Europe could learn from the FSA.
The implications of Solvency II should be fairly clear. Whisper it, but it’s a big step towards a single market. And it could lead to an even bigger step – the creation of a European supervisor, or regulator.
Put national protectiveness and inter-state squabbles to one side, and it makes perfect sense. The major insurers all operate across numerous European states already. Under Solvency II, they will operate under the regulatory regime of just one of those states – the one in which they are headquartered. So why not make all those regimes the same? It would save time and money and, by establishing a gold standard, eventually be the interests of the policyholder – which is after all the ultimate goal of regulation.
But such a move would be fought tooth and nail. Smaller states, or those which are new to the EU, would fear that they would be left with no control over the financial dealings happening in their jurisdiction. Worse, they would worry that a company with a presence in their state would collapse, through no fault of their own, and they would be left to pick up the economic pieces.
The first fear is a simple example of national protectionism, which will have to be overcome if a single market is ever to be established. The second is easier to assuage. If the European regulator does its job well, collapses should simply not happen. Despite its problems, the FSA is generally recognised to be among the best regulators in Europe. It is perfectly placed to lead the way.
