Initial results of a KPMG report on insurers' attitudes towards the FSA's more principles-based regulation (MPBR) initiative revealed that firms believe that MPBR will reduce their regulatory burden (67%) and result in operational and cost efficiencies (56%).
However, nearly half the insurers surveyed were concerned that MPBR will lead to a great risk of FSA-enforcement.
Only 22 per cent believe it will improve access to insurance by a wider cross section of consumers, while 56 per cent believe MPBR will not deliver consumer benefits, such as enhanced service.
Sixty-four per cent said they did not have management information in place which addresses all the eleven principles and are reconciled to the FSA-prescribed outcomes. Only 13 per cent said their management information was designed with MPBR in mind.
Senior management will have to have effective management information systems in place to demonstrate compliance with MPBR, as this is likely to be ‘tested' on FSA supervisory visits.
Speaking at the Association of British Insurers' Conference today, Fiona Fry, Financial Services Partner at KPMG said: “If successful, firms will be allowed the freedom to operate flexibly, drive forward innovation and ease the overall burden of regulation. However, the price of these benefits will inevitably be a greater degree of subjectivity - and therefore risk - in the relationship between the regulator and the regulated.
“Insurers are concerned that the FSA will struggle to engage consistently and constructively in its day-to-day supervision of firms.
"From the regulator's perspective, firms are being challenged to take much more responsibility for their own regulatory agenda at Board and senior management level."
The survey, which is due to be published in full this summer, shows that overall, firms believe that MPBR will be less onerous than a rules-based regime, but they would like greater explicit guidance from the FSA on key areas.
