Late last year the Prudential Regulation Authority (PRA) proposed to raise the fee it charges for processing insurance business transfers under Part VII of the Financial Services and Markets Act 2000 (FSMA). Now the UK watchdog has released a policy statement in response to comments from the industry.
Referring to the results of its consultation paper (CP28/18) on the proposal, the PRA noted: “One respondent suggested that the proposed changes to the transaction fee for insurance business transfers under Part VII FSMA could act as a deterrent, or make the transaction less attractive, for smaller insurance firms.
“The proposed transaction fee reflects the PRA’s costs to process such applications, which tend not to vary significantly with the size of firm in question. The PRA considers that the charge should not be prohibitive for most firms looking to undertake a Part VII but would consider any application for a fee modification or waiver in line with its usual processes for exceptional cases.”
From the current two-fee approach wherein long-term business transfers require a £9,250 payment while all others are charged £5,000, the regulator wants to move to a single figure of £20,000 – the approximate average cost across all Part VII types, according to the PRA. Implementation is slated to begin on March 01.
The regulator is of the view that adjusting the amount to a level representative of the processing costs will improve the fairness in fee allocation by ensuring that these costs are not borne by organisations which do not undertake such transactions.
“One respondent said it was not clear how CP28/18 applied to all firms,” added the watchdog. “To help address this issue, the PRA will provide further clarification of the firms it expects to have greatest interest in each proposal in future fees consultations.”
