There is a risk that the EU’s Solvency II proposals, if implemented in the wrong way, may increase the volatility of insurance companies’ balance sheets and force them to raise capital levels. Capital is a raw material used in the manufacture of our products. If more is needed, prices go up, and value for the customer is eroded. The value of UK pension savings could be cut substantially and the price of insurance products rise as companies pass on the costs of carrying extra capital. Capital hording also reduces available investment in the broader economy.
We are at the vanguard of seeking changes to the proposed prudential regulatory regime in order to secure the best possible outcome for UK pension savers.
Another key area for focus is Conduct of Business regulation in UK financial services. A clear regulatory approach which does not rely on hindsight judgements is required. It should also provide single accountability for regulation, ensuring consumer access, experience and outcomes are at the heart of regulation. In turn this will enable the Financial Ombudsman Service (FOS) to focus on its role as an arbitration service, providing a fast and high quality service to consumers and a fairer framework for consumer protection, without excessive regulatory costs.
