(Reuters) – London’s commercial insurance market is in talks with the Bank of England to allow companies to set up prisoners without unnecessary bureaucracy, in order to catch up with Bermuda, Singapore and the EU, an industry association said on Thursday.
Every final decision would be up to the British government, said the Bank of England’s insurance chief.
The UK’s commercial insurance market is the largest in the world, but to stay on top, there must be product innovation, for example by allowing prisoners, Caroline Wagstaff, CEO of the London Market Group, told a Westminster Business Forum event.
Companies set up their own captive insurance units to insure their company directly, which means that external insurers disappear.
Companies are increasingly benefiting from the use of captives as commercial insurance becomes more expensive.
Most FTSE 100 and Fortune 100 companies own one, industry sources say, but if the company is based in the UK, the captive insurance unit will be based abroad for now.
However, several other countries allow the establishment of prisoners, including EU Member States, provided by the United Kingdom.
“The best experts are in London, but the UK does not actually have any prisoners in our jurisdiction. There is a clear opportunity for the UK to grow its market,” said Wagstaff.
Insurance may no longer be the “bright jewel in the crown” of British financial services as it once was, given a decade of stagnation in the market share of London’s commercial insurance companies, Wagstaff said.
“We do not have the right regulatory environment,” she said.
Captives could be set up under current rules, but the London Market Group is talking to the Bank of England’s Prudential Regulation Authority, which regulates insurance companies, to ensure the process goes quickly.
A slow process would work as a deterrent, Wagstaff said.
UK regulators need to reconsider how they apply strict consumer protection measures to retailers in a commercial market used by large professional buyers who do not need the same “one size fits all” protection, she said.
“The biggest change we will be looking for is less about rules and more about behavior and culture,” Wagstaff said.
Alan Sheppard, PRA’s chief insurance officer, said at the event that the regulator was “neutral” to prisoners and that it was up to the government to decide whether a domestic corporate market would be good for the wider UK economy.