Andrew Holt says our offshore competitors are benefiting from our stifling regulatory environment
The threat of excessive regulation facing the insurance industry is well documented, with the consequences usually focused on horror stories involving individual businesses, but what about the impact on the industry as a whole. Is too much red tape driving the industry offshore?
Consultant Moore Stephens certainly thinks so. Partner Michael Butler says that the UK's insurance, and particularly Lloyd's, is "under threat". He rightly cites regulation and the rise of technology as the reasons for this. Regulation is clearly taking place faster than it needs to and quicker than other EU states.
As ever, it is only the Brits that follow the dogmatic letter of EU regulatory law. Therefore, offshore jurisdictions are benefiting from the OTT regulatory state we are in. Take Bermuda. It is attracting plenty of insurance capital because of its favourable tax and regulatory regime. Thus our industry is being eroded by offshore competitors aided by their sensible regulation and low taxation.
Insurance Times' very own insurance Czar Robert Hiscox made the valid point last year that the government should reduce taxation on insurance reserves to counter the attraction of Bermuda and other offshore centres.
It is a mystery why the government has poured good money after bad into ailing businesses, but done nothing to encourage the world pre-eminence of our insurance industry.
Added to this is the challenge posed by technology. In essence, there are no longer real reasons why companies should be based in London. And it goes without saying that Lloyd's has to reduce costs to maintain its position as the leader of the London market, so that London remains the premier market for internationally-traded business. At least Lloyd's itself realises this. Lloyd's director of change management Stephen Haasz last week told Insurance Times that Lloyd's had no "God-given right to exist." Although he believes Lloyd's and Bermuda can exist as separate growing markets.
But look at the recommendation for another offshore jurisdiction, Guernsey. Steve Camm, the underwriting director at Hiscox on the island, says: "Having been a Lloyd's underwriter for many years and in the insurance industry for over 25 years, Guernsey is a place that still can reward hard work without tying you up in red tape. The regulators are always willing to listen and offer constructive advice rather than the barriers I've seen in other jurisdictions."
So the industry cannot afford to be complacent about the offshore threat. More needs to be done to lobby government for tax changes and the EU to restrict the path of constant diktats
Because until something is done, regulatory pressures will continue to stifle the industry and the offshore competitors will benefit. IT