FSA's new turmoil at the top

The industry is still coming to terms with last week’s surprise announcement that FSA boss Hector Sants is to step down – prior to the formulation of two new regulators, the Prudential Regulation Authority and the Financial Conduct Authority.

While Sants was not necessarily the industry’s favourite person, he was at least clear, consistent and the provider of continuity in a period of significant regulatory upheaval. As DAC Beachcroft partner Matthew Rutter pointed out last week, Sants has been a high-profile and influential chief executive, meaning that little is known about the views or approaches of the layer of management underneath him. That layer too is in turmoil, with managing director Margaret Cole announcing her intention to resign last month.

The stream of management departures from the FSA bodes ill: it suggests that the top brass do not have confidence in the new system. It also puts the two new bodies at substantial risk of lacking the necessary skills and experience to get off the ground effectively. Instead, they will inevitably be navel gazing as they seek to recruit and embed new management.

The industry’s regulation ‘to-do’ list has never been longer”

This comes at a time when the industry’s regulation ‘to-do’ list has never been longer. There’s the crunch review of FSCS fees, a key factor in many brokers’ long-term planning and even survival; the high-profile interventions in the motor market; the fight against fraud; the unravelling of the PPI scandal; the European review of the Insurance Mediation Directive. Oh, and the ‘minor’ matter of Solvency II …

This is an extremely diverse range of issues, all of which require confidence, assurance and detailed knowledge of the insurance industry for proper handling. As the new regulators go searching for their top teams, they would do well to look to industry rather than the ranks of the civil service.