Insurance Day is part of Maritime Intelligence

This site is operated by a business or businesses owned by Maritime Insights & Intelligence Limited, registered in England and Wales with company number 13831625 and address c/o Hackwood Secretaries Limited, One Silk Street, London EC2Y 8HQ, United Kingdom. Lloyd’s List Intelligence is a trading name of Maritime Insights & Intelligence Limited. Lloyd’s is the registered trademark of the Society Incorporated by the Lloyd’s Act 1871 by the name of Lloyd’s.

This copy is for your personal, non-commercial use. For high-quality copies or electronic reprints for distribution to colleagues or customers, please call UK support +44 (0)20 3377 3996 / APAC support at +65 6508 2430

Printed By


London brokers hoping for better regulatory support this year: Liiba’s Croft

Liiba is looking for FCA to take a more constructive approach to commercial insurance brokers

The FCA needs to adopt a ‘more nuanced and lighter touch’ approach to London’s commercial insurance brokers, Liiba chief executive Chris Croft tells Insurance Day

London brokers are hopeful that UK and EU regulatory changes that would enhance their competitiveness internationally will start to appear as early as April.

The London & International Insurance Brokers’ Association (Liiba) is waiting for the UK’s Financial Services and Markets Bill to complete its passage through parliament and for the European Insurance and Occupational Pensions Authority (Eiopa) to publish its supervisory statement on third country branches, which will inform the Insurance Distribution Directive (IDD).

In an interview with Insurance Day, Liiba chief executive, Christopher Croft, said he expects the parliamentary process for the bill to conclude towards the end of the first quarter. That will be followed by Royal Assent and an implementation period, but it should eventually lead to the Financial Conduct Authority (FCA) adopting a more constructive approach to commercial insurance brokers. That would mean, for example, an end to domestic administrative burdens on what is predominantly an export market.

“We’ve been lobbying for the reintroduction of a competitiveness objective for the regulators for at least the last seven years, and it ought to be the thing that makes the FCA treat us differently,” Croft said. “But that will only happen if the FCA are held to a new accountability framework that goes beyond them pitching up at the Treasury select committee twice a year, getting a kicking, going away and then not doing anything about it.”

The FCA should be benchmarked against regulators in other jurisdictions to ensure it is cost-effective and supports competition. A good start, Croft said, would be a UK definition of a “sophisticated customer”. Liiba would be happy, he said, to help the FCA formulate that definition.

“Our members deal with very sophisticated corporate clients who have their own risk management divisions, which means they don’t need protecting by a regulator in the way retail customers do,” Croft said.

The FCA needs therefore to adopt a “more nuanced” and “lighter touch” approach to London’s commercial brokers, he said. At the very least this would relieve Liiba members of “vast bureaucratic exercises”, like the Fair Value Assessment, he added.

'Our members deal with very sophisticated corporate clients who have their own risk management divisions, which means they don’t need protecting by a regulator in the way retail customers do'

It would foster a “more proportionate” approach from the FCA, whose level of knowledge of the London insurance market has sunk to “an all-time low”.

“To some extent that’s our fault because we weren’t good at expressing how we’re different from the rest of the insurance industry and the rest of the City, but we have got better at it since 2014, when the first London Matters report was published,” Croft said. Improved messaging by Liiba has left the FCA with “few excuses”, but it is now handicapped by staff turnover, which has further reduced its London market expertise, he added.

Another problem is structural. Liiba’s members sit in the competition and consumer division of the FCA rather than in the more appropriate wholesale markets unit. Croft said: “I don’t overly care where they put us though, as long as they change their behaviour, but if they did put commercial brokers under the wholesale part of their supervision that could, at the very least, be a symbolic gesture.”

The Bermuda Monetary Authority and the Monetary Authority of Singapore actively work to promote the competitiveness of their jurisdictions, Croft said, which should also be the priority of the FCA and the Prudential Regulation Authority for the London Market. The UK regulators’ lack of support for London brokers is at least partly responsible for lost business, particularly in reinsurance, he stressed.

“The wholesale insurance broker market study the FCA commissioned in 2018 included interviews with international clients of Liiba members. The number one thing they said was stopping them bringing more business to London was the burden of repetitive regulation.

