Insurance executives to take the blame for failure under new rules

Top staff at Lloyd's of London insurers will be included in the new rules
By Marion Dakers, Financial Services Editor

Insurance executives will become directly responsible for decisions they make, under plans by the financial regulator that mirror the tougher rules imposed on bankers.

Senior managers at large insurance firms will also need to satisfy the Prudential Regulation Authority that they are "fit and proper" to carry out their job, as part of an attempt to supervise insurers more closely.

The PRA and the Financial Conduct Authority (FCA) set out supervision rules for senior bankers in July, proposing seven-year clawback periods on bonuses and possible prison sentences for those responsible for the collapse of a company.

Bankers will also be subject to a presumption of responsibility if their institution fails, which will not be the case for insurers.

The Association of British Insurers said it was "reassured" by the regulators recognising the difference between the two industries. "We will be working with our members and the PRA and FCA to ensure that the regime is fit for purpose and ensures a continuing flow of high level talent into the insurance industry," said a spokesman.

The rules will apply to chief executives, along with finance, audit, risk and actuarial bosses at the biggest firms, as well as some senior staff in the members of the Lloyd’s of London insurance market. The paper, published on Wedneday sets out how the UK will enforce parts of the global Solvency II regime for insurers.

"The proposed rules do not go as far for insurers as they do for bankers, but they are heading in the same direction," said Paul Edmondson, a partner at the law firm CMS. "Now that banks and insurance firms have been covered, who will the regulators come for next?"

The Financial Stability Board, a group of global banking regulators, last year deemed nine insurance firms including Aviva and Prudential to be systemically important financial institutions – a title that comes with tighter rules on capital and oversight in a bid to prevent another widespread financial crisis.

About 104,500 people worked in the UK insurance industry in 2013, according to the Office for National Statistics.




Source: Telegraph