London market insurers have raised concerns that the rising costs of regulation could damage the UK insurance industry's competitiveness.
The rising cost of regulation that insurers will be facing next year include:
- the Prudential Regulatory Authority’s (“PRA”) proposals to raise its industry charge for ongoing regulatory activities by an average of 4.7%;
- the levies on the Society of Lloyd's for ongoing regulatory work rising by 5.6%; and
- the Financial Conduct Authority’s (“FCA”) plans to increase costs for UK general insurers and Lloyd's managing agents by 8.5%.
Chris Jones, a director at the International Underwriting Association, voiced his complaint,
"regulatory costs in the UK are already high in comparison to other European countries and this further rise will affect our industry's ability to attract inward investment.”
The PRA has stated that the 2015/2016 increases are necessary to cover the cost of staff in preparation for Solvency II, which comes into effect on January 1, 2016.
Senior executives have also had their say on the potential exit of the UK from the EU, and they believe that such an exit could lead to even tougher regulation for the domestic insurance industry.
At the annual Insurance Europe conference held in Luxembourg on May 27, one participant stated that an EU exit would be "disastrous" for the UK insurance industry, adding "let's please try to do everything we can to avoid that happening".
Lloyd's of London CEO, Inga Beale, reiterated this sentiment; she believes it is essential to maintain open trade in an era of globalization: “being part of a bigger community is very important.”
A referendum on the UK's EU membership was included in the Queen's Speech that sets out the government's legislative agenda. The referendum is due to be conducted before the end of 2017 but is more likely to take place in 2016