"In well-regulated territories, such as the US, the producing broker will have done all the compliance, know-your-customer and anti-money laundering checks. But the FCA won’t say anything definitive and the compliance departments here are necessarily risk-averse, which means our members feel obligated to duplicate those checks. And that’s why they won’t send more business to London, because compliance here is a nightmare,” Croft said.

Asked whether Brexit was being used as a carrot or stick in parliamentary debates about the Financial Services and Markets Bill, he said: “The government would tell you that the competitiveness objective is a Brexit dividend, which is nonsense, of course, because it had a competitiveness objective up until 2010 and we were members of the EU then. But if the new competitiveness objective delivers the right outcome for Liiba members, then I’m happy for them to call it a Brexit dividend, or whatever else they like.”

The London market is a major contributor to the UK’s GDP – gross written premium grew from £80bn in 2014 to £121bn in 2020, which translates as £40bn annually into the Treasury and one-quarter of the contribution by the City.

The challenge facing Liiba members with the European Union lies with “third country branches”, a definition Eiopa applies to business where both the policyholder and risk are located and requires authorisation under the IDD for insurance distribution activities.

“You need to have a broker authorised in one of the 27 EU member states, essentially, but the FCA has a very different interpretation of where such activity takes place,” Croft said. “Delivering insurance distribution in the UK requires FCA authorisation, regardless of where the risk is located.”

EU business accounts for just 10% of the London market and most Liiba members (apart from around 50 members) are not touched by Brexit at all. But those who do have EU business and were previously passporting as a UK-authorised firm, have each established a subsidiary in an EU country, the largest number of which are in Brussels, Dublin and Paris. They have their subsidiary authorised by the local EU regulator and also have a London branch to satisfy the FCA’s requirements. Moreover, the European subsidiary in most cases is in the process of being authorised by the FCA as well.

'You need to have a broker authorised in one of the 27 EU member states, essentially, but the FCA has a very different interpretation of where such activity takes place. Delivering insurance distribution in the UK requires FCA authorisation, regardless of where the risk is located'

The Eiopa supervisory statement is an attempt to provide more clarity for EU regulators when considering whether to authorise these models. The danger is , if they are too restrictive, the end result will be EU corporate clients are cut off from global capacity – which would not be in anyone’s interest.

“You can’t treat one third country differently from another," Croft said, "because there is no 'least-favoured nation' status under WTO [World Trade Organization] standards." He continued: “At a minimum, they should remove the phrase ‘should be avoided’, though our preference would be to delete the entire paragraph in which it appears.”

If Liiba gets its wish, then individual EU regulators would have the flexibility to approve and regulate models, which is the case in the Belgian and Irish markets, Croft said.

Bipar, the European federation of insurance and financial intermediaries, is supporting Liiba, since neither the UK regulator nor government ought to get involved. “Anyone with an English accent isn’t going to help in something so politically sensitive,” Croft said. “Bipar is a European organisation and, post-Brexit, it is our only route to the EU.”

After the Eiopa consultation is completed next month, the next big milestone for Liiba members in the EU context is the formal review of the IDD, which is expected in 2024. “We’ll begin gathering our thoughts on what we might try and push for as part of that exercise,” Croft said, “but, without being overly dramatic, our progress depends on what happens with the Northern Ireland Protocol.”

An amicable solution between the EU and the UK on the remaining political tensions created by Brexit will enable “sensible” dialogue on the way business operates. “We need a vastly more positive political atmosphere before we can think about having that conversation,” Croft said.

Related Content





Ask The Analyst

Ask The Analyst - Ask Your Question Send your question to our team of expert analysts. You can: • Ask for background information on/explanation of articles in Insurance Day * • Find out more about our views on industry developments • Ask for an interpretation of market trends • Source supplementary data relating to articles • Request explanations to further your understanding of current issues (* This relates to any Insurance Day that is included as part of your subscription) We will do the research and get back to you personally with the information you need.

Your question has been successfully sent to the email address below and we will get back as soon as possible. my@email.address.

All fields are required.

Please make sure all fields are completed.

Please make sure you have filled out all fields

Please make sure you have filled out all fields

Please enter a valid e-mail address

Please enter a valid Phone Number

Ask your question to our analysts