Lloyd’s managing agents won’t get to interact as much as they used to with the Prudential Regulation Authority (PRA) from a supervisory perspective, following plans announced by PRA insurance supervision director Shoib Khan.
Speaking at the Bank of America Securities Annual Financials CEO Conference, Khan told attendees: “Both the PRA and the Society of Lloyd’s have a role in regulating the Lloyd’s market, and we work closely together, supported by a public Cooperation Agreement.
“Lloyd’s managing agents, as PRA-authorised firms, are supervised to the same standards as all other PRA firms, but Lloyd’s also provides oversight over managing agents and, in recent years, has implemented its principles-based oversight framework to enhance that oversight. So, we have been carefully considering how we can enhance our current cooperation.”
One area in which the PRA is looking to make changes is the authorisation process for managing agents. According to the insurance supervision director, his camp is working with Lloyd’s and the Financial Conduct Authority on how it can be quicker.
“We think we can coordinate more with Lloyd’s to ensure our oversight of managing agents is effective and efficient,” Khan noted. “To this end, we have also modified our categorisation for managing agents. While the categories will remain subject to review, the impact for affected managing agents will typically be a lower level of supervisory interaction with the PRA.
“These changes should reduce duplication and regulatory costs to support the competitiveness of the London Market without compromising prudential standards.”
Meanwhile, among other things, the PRA also aims to consult later this year on introducing an accelerated pathway for catastrophe bond applications – something London Market Group chief executive Caroline Wagstaff (pictured centre) commended.
“This announcement by the PRA to streamline and speed up the application and approval processes for catastrophe bonds is very welcome given their impact on the lived experience of companies looking to use the UK regime,” Wagstaff said.
“Making our ILS (insurance-linked securities) regime streamlined and competitive should encourage greater investment in the UK. We are also pleased that the PRA has listened to member firms on further refinements to the UK ISPV (Insurance Special Purpose Vehicle) regulatory regime and look forward to continued forward momentum on improvements.”
As for the adjustments in regulatory oversight, Lloyd’s chief risk officer David Sansom (pictured left) expressed approval.
“In recognition of the unique nature of Lloyd’s and the evolution of our principles-based oversight framework, we are delighted that the PRA will be advising a number of managing agents of its intention to reduce their impact categorisation which, in turn, informs the level of the PRA’s supervisory activity and intensity,” Sansom commented.
He added: “We are pleased with the support and challenge that the PRA continues to give us with regard to the design and implementation of our oversight framework and the constructive and positive response to this change of approach that we have received from managing agency boards and the LMA (Lloyd’s Market Association).”
Similarly appreciative of the changes is LMA CEO Sheila Cameron (pictured right), who welcomed both plans on managing agents and catastrophe bonds.
“The Society of Lloyd’s has done a huge amount of work in partnership with the market to develop the principles for business oversight framework, which is now deeply embedded with managing agents,” Cameron highlighted. “We believe this framework is robust, and we are pleased to see this vote of confidence in the framework from the PRA.
“We would also like to thank the LMG for the work they did to ensure the secondary growth and competitiveness objective was included in last year’s Financial Services and Markets Act.”
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