COVID-19: Regulatory Impact Phase 2 (22) 29/9

From 16 March to 31 July, I wrote a series of daily blogs looking at Covid's initial impact on regulation. We are now moving into a new phase, most obviously as regulators try to unwind some of the temporary measures they have put in place, but also as they strive to move on. This new blog series will track their progress...

This recent speech by Anna Sweeney, the PRA's Exec Director for insurance, is especially interesting for a couple of reasons. One is as an example of the way the PRA uses speeches as a regulatory tool, often quite differently from the FCA's practice. The other relates to how the PRA, perhaps because it's part of the central bank, perceives its remit in broad terms and what this might mean longer term.

It is useful to contrast the speech with the FCA final report on pricing in the home and motor insurance markets, which covered some of the same content and was released on the same day. This report, signalling a major consultation, is the latest stage in a long process that goes back to at least 2015, when the FCA consulted on increasing the "engagement and transparency" around renewals. Even now I sense there is still a way to go on this! Seen against this measured approach, it's striking that Anna Sweeney, representing an organisation not known for either its lack of analysis or its willingness to shoot from the hip, is comfortable referring to "the common complaint about insurers putting premiums up every year" and to "the popular caricature of an industry that is happier to accept premiums than to pay claims".

It's a generalisation, but a useful one, that PRA speeches (like this one) tend to be more comfortable with expressing opinion and to contain concrete indications of their current approach to issues; whereas FCA ones more typically refer to longer term (often policy-driven) work happening around a given issue that will have an impact in the future.

The other point of special interest to note is that the PRA/Bank has always been comfortable commenting on conduct issues in a way that the FCA would not on prudential ones. In this case, the speech includes a major section about potential ramifications of the dispute around business interruption insurance, an issue that a prudential regulator with a narrower conception of its remit would surely have steered away from.

As the FCA acquires a new CEO and Covid continues to blur lines of accountability between the two regulators, it will be fascinating to see how far, if at all, the character of the FCA changes. Whether it continues its reliance on policy remedies or starts to take a more direct approach.

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