Now London and the City have fired back into life, it is easy to believe that this financial services hub continues to be the fast-paced, dynamic and cutting-edge centre of commerce and finance that we all want and need it to be. And in many ways, it is – the London Market remains the leading insurance market in the world, offering more choice, more expertise and higher standards than anywhere else. However, while total income continues to grow, London’s market share has stagnated in the last decade. If we want to keep pace with the emerging centres of financial services, we have to start thinking about what we need to do differently.
Our focus needs to be on creating a supervisory and regulatory culture that encourages businesses to invest their capital and people in the UK ahead of anywhere else. Businesses have more choice than ever about where to do that, and while the quality of our regulation is a major asset for the UK, it remains true that, in some cases, its burden and cost creates a negative perception that is damaging our ability to grow our market. More can be done to make London a compelling investment proposition.
Slowly but surely, we’re getting there. The Government has now agreed to give regulators a growth and competitiveness duty, which will be a feature of the upcoming Financial Services and Markets Bill. While I still believe the Government and regulators need to go a lot further – particularly on making regulation more proportionate – this at least represents a start. Many of our closest competitors are ahead of us on proportionality, so there is little time to lose.
Nonetheless, objectives and duties on their own are insufficient. We must now focus on how regulators intend to implement the competitiveness duty, and how they will be held to account for meeting its requirements. If the new regulatory framework is to have any effect on the London Market’s international standing, then we must ensure it has the necessary ‘teeth’ to be effective and maintain the UK’s leading position.
This will be impossible if we do not measure the impact of reforms. The Government must set out clearly how it intends to make regulators demonstrate their compliance with the competitiveness duty, and how they will be held to account. If we don’t have proper metrics and benchmarks in place to measure progress, we risk lip-service being paid to the reforms, without any actual change happening. Regulators should be responsible for streamlining regulations and reducing the burden where possible. It is easy to measure how well they are doing this – and we should be measuring it.
The LMG recently published its Metrics for Success proposals for assessing how well supervisors are doing at making the UK more competitive, suggesting practical measures for how success might be demonstrated. In it, we recommend that regulators can do more to help businesses’ operational efficiency, particularly regarding changes in senior personnel. Regulators should be set indicative timeframes for the authorisation of individuals, and publish statistics on how they perform against those timeframes. Addressing the issue of delays to appointments will ensure the London Market remains agile and adaptive to change, while also keeping it open to overseas talent. A similar set of targets and metrics should be used for other applications to regulators, for example regarding new authorisations.
We also argue that the enormous amount of data firms are required to provide, especially if they are dual-regulated, increases the cost of doing business and makes London less attractive. While we recognise that many of the data requirements play an important role in encouraging good market and consumer outcomes, often similar information has to be provided to separate regulators, creating unnecessary burdens. There is a clear need to look at unnecessary duplication, as well as the proportionality of some data requirements. Regulators need to measure the number and type of requests they are making of firms, and use this as a baseline for reducing the number of requests in future. The PRA and FCA should come together to work through new and existing requirements, with a view to working out where efficiencies can be created.
These represent just a few of the suggestions that we have made, but our intent is clear. We want to work quickly to remove unnecessary and disproportionate burdens on firms and make regulators accountable for doing so. If the Government is serious about making the London Market competitive – and it’s vital to the UK’s prosperity that it is – then it needs to set out a clear system for measuring our progress towards reducing costs for firms and maintaining the UK’s status as the obvious place for insurers to invest.
