By  Patience SAGHANA
The International Underwriting Association has called on the coalition government to ensure that there is a strong insurance prudential regulator as part of its shake_up of the financial services industry.

The government outlined its plans for new regulation for the sector including the creation of the Financial Policy Committee, the transfer of the macro prudential regulation to the Bank of England and the abolition of the Financial Services Authority.

However, Nick Lowe, director of government of affairs at the IUA said that the fact that the insurance industry was less of a systemic risk than the banking sector should be recognised.

He said: “Our principal concern in relation to the new proposals is that the prudential regulator of insurance should be an integrated authority with a good understanding of general insurance, of its role in the economy, of its strengths and weaknesses and of the importance of the London insurance and reinsurance industry in the UK and the global economy.

“Only an integrated well informed body with competent staff experienced in insurance matters will be able to develop and implement the long_term holistic policies that are needed for sound and consistent supervision of solvency and risk management within the industry.
“If that body is also to be incorporated into an overall single prudential regulator for financial services, then there may be benefits in terms of synergy, provided that the senior management of the single prudential regulator has a deep understanding of insurance matters and is not overly dominated by banking concerns.”

He added: “With regard to regulation of systemic risk and oversight over long_term trends and the broad effects of changing practices and new products in financial services at the national and global levels, we agree that overarching structures are required to ensure that risks are identified and mitigated in a timely manner.

“While insurance and reinsurance are not generators of systemic risk, they may be threatened by it and as key branches of the financial services industry need to be integrated into all analyses of systemic risks to the economy.
“We welcome, therefore, the importance attached by the new Government to the need for joined_up macroeconomic supervision, but also feel it necessary to emphasise the need for the bodies charged with undertaking it to be adequately staffed, advised and influenced by individuals who have a profound knowledge and experience of the insurance and reinsurance industry, either as regulators or practitioners.”