On 1 September 2010, Ken Hogg, the director for the insurance sector at the FSA, delivered a speech at the CILA II Seminar regarding the future of the life insurance industry.
The speech explored how the recent economic crisis has affected the life insurance sector and provided a reminder that firms need to (i) increase their attention to capital management and planning, with a particular focus on the risk of a further downturn in the economy and (ii) review their strategies and plans.
Ken Hogg then discussed the new regulatory framework for financial services which will be introduced from 2012 and, importantly, how the FSA will act in the period prior to these changes. Ken Hogg highlighted that the FSA “will continue to focus on delivering the policies and reforms required to ensure stronger, more proactive regulation, creating a more stable economy and better outcomes for consumers. We will continue to progress our core reforms, such as the RDR, the Mortgage Market Review, the implementation of Solvency II and our work to progress the regulatory philosophy of intensive supervision. We will continue to be at the forefront of the debate on, and reform of, financial regulation, both domestically and internationally”.
The speech then reviewed in detail :
- the FSA’s with-profits review and the publication of the FSA’s findings;
- the FSA’s retail distribution review, one of the FSA’s core reforms which will remain on the regulatory agenda;
- Solvency II, which Ken Hogg classed as another core reform which will continue at pace; and
- Government reforms, specifically those beyond the changes to the regulatory framework which will also affect the insurance sector.
Lastly, Ken Hogg discussed the impact of all the above factors on life insurance companies. Specifically, Ken Hogg raised the following questions which life insurers will need to answer:
- “How will you access customers in a post retail distribution review environment? Without the influence of commission, you will need to find ways of making products visible and attractive to consumers in Independent Financial Advisers’ shop windows;
- If you are a Group Personal Pension provider, how will the introduction of NEST and auto-enrollment affect your firm’s retention planning and profitability?; and
- How will Solvency II affect your ability to provide products that meet demand?”
To view a summary of Ken Hogg’s full speech, please click here.