What is likely to be the UK Financial Service
Authority’s (FSA) swansong annual fundin requirement announcement
has received a cold reception from the Association of British
Insurers (ABI).
It is hardly surprising. In its 2012/2013
fiscal year, the FSA is looking to raise £578.4m ($910m) in fees it
levies on financial services companies, an increase of £77.9m
(15.6%) compared with 2010/2011.
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The brunt of the increase will be borne by
large companies to reflect what the FSA terms the “intensive and
intrusive supervision” required in the current uncertain “difficult
economic environment” and with regard to implementation of Solvency
II, the Retail Distribution Review and the Mortgage Market
Review.
Taking the FSA to task, ABI director general,
Otto Thoresen said: “This massive increase in regulatory fees comes
in a year when insurers already face increased costs associated
with implementing the Retail Distribution Review, Solvency II,
changes to gender risk pricing and auto-enrolment.”
Referring to the pending splitting of the FSA
into the Prudential Regulation Authority and the Financial Conduct
Authority in 2013 – the so-called “twin peaks approach” to
regulation – he continued: “We knew that there would be a cost
involved in moving to twin peaks regulation but, in this difficult
financial environment, all organisations need to be focused on
controlling their costs.”
In defence of the FSA’s funding requirement
increase, Hector Sants, CEO of the FSA, argued: “Much of the
increase in AFR is the result of the additional resources needed to
implement the new regulatory structure but these costs for the
restructuring are in line with government forecasts.”
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By GlobalDataThe FSA noted that £32.5m of its fee income in
2012/2013 would be used to cover the costs of the switch to the
twin peaks regulatory regime. A further £22.4m is required to
upgrade technology systems, added the FSA. Clearly unimpressed with
the FSA rationale for its fee increase, Thoresen warned:
“While insurers will do their best to absorb
these costs, some will inevitably be passed on to the small
companies and private individuals who are customers of the
insurance industry at a time when they can least afford it.”
