ABI attacks FSA doubling fees

The Association of British Insurers (ABI) has confirmed its criticism in today’s FT that higher fees demanded by the Financial Services Authority (FSA) for Solvency II are "unjustified" and mean a doubling in fees over three years.

Peter Vipond. ABI director of regulation critcised "the lack of effective oversight" of how the FSA sets its budget requirements.

"It is difficult to see the justification for these increases as insurers and insurance regulation were proven to be both strong and stable during the financial crisis," Vipond said.

"We are concerned about the lack of effective oversight [by government and parliament] of the way in which the FSA sets its budget requirements and charges levies to firms. At present, there is no way to know whether their proposals on these are reasonable or represent value for money."

Funding requirement

The FSA said its annual funding needs would rise 9.9% to £454.7m when it issued its business plan for 2010-11 in mid-March. Today is the deadline for industry responses to the plan.

The FSA said much of the increase in its funding needs stemmed from the costs of Solvency II, which alone would cost £100m-£150m by the time it was implemented in 2012. The regulator plans to take on 460 more staff, or an extra 14%.

Vipond called on the FSA to ensure that any work necessary to implement Solvency II was done in the most cost-effective way as possible. "Fees for regulatory compliance must be reasonable and not be allowed to become a financial burden on insurers," he said.