FSA slates unfair contracts

The Financial Services Authority (FSA) criticised insurers in its annual report for continuing with policy wording it had ruled unfair the previous year.

“We found that some insurers had the same or similar terms in their contracts we viewed as unfair two years previously. In light of the report and our review of legal expenses insurance, we reiterated our views that firms should remain alert to other firms’ published undertakings and consider their own contracts in line with them,” the report said.

Elsewhere it said: “There has been encouraging progress in the quality and robustness of insurers’ risk management practices.”

Banks take the brunt

The report concentrates on the banking crisis and its impact on central banks and regulators.

Chairman Lord Turner said: "The year 2008/09 has been an extremely difficult one for regulators across the world. Looking at the year as a whole, I believe the FSA has dealt successfully with the immediate crisis, and taken actions to ensure that we build a more stable financial system for the future."

FSA chief executive Hector Sants said: "It is critical to understand that the individual firm problems we have seen emerge in the last year had their origins in the boom, and were not reversible in the current market conditions. Our objectives in the past 12 months have been to minimise the impact of these weaknesses and to lay the foundations of a more effective and better regime for the future. I believe we have made good progress in extremely difficult conditions in pursuit of these goals.

Report highlights

• Staff numbers up from 526 to 703;
• Changing the authorisation process for Significant Influence Functions (SIFs) to ensure it was judging the competence and regulatory knowledge of senior people at firms as well as their probity;
• Reorganised and strengthened risk identification and mitigation capacity;
• Revised supervisory risk assessment framework to include greater focus on business models; and
• Increased engagement with auditors and investors to emphasise their role in the oversight of firms.

FSA regulatory action

• 302 investigations closed resulting in 371 outcomes. Of these, 243 concluded with the use of powers (such as prohibition, financial penalties and variations of permissions) and 128 without the use of powers. 30 of these 128 outcomes were private warnings.
• £27.3m in financial penalties, compared with £4.4m last year and prohibited a record 58 individuals from carrying out regulated activities compared to 30 the year before.
• Number of regulated firms decreased from 28,325 to 27,340.
• Number of approved persons decreased from 172,077 to 166,420.

At what cost?

Adair Turner's total remuneration for the period 20/09/08-31/03/09 was £246,546, made up of salary of £219,000 and benefits totalling £27,346. Hector Sants' total remuneration was £623,170 (2007/08: £661,948). Made up of a salary of £478,000 and other benefits totalling £145,170. He declined to take his bonus award of £130,000.