (May 2022).

The LMG said: “There have been growing concerns about delays. In particular, there have been delays in appointing case officers, with a typical two-month lag at present.

“This, in turn, delays the start of the assessment process. Following the start of [an] application review, there are then also frequent follow up questions, which can slow the process even further.

“There are clear steps that can be taken and a good opportunity to create a revised model that is robust, protects customers and markets but demonstrates to investors the openness and competitive intent of the London market.”

New bill needs ‘teeth’

Alongside the Making the UK more competitive: Metrics for success report, the LMG has also published a secondary document - A plan for the future: One year on and next steps. This details the London market’s five-point plan “to help seize new global market and trade opportunities”.

The report provides a follow-up to the LMG’s original goal-setting publication in June 2021, detailing the progress made over the last year.

The LMG’s objectives are:

  • Ensuring that the London market remains the most attractive home for large risks through an international competitiveness duty for UK regulators.
  • Recognising the nature of the large complex risks the market covers and the sophisticated corporate buyers it serves through a more proportionate approach to regulation.
  • Making London a natural home for foreign (re)insurance companies by reforming the Solvency II regime.
  • Increasing the choice of buyers and growing the market by developing and promoting a UK captives market.
  • Gaining access to emerging markets around the world, to help them build resilience against natural disasters and climate change events through trade negotiations, regulatory dialogues and market promotion.

Speaking on the LMG’s reports, Caroline Wagstaff, chief executive of the LMG, said: “We are delighted that the government is proposing to include a competitiveness objective in the new Financial Services and Markets Bill, but words are not enough.

“If there is any chance of the reforms succeeding, they must ensure that the regulators can be held accountable for delivering on these new duties. For this bill to change the way the regulators operate, it needs ‘teeth’.

“Our concern at the moment is that this might be treated as a tick box exercise rather than something which can seriously support UK competitiveness.

“For us, the success of this development hinges on establishing an approach to regulation that genuinely focuses on risk and sets the right rules for the right firms in the right way.

“It also rests on measuring change. So, our document offers some practical suggestions by which this competitiveness agenda can start to be established and measured.

“These suggestions include getting the basics of operational effectiveness right to give a platform to build on, however, it should also involve setting the tone for future ‘activity specific’ regulation by increasingly considering proportionality in current and ongoing activity.

“A focus on proportionality will help lay the groundwork for the growth of new entrants, new business models and the wealth of new investment opportunities that exist.”