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BoE to step up scrutiny of UK insurers

Bank of England (BoE) governor Mark Carney warned UK (re)insurance executives that they will be held to account for decisions that harm policyholders in the same way as errant bankers, in a sign that the bank is taking a more aggressive approach to regulating the sector.

The BoE, which has been responsible for monitoring the overall financial stability of the insurance industry since April last year, will create a new set of rules designed to hold senior insurance executives responsible for decisions that cost customers money, Carney wrote in the Times newspaper on 22 May.

"If we think that management's actions today pose a risk for tomorrow, we won't hesitate to step in," wrote Carney.

The central bank will intervene to prevent insurer collapses that might cost policyholders or taxpayers money, or make insurance less available, he added.

The regime for insurers will be modelled on a similar set of rules for banking executives that are currently being drawn up by the BoE at the UK parliament's request.

Speaking to The Insurance Insider, Nathan Willmott, a partner at law firm Berwin Leighton Paisner, commented: "I think that across the UK insurance industry there is a rising feeling that the current level of regulatory intrusion is not proportionate to the risks that insurers pose to the regulators' statutory objectives."

However, Carney also wrote that if regulation at a UK, European or global level began to hold back insurance companies from contributing to growth, the BoE would refine its approach.

Willmott said: "I think the message coming from the industry is that the regulators do need to refine their approach - to move away from the current aggressive and untrusting approach, to a more constructive dialogue with insurers aimed at working with them to help them manage the risks that they face."

Without a more productive approach, Willmott added that groups with European operations might consider basing their operations somewhere with a more balanced regulatory approach.

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