The FSA has warned firms that they need to improve their risk management if they are to meet the new solvency requirements.
Speaking at the European Insurance Summit in Vienna, David Strachan, FSA director of retail firms, said that the regulator's review of risk management practices had uncovered “pockets of weakness”.
These pockets included lack of independent and objective assessment of risks; poor quality management information; and a lack of coordination between internal audit, risk assessment functions and those responsible for assessing capital requirements, he said.
“I would expect there to have been incremental improvements in all of these areas as firms get to grips with the requirements of the new regime,” said Strachan.
He emphasised that the FSA expected “sound risk management practice” to be developed. “[By that] I mean risk management that is rooted deep within the culture and business model of the firm, as opposed to changes on the surface that seek to do little more than demonstrate compliance with our guidance.”
