FSA climb down on risk manager regulation
UK risk managers’ representative body AIRMIC has welcomed a statement from the Financial Services Authority (FSA) that many group risk managers will be spared from regulation imposed by the Insurance Mediation Directive when it comes into force at the start of 2005 which would have required them to apply for authorisation to buy insurance.
The news will come as a relief to group risk managers in the UK, who feared that they might be dragged into regulation intended to level the playing field for insurance intermediaries.
Indeed, according to AIRMIC, almost one in seven UK companies were considering relocating their risk management operations overseas to avoid the regulation.
In a statement, AIRMIC revealed that it had sought and obtained an opinion from Thomas Sharpe QC that: “The UK, by including group risk management companies within the scope of the FSMA 2000 regulations on insurance mediation, has not properly incorporated the Directive into English law.”
The organisation forwarded the opinion to the FSA. In a letter back to AIRMIC, the FSA’s Dr Eleanor Linton said: “We are grateful to you for sharing this Opinion with us which has assisted us in our further analysis… We have throughout recognised the force of the policy arguments which you and others have made on behalf of group risk managers and we are pleased that we have also now identified a possible legal basis for deciding that authorisation may not be necessary.”
This, said AIRMIC, means the FSA has accepted that risk managers who buy insurance on behalf of their group and then recoup administration costs from other companies in the group are not receiving remuneration for doing so.
“This is excellent news for UK companies, who would have been put at a competitive disadvantage if risk managers had been regulated,” said AIRMIC executive director David Gamble. “We are grateful to the FSA for their flexible and constructive approach.”