Last week’s insurance summit on market reform was pre-empted by a government leak suggesting that tax cuts were off the agenda. Where does this leave Lord Levene and his modernisation plans? James Dean reports
Last Tuesday morning, 24 hours before Lord Levene was due to present to the Treasury on market reform, the Financial Times (FT) ran a small news story. “Insurers can fend off threat from Bermuda,” it said. “London’s insurance market does not need special tax breaks to head off the threat of zero-rate in Bermuda, Kitty Ussher, City minister, will tell the industry tomorrow.”
So why did the Treasury take the unusual step of a briefing a day before Levene was due to present his findings? It had previously advocated a collaborative approach to improving competitiveness.
Levene has been leading an inquiry into the London insurance market’s global competitiveness for the last year, at the behest of former chancellor Gordon Brown and former City minister Ed Balls.
Ussher, who replaced Balls following Gordon Brown’s move to Number 10, seems to have had a full and frank conversation with the FT.
She told the paper that after wide consultation, the government had concluded that the London Market was in good shape to fend off compet-ition from Bermuda and other low tax centres. If the government could come to this conclusion of its own accord, it begs the question: what now is the function of the Levene group?
Wednesday’s insurance summit was born out of meetings of a secretive high level group on financial services – a panel of the City’s most influential men and women, including the top executives from banks, law firms and insurers, as well as the more familiar faces of Mayor of London Ken Livingstone and Lloyd’s chairman, Lord Levene.
The press and public are excluded from the meetings, and neither transcripts nor minutes are released. The group has met twice in the past 13 months. The meetings began back in October 2006, with the aim of enhancing the City’s competitiveness.
The government proposed that, along with the FSA, it would “examine whether the regulatory regime might be lightened for insurance services with low consumer detriment or systemic risk.”
“The FT was told that after consultation, the government had concluded that the London market was in good shape to fend off competition from Bermuda and other low tax centres. If the government could come to this conclusion of its own accord, it begs the question: what now is the function of the Levene group?
As part of this examination, the insurance market was tasked with creating a modern-isation plan, to be led by Lord Levene.
Levene created the Wholesale Market Review Group with Andrew Kendrick, from Ace Europe, and Grahame Millwater, from Willis Re.
The high-level group met for a second time in May this year to discuss progress. Notably, nothing was said of the Levene working group, although an insurance summit was planned for 7 November. Indeed, since it was created, the activities of the group – like the high-level finance group – have been kept out of the public eye.
There has been fairly widespread speculation that, since the change of government ministers, it has dropped off the agenda. This idea has been given credence by last week’s events. The Treasury refused to comment on the leak.
Following the FT story, Lloyd’s had two choices: to come out fighting, or to hold fire behind closed doors. It did the latter, releasing a statement that said only: “These reported comments from the Treasury are based on a consultation that has not been shared with us yet. We look forward to seeing this consultation and discussing these findings with the Treasury.”
After the summit, an inside source spoke to Insurance Times, but was wary of disclosing the precise details of the meeting. However, the source did confirm that a presentation on the reform of the London insurance market was made by Levene, as well as presentations by the FSA and Treasury.
Lloyd’s commented post-summit, with a spokesperson saying: “Following the meeting, we are going to continue a constructive discussion with the Treasury on tax matters. But tax was not the only issue discussed at the meeting – training, recruitment and improving efficiency were also on the agenda.”
It therefore remains uncertain how the leak affected Levene’s presentation on the day.
Yesterday, after Insurance Times went to press, the high-level working group was scheduled to have another meeting.