Insurance regulation will not take a back seat to the oversight of deposit-taking financial institutions under the sector’s new supervisory regime, according to Mark Hoban MP, who will deliver a keynote speech outlining the government’s plans for its Prudential Regulation Authority (PRA) at this year’s summit.
The financial secretary to the treasury is a firm believer the PRA will play a key role in the monitoring of overall risks in the UK financial system, spotting dangerous inter-connections and stopping excessive levels of leverage before it’s too late.However, he views the government’s proposal to provide the PRA with a specific statutory objective for its insurance responsibilities as proof that it recognises “the inherent characteristics of an insurance business model are different to those within a bank’s”.
“The PRA will focus more closely on the microprudential side of what the Financial Services Authority has done,” Hoban said in an article for the Chartered Insurance Institute entitled Insurance Regulation in 2012: Finding Solutions to the “British Dilemma”.
“We think the PRA will bring judgment to the vital task of regulating the soundness of individual firms that manage risk on their balance sheet, particularly banks and insurance companies. But we recognise of course that banks and insurers engage in very different types of business.”
Hoban added that although he recognised insurers face tough challenges in the current economic climate, there are opportunities for the UK sector to build on its “world-leading” strengths, although he stressed this would require constant innovation and adaptation in light of “worthy and rising competitors”.
Hoban has shown an increasing interest in the insurance industry since being appointed to his current position in 2010, having occupied the role in opposition for the previous five years.
He has been actively involved in moves to compensate savers who lost money in the Equitable Life affair and, more recently, has also contributed to discussions about the calibration of the Solvency II standard formula.
The financial secretary to the treasury will deliver his keynote speech on the opening morning of the summit (May 15).
