Richard Burger, partner for London-based regulatory law firm Reynolds Porter Chamberlain, said the FSA’s inspections of insurance businesses have jumped 38 per cent, from 47 visits over the whole of 2012 to 64 for the first two months of 2013.
By comparison, there were just 24 during 2011.
Mr Burger said: “The level of regulatory scrutiny during an Arrow visit is intense. As well as going through the numbers and risk management framework with a fine-toothed comb, the FSA will also conduct comprehensive interviews with senior management, especially if the insurer is writing new lines of business or has side stepped into asset management.”
“Arrow visits are gruelling, time-consuming and expensive for businesses under the FSA’s microscope.”
It comes after research by Deloitte predicted annuity rates could drop by up to 20 per cent as a result of the next stage of Solvency II.
It claimed that regulators are testing approaches to how insurers set reserves and capital for products such as annuities, which could force insurers to hold greater reserves, raise more capital and charge more for annuities – resulting in lower pension payments for consumers.
Adviser view:
David Trenner, technical director for Glasgow-based Intelligent Pensions, said: “Annuity rates fell in the final quarter of 2012 ahead of gender equalisation. I suspect that insurers also took the opportunity to make allowances for Solvency II.”
Subsectors | 2011 | 2012 (to Sept 30 only) |
General insurers in run-off | 1 | 6 |
Life insurers | 8 | 12 |
Retail general insurers | 5 | 4 |
Wholesale and commercial insurance intermediaries | 7 | 7 |
Wholesale and commercial general insurers and Reinsurers | 13 | 18 |
Total | 34 | 47 |
