The future head of the Consumer Protection and Markets Authority has plenty of financial sector experience, but whether he understands insurance is as yet unknown

Until Martin Wheatley was unveiled this week as the future head of the embryonic Consumer Protection and Markets Authority (CPMA), his claim to fame was having his picture burnt by protestors in Hong Kong playing Chinese funeral music.

With news of his appointment coinciding, inauspiciously, with the eye-watering 50% hike in the levy on brokers to the Financial Services Compensation Scheme, exactly what it portends for the insurance remains to be seen. Ominously, perhaps, Wheatley has no particular background in the insurance industry and the evidence available gives brokers and insurers no reason to think they are in for an easy time.

Driving force

Wheatley becomes chief executive of the CPMA once it is established to partially replace the Financial Services Authority (FSA) at the end of 2012. But he will be active in the insurance industry before that as he’ll be the new managing director of the FSA’s consumer and markets business unit from 1 September 2011. A key part of his role will be to shape the CPMA.

So how is he likely to approach his new role? Wheatley, 51, undoubtedly has a credible background in financial regulation, but he’s never worked for an insurance company or broker.

Instead, his experience is firmly in markets. In his current role as chief executive of the Securities and Futures Commission (SFC) in Hong Kong, where he has spent the past six years, he oversees both institutional and retail activities, admittedly including the insurance industry.

Prior to this he worked at the London Stock Exchange for 18 years where his final role was deputy chief executive under Dame Clara Furse. So established was he there that 10 years ago he was tipped to become the market’s next chief executive.

Mathew Rutter, partner at law firm Beachcroft, says: “Martin Wheatley is a good candidate for the markets side of the CPMA, but it is not so clear how qualified he is for the consumer protection side. He’s a bit of an unknown quantity.”

There is a danger, warns Rutter, that he could “lack full understanding of the insurance industry”.

Past form

Where Wheatley has acted to protect consumers his approach has, at least once, been controversial – although with the consumers themselves rather than with institutions – hence the fiery protest in Hong Kong by investors angry at the compensation they were offered for buying bonds sold by collapsed Lehman Brothers. He announced his departure from the Hong Kong job swiftly after these events.

But a key concern being voiced in the insurance sector this week is whether Wheatley knows the difference between banking and insurance.

Richard Hobbs, director of Lansons Communications, says: “The insurance industry will be looking for recognition that insurance is neither banking nor quasi, shadow, grey or investment banking. It should therefore receive proportional treatment, based on the evidence presented.”

Many insurance insiders feel that the FSA, in contrast, is taking a one-size-fits-all approach.

The regulation expert said that Wheatley must understand the differences between the types of business within the insurance industry, too. “Does he see a difference between the level of risk presented by, say, wholesale brokers and retail brokers?” asks Hobbs. “We hope he does, but so far there is no evidence either way.”

Early intervention

This all points to one thing: To ensure the industry gets off to a good start with the new chief regulator, talks must start now.

Beachcroft’s Rutter says: “People should get in early and make sure he understands the sector. As he doesn’t start for nine months, he’ll be working out his approach in the meantime, so now’s the time to get in front of him and make sure he understands your position.”

“Hopefully Wheatley will be in listening mood,” he adds.

However Wheatley treats these advances, it is worth remembering that much of the CPMA’s work will be to simply implement EU regulations. This, combined with the government’s apparent intention to reduce the “gold-plating” of EU directives, means, says Rutter, “it might not make that much difference who runs the CPMA.”