The Bank of England has signalled its intent to speed up and improve the application process for traditional reinsurance capital vehicles and ILS in a speech given in London.
Alan Sheppard, head of insurance policy at the Prudential Regulation Authority (PRA) for the bank, was speaking at the Westminster Business Forum. The subject of Sheppard’s speech was the future of international insurance in the UK. Included within the speech was an outline of some of the reforms the PRA is planning to make it easier to put capital to work in the London market.
Sheppard said: “We know that a critical factor in choosing where to locate a new venture is having confidence that the regulator will engage with an application swiftly. Firms want to know that they will receive a decision in time to make the most of business opportunities in a fast-moving market, and through this pathway we aim to provide that confidence. There is also a circularity to be overcome: regulators requiring capital to be committed and executives in place before an application is considered; but capital providers and individuals not willing to commit whilst there remains high uncertainty over the outcome of, and timeline for, authorisation.”
He went on to say that he thought the PRA could move more quickly to identify prudential concerns, resolve issues, give clearer guidance, and take decisions on applications.
He added: “We will achieve this by taking account of the nature of the underlying business, the experience of the proposed members of the executive and the Board, the clarity of the plan to develop the business and its operations during the initial set up phase, and the availability of material capital levels to deal with any issues that arise.”
This new approach, said Sheppard, would not weaken the ‘high standards’ that he said had been part of London’s success as a wholesale insurance market. It would also apply only to wholesale business, avoiding any area that requires protection under the Financial Services Compensation Scheme.
Sheppard said: “Within that, in order to be able move swiftly and on the basis of preliminary information and arrangements, the PRA will need to be satisfied, for example, that sourcing of substantial capital is already well advanced, that the prospective core membership of a credible senior executive team with a strong track record in the relevant sector is clear, and that the applicant itself has the resources to be able to move swiftly: to act with the responsiveness, availability and flexibility needed in order to maximise the benefit of the new approach.”
Coming months, said Sheppard, will see the PRA work with the FCA on this new approach.
