Risk managers ‘on hook’ for EU directive
UK risk managers association AIRMIC has hit back at the Treasury after it declined to automatically exempt UK risk managers from being regulated by the European Insurance Mediation Directive.
As reported in Insider Week No 127, the plan requires UK intermediaries, including risk managers, to be registered with the FSA to comply with the directive when it comes into force in January 2005.
AIRMIC’s major objection to the plan is that the UK appears to be the only country in the EU where risk managers must be regulated in this way and it says this will make the UK a more expensive place to do business.
In a letter to AIRMIC, the Treasury said it would not hold risk managers exempt from the Directive - a stance that directly contradicts that of the FSA, which on 3 August said it would grant a partial exemption to risk managers.
In a statement released last week, AIRMIC noted: “AIRMIC is disappointed that the Treasury appears to have missed the point of the request for exemption, which is based around the need for absolute clarity in this matter. Whilst the FSA’s helpful and flexible attitude would appear to have removed the threat of regulation from the majority of UK risk managers, there will always be a measure of uncertainty unless the Treasury uses their powers to grant an exemption. And uncertainty is bad for business.
“Individual risk managers across the country and their legal advisors will now be obliged to consider the precise legal implications of the FSA’s definitions and communicate these within their own organisations and to brokers, insurers and other stakeholders. All this takes time that could be better spent on helping their organisations to manage risk. Since the Treasury have already acknowledged that there are no policy reasons for regulating risk managers, it would have been much better for them to have granted a total exemption, as they are able to do and is the case in other EU countries.”
Other organisations that have made similar representations as AIRMIC to the Treasury include the Confederation of British Industry, London Market Brokers’ Committee, Association of British Insurers, International Underwriting Association, Institute of Chartered Secretaries and Administrators and Association of Corporate Treasurers.
AIRMIC noted that it was “considering its options” and would “continue to work with the FSA to clarify the precise position of risk managers in relation to the Insurance Mediation Directive”.
A survey of risk managers held at AIRMIC’s annual conference in June 2004 revealed that one firm in seven would consider moving its risk management function overseas if it were forced to comply with the Insurance Mediation Directive.
Additionally, 88 percent of the 106 survey respondents said regulation would affect their jobs either negatively or very negatively. Six percent said there was a “strong possibility” that it would cause the risk management function to move to another country, with eight percent describing it as “a small possibility”.