The FSA will spend £100m implementing EU-wide insurance regulation Solvency II, which is "towards the low end" of original estimates but excludes "considerable" direct costs to the UK industry, FSA CEO Hector Sants says.
Speaking at an Insurance Institute lecture in London yesterday, Sants acknowledged the European regulation has "considerable direct implementation costs" which are being borne by UK financial services directly.
But he said the FSA was also incurring extra costs as a result of Solvency II which it expects to total about £100m, money it will need to recover from the industry, he said.
The nine-figure sum is "towards the low end" of the FSA's earlier estimates, he said.
Solvency II will overhaul the solvency and risk management standards for the European insurance industry, with the intention of strengthening the prudential standards of European insurers to prevent firm failures.
Sants said the improvements should be a significantly reduce the probability of firms failing and a result in significant improvement in policyholder protection.
However UK insurers have heavily criticised the regulation for acting on what they say is an unfair read-across to generally low risk life companies of more stringent prudential rules for banks in the wake of the financial crisis.
But the EU Directive is already agreed and the Solvency II regime is due to be in place from January 2013, which is also the likely start date of the new UK regulatory structure.
Sants said, as required, the FSA will be laying out a UK cost-benefit analysis in the next year, but this will be a largely ‘after the fact’ exercise.