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This is in response to a recommendation of the Treasury Select Committee on the Solvency II directive and its impact on the UK insurance industry, which says: “The Treasury should immediately review the PRA’s approach to its competition objective, at least for insurers, and consider giving the secondary competition objective equal primacy with the PRA’s other statutory objectives, introducing primary legislation if necessary.”
The PRA has two primary objectives: a general objective to promote the safety and soundness of the firms it regulates; and an objective specific to insurance firms, to contribute to the securing of an appropriate degree of protection for those who are, or may become, insurance policyholders.
The Treasury said: “The secondary competition objective of the PRA states that, when discharging its general functions in a way that advances its primary objectives, the PRA must, so far as is reasonably possible, act in a way which, as a secondary objective, facilitates effective competition in the markets for services provided by PRA-authorised persons in carrying out regulated activities. This ensures that where there are choices to be made by the PRA as to how it advances its general objective to promote the safety and soundness of the firms it regulates, it must consider which course of action is the best for facilitating competition.”
The Treasury said that giving the PRA a primary objective on competition “would distract from their crucial role in ensuring the safety and soundness of firms”, adding: “It would also create duplication with the role of the primary concurrent competition regulators active in the financial services sector, namely the Financial Conduct Authority, the Payment Systems Regulator, and the Competition and Markets Authority.”
It went on: “The government believes that the benefits of the regulatory regime are best achieved if the primary focus of both the FCA and the PRA are on their own core responsibilities (as set out by their primary objectives), but with both institutions fully committed to working together and coordinating firm supervision and regulation across the full range of regulated activities.”
The Treasury Select Committee also recommended that the insurance industry should be regarded as a priority sector during the Article 50 negotiations.
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