We have reported previously on proposals to establish a ‘twin peaks’ regulatory approach in the UK (click here to see our most recent post and here to read an article in the December 2010 issue of Insurance and Reinsurance Review).
Hector Sants, the Chief Executive of the FSA and Chief Executive-designate of the Prudential Regulation Authority (PRA), spoke at a Reuters Newsmakers Event on 13 December 2010. He gave an update on the progress that has been made on the design of the supervisory approach for both the PRA and the Consumer Protection and Markets Authority (CPMA).
Sants noted that the PRA could allow firms to fail, if the PRA considers that failure would be ‘low impact’. Medium impact firms could also be allowed to fail, while high impact firms will be subject to “intensive, intrusive, judgment-based supervision”.
At the event, Sants is reported to have acknowledged that insurers do not pose the same risks to the financial system as banks, and that the PRA’s intensive and intrusive approach to large insurers will differ from the approach to banks.