The ABI believes that this consultation document builds on the FSA’s work towards a risk based regulatory framework for life insurance companies.
The ABI’s response to CP 195:
* welcomes moves to a realistic basis for measuring with-profits liabilities to policyholders - this will allow firms to make better use of their capital in supporting their with profits business, and it will enable the FSA to have a sharper measure of firms’ assets and liabilities;
* calls for increased clarity in the use of a rating agency "BBB" rating for supervisory purposes, in order to recognise the differences between regulating financial firms and rating capital products;
* stresses the need to move toward a common definition of capital between banking and insurance, as far as current EU directives allow, and then more fundamentally with the advent of Solvency II.
Peter Vipond, the ABI’s Head of Financial Regulation and Taxation said:
"The approach in CP195 is right. A realistic basis represents the way forward and offers the best prospects for protecting policyholders and shareholders. Parts of CP195 will require considerable additional work before they can be implemented next summer, but the industry is willing to work with the FSA to make these proposals a success. These proposals should have real relevance for future work on European and international standards".
