Reforming european and uk financial regulation

1. Reforming european and uk financial regulation 19 March 2012 Alastair Evans, Head Government Policy & Affairs, Lloyd’s

2. Contents • Insurance Legislative and Regulatory Environment • Reform of UK Financial Regulation • Solvency II Reforming European and UK Regulation 19 March 2012

3. Insurance Legislative and Regulatory Environment • Lloyd’s • Formidable array of debates, challenges and change internationally, affecting both the substance and architecture of insurance regulation. • Individual countries, e.g. US (Dodd-Frank, establishment of FIO). • EU: ESRB, EIOPA, Solvency II, revision of Mediation Directive, insurance guarantee schemes, data protection, anti-discrimination proposals (gender, age and disability) • Globally: work of IAIS on systemic risk, regulation of internationally active insurance groups. Reforming European and UK Regulation 19 March 2012

4. The Lobbying Environment Global environment G 20 WTO EU IMF SANCO MARKT OECD EMPL TAXUD European Commission ENV COMP ECON EMPL Economic & Social Committee IMCO AGRI TRADE European Parliament TREN ENTR INTA WB ENVI JURI ITRE UNEP ARC Council/ EU Presidency European Central Bank ECJ Lloyd’s IASB IAA/EAG IFRIC EFRAG CESR EFC EIOPC ESRB NCOIL Occupational pensions IAIS Insurance mediation FSC Insurance groups EIOPA Financial stability FCC Joint Forum NAIC Solvency II FSB IOPS = central bodies = representation of States Reforming European and UK Regulation 19 March 2012

5. Reform of UK Financial Regulation • Reforms were principally a response to the banking crisis. • Government’s first condoc (July 2010): insurance supervision hardly mentioned. • Insurance has different features from banking (business model, performance during crisis). • New structure applies across the financial sector. Reforming European and UK Regulation 19 March 2012

6. Reform of UK Financial Regulation (cont’d) • Main issues identified in our responses: • FPC should have access to sufficient levels insurance expertise. • PRA should include a separate insurance division headed by individual of same level of seniority as for banking. • PRA and FCA must be under obligation to publicly consult on rules. Reforming European and UK Regulation 19 March 2012

7. Reform of UK Financial Regulation (cont’d) • The regulatory bodies’ rule making process must be subject to the full range of statutory safeguards that exist under FSMA. • There must be proper co-ordination between the new regulatory authorities. • There must be proper co-ordination between the authorities in making input into EU debates. • Transitional arrangements must be well managed given other regulatory challenges currently faced by the insurance industry • PRA should prudentially supervise Lloyd’s market. Supervisory co-operation arrangements between regulator and Lloyd’s should continue. Reforming European and UK Regulation 19 March 2012

8. Reform of UK Financial Regulation (cont’d) • These concerns largely taken on board by Government in recent condocs, in draft Financial Services Bill and proposed Memorandum of Understanding between the regulators. • Welcome establishment of shadow PRA and FCA teams within FSA. • Will continue to monitor draft Financial Services Bill closely. Reforming European and UK Regulation 19 March 2012

9. Solvency II • Complete overhaul of EU system of insurance supervision. • Objectives • Three Pillars • Omnibus II/Level 2 measures. • Challenging Legislative Timetable • Some unresolved issues (length of provisional equivalence period for third countries, currency risk). • Lloyd’s: £300m expenditure on preparation. • Supportive of overall regime. • 2014: implementation date for firms. Reforming European and UK Regulation 19 March 2012

10. Reforming European and UK Regulation 19 March 2012