UK regulation driving commercial insurance away from London, Zurich tells Lords

UK regulation is increasingly pushing commercial insurance business away from London and into overseas markets, according to senior figures giving evidence to a House of Lords inquiry on Tuesday (6 January 2026).

At the inquiry hearing, Zurich warned that the cost, complexity and unpredictability of the regulatory framework was acting as a drag on investment and growth.

The House of Lords Industry and Regulators Committee heard from Georgina Fleet, chief compliance officer at Zurich UK, Scott Steedman, director-general at the British Standards Institute, and Caroline Allen, senior vice-president for regulatory affairs at Smith and Nephew, as part of its inquiry into the relationship between regulators and economic growth.

Fleet told peers that while the UK regulatory system remained globally respected, its cumulative burden was now affecting where insurers chose to deploy capital and write business. She said data showed commercial insurance growth was increasingly occurring outside London, despite the UK’s historic strength as a global insurance hub.

“The overall share of that market is now 0.3% in recent years,” Fleet said. “That grew by 32% in London, but it grew by 59% elsewhere in the world.”

She warned that international counterparts were becoming cautious about operating in the UK, too.

“Our US and European counterparts are slightly nervous about doing business here because of the cost of regulation and the cost of capital,” Fleet said.

Fleet also stressed that Zurich was not arguing that the system was fundamentally broken, but said regulation had become overly focused on risk mitigation at the expense of growth.

 “It’s not saying the whole thing is broken. It’s saying that we are regulating for risk rather than regulating for growth,” she explained.

Misapplied to commercial lines

A central theme of Fleet’s evidence was criticism of the Consumer Duty, which she said was being “gold-plated” and, in some cases, misapplied to commercial insurance. While she acknowledged the intention behind the principles-based regime, she argued that its high-level nature had created uncertainty and inconsistency across the market.

“Consumer Duty is principles-based regulation. It’s outcomes-based, its intention is fair and clear and wants to do good, but because it’s very high level principles-based, we’re left with an industry trying to understand how to implement that,” Fleet said.

She added that firms had taken different approaches, only to face retrospective scrutiny. “Each firm would have done that differently and what the FCA will do is try to manage to standards, which are kind of gold-plated to the highest degree,” she said. “

We’ve all spent a lot of time and cost in trying to get to what good looks like without really understanding what good looks like until you get to enforcement activity.”

Fleet questioned the extension of Consumer Duty concepts into complex commercial arrangements, particularly where policies covered groups with end beneficiaries. Applying those requirements to commercial lines “does not make any sense”, she said, arguing that the cost outweighed any benefit.

The burden was particularly acute, Fleet said, when it came to fair value assessments. “Trying to provide a value assessment every year or every three years now is a great expense for no value,” she told the committee.

She pointed to industry data showing the scale of the issue. A recent ABI questionnaire found that 84% of compliance leaders had seen regulatory costs increase over the past five years, with regulatory compliance accounting for around 30% of insurers’ operating costs. For the largest firms, this equated to approximately £33.9bn annually.

“That 30% is probably around the right number in terms of complying with regulation, but it could be higher depending on the year,” Fleet said, adding that the actual cost was difficult to isolate because compliance had become embedded across organisations, from reporting and fair value assessments to fees and enforcement activity.

Time for consolidation

Both Fleet and Steedman highlighted the cumulative effect of decades of regulatory layering. Fleet said insurers were grappling with “many, many rules built up over time”, making it increasingly difficult to understand what compliance actually required.

“You can sometimes need an army of advisors to get through that regulation,” she said, calling for regulators to periodically consolidate rulebooks rather than forcing firms to “go back to things from the 1970s”.

Steedman echoed those concerns from a standards perspective, warning that regulations often referenced outdated standards while the industry was adopting newer approaches. “You end up with regulations referring to old standards, but industries wanting to use new standards,” he said.

The inquiry also heard criticism of regulatory unpredictability, with Fleet on behalf of Zurich welcoming recent reforms to the Financial Ombudsman Service, but arguing that further change was needed. She described the FOS as having acted like a “quasi-regulator”, with outcomes that were difficult to predict.

Despite the criticisms, Fleet acknowledged signs of a cultural shift among regulators. She said there were “green shoots of collaboration” and a move away from a “parent-child” relationship towards a more cooperative approach.