UK insurance watchdog to allow companies to collapse

Written By Unknown on Selasa, 16 Oktober 2012 | 16.47

LONDON | Mon Oct 15, 2012 1:02pm EDT

LONDON Oct 15 (Reuters) - Failing insurers will be allowed to go bust under a new British regulatory regime which will focus on limiting the impact on customers, one of the system's watchdogs said on Monday.

The Prudential Regulatory Authority, a Bank of England unit whose job from next year is to keep the financial system stable, "will not seek to operate a zero-failure regime," it said in a document setting out its approach.

"The PRA will seek to ensure that any insurers that fail do so in a way that avoids significant adverse effects on policyholders," it added.

Britain's Financial Services Authority is being replaced next year by the PRA and the Financial Conduct Authority, responsible for making sure banks and insurers treat customers fairly, as part of a revamp of the regulatory regime launched in response to the 2008 crisis.

The PRA also said it would categorise Britain's 1,000 insurers according to how big an impact their failure would have on the financial system, and would spend more time supervising those that pose the biggest threat.

Britain's insurance industry said it was concerned the PRA lacked senior figures with experience of the sector.

"We have always stressed that it is vital the PRA has people at the very top who understand the insurance industry, so we will look to see that the regulator delivers on its commitment to have staff with strong and relevant expertise," the Association of British Insurers said in a statement.

Insurers accuse regulators of focusing exclusively on the banking sector since it sparked the 2008 financial meltdown, increasing the risk that rules designed for banks could be imposed across the entire financial services industry.

Britain's leading insurers include Prudential, Aviva , Legal & General, and RSA.

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