A trade body representing more than 350 underwriters and brokers in London’s specialist insurance market has called on UK policymakers to use Brexit to boost the sector’s competitiveness and bring in foreign investment.
The London Market Group is publishing a five-point plan this week on how it thinks government and regulators should use reviews of insurance and financial services rules to support the sector — which attracts more than $100bn a year in premiums for policies covering everything from container ships to computer networks.
It joins other industry bodies pushing for post-Brexit rule changes. The Association of British Insurers called in February for a reduction in capital requirements for its members.
The UK’s departure from the EU has provided an opportunity “to refresh and reinvigorate”, said Caroline Wagstaff, interim chief executive of the LMG.
“It’s a moment in time when we can all step back, look at the environment and say, how can we do it better?” she added.
The LMG brings together Lloyd’s of London, insurers and brokers that operate in that market as well as the “company market”, which offers similar insurance but not within Lloyd’s.
One of its recommendations is for regulation of UK branches of overseas firms to be “scaled back”. When the British business of an insurer based in the European Economic Area is not underwriting any UK policies, for example, the LMG argues that the UK’s Prudential Regulation Authority does not need to be involved.
This would “significantly boost the UK’s competitiveness and its attractiveness to EEA firms seeking to write global cover in the London market, while presenting no risk to UK policyholders,” the LMG says. It also calls on the regulator to rely more on supervision by non-EU regulators, in cases where the rules are equivalent to those of the UK, and to treat reinsurance branches of big insurance groups more lightly.
The PRA’s executive director for insurance Anna Sweeney said last month that it is “taking steps to rationalise the requirements that branches are subject to” but added “there can be no question of insurance branches being held to lower standards than insurers that are based here”.
FCA chief executive Nikhil Rathi has said that international co-operation can allow regulators to “defer to each other’s regulation, and thereby avoid duplication”.
The LMG is also calling for lighter regulation of insurance brokers that serve sophisticated corporate clients.
And it wants regulators to have an overarching statutory duty to promote international competitiveness. The Financial Services Act 2021 introduced a requirement for UK regulators to “have regard” to the relative standing of the UK, but only in certain areas. The LMG wants the government to do more to promote inward investment.
The LMG has also called for a relaxation of rules in order to encourage the market for “captive” insurance companies — entities set up within a group to self-insure certain risks. It is also calling for quarterly reporting to be scrapped.
In contrast to the ABI, the LMG warns against major changes to capital requirements that could sour the UK-EU relationship.
“It is crucial that any changes do not threaten the judgment of the UK’s regulatory framework as equivalent, which is important for ensuring a level playing field across the EU member states for UK reinsurers,” it said.
The Treasury said it was considering the replies to the consultations and would publish its responses in due course. The PRA and FCA declined to comment.