UK Insurance Regulation
Ted Wainman
20 years: CA & educator
It is evident that when an insurance company fails, this has an adverse impact on the policy holders as well as the FSCS due to the interconnectedness of the financial market. Therefore, there is an incentive to ensure that insurance companies are financially sound, well run with good corporate governance structures in place, and an appreciation of the risks that they are underwriting.
It is evident that when an insurance company fails, this has an adverse impact on the policy holders as well as the FSCS due to the interconnectedness of the financial market. Therefore, there is an incentive to ensure that insurance companies are financially sound, well run with good corporate governance structures in place, and an appreciation of the risks that they are underwriting.
Join now to start learning today
Finance Unlocked is the video learning platform built for finance professionals.
This content is also available as part of a premium, accredited video course. Sign up for a 14-day trial to watch for free.
UK Insurance Regulation
6 mins 16 secs
Lehman Brothers declared bankruptcy on 15th September 2008, when the Federal Reserve was unable to persuade other Wall Street banks to bail it out. The very next day, AIG – the world's largest insurance company – was on the verge of bankruptcy, due to its exposure to Credit Default Swaps on the US housing market. AIG was bailed out initially in the form of an $85bn loan, with the Fed taking ownership of nearly 80% of AIG's equity. Over the coming years, following restructuring, the bailout then rose to over $150bn in total.
Key learning objectives:
Understand the statistics for the UK insurance industry
Understand how insurance companies view the strength of their balance sheets
Understand the Financial Services Compensation Scheme
Book a demo to access
This content is also available as part of a premium, accredited video course. Sign up for a 14-day trial to watch for free.
Understand the statistics for the UK insurance industry
- It is the 4th largest market in the world
- It contributes £30bn to the economy
- It provides £1.74tn of investments to the capital markets
- There are nearly 1000 companies, employing over 300,000 employees
- It contributes nearly £12bn in tax
What is the Financial Services Compensation Scheme?
The aim of the FSCS is to protect policyholders who have taken out policies with companies that are covered by the scheme. Where possible, this will involve selling, or transferring, the insurance policies from the failed company to another insurer. If there is no taker for the policies then the investments of the insurance company will be liquidated and the policy holders will receive a proportion of what they might have been entitled to.
How do insurance companies view the strength of their balance sheets?
- Solvency requirements
- Credit ratings provided by the independent credit rating agencies
- The reputation of the company in the marketplace
Book a demo to access
This content is also available as part of a premium, accredited video course. Sign up for a 14-day trial to watch for free.
Ted Wainman
11:09
09:51
Related videos
History of Insurance
The history of insurance can be traced, in some form or other, back to prehistory and to the world of barter and trade. In this video, Ted covers the history of the various types of insurance, some of which include, property insurance, life insurance, and national insurance.
Ted Wainman • 09:51
What is Life Insurance?
Life Insurance policies will pay out on the death of an individual which may or may not happen during a particular time period. The sum paid out may be fixed or may reduce over the time of the policy. Life Assurance provides ‘whole of life’ cover and will pay out to the beneficiary on the death of an individual. Ted outlines the different types of life insurance policies, for example, universal life coverage and endowment life policies.
Ted Wainman • 06:30
What is General (Non-Life) Insurance?
In this video, Ted discusses the various forms of general insurance and explores the concept of IBNR – Incurred but Not Reported – this refers to the statistical calculation of claims relating to events that have occurred but have not yet come to light.
Ted Wainman • 09:01
UK Insurance Regulators & Solvency II
The regulation of insurance companies has developed from the FSMA 2000 to the concept of ‘twin peaks’ regulation in 2010. Today the responsibility for regulation is split between the FCA (Financial Conduct Authority), the PRA (Prudential Regulation Authority) and the FPC (Financial Policy Committee).
Ted Wainman • 10:46
Insurance Capital and Liquidity
In this video Ted outlines how insurance companies are funded and how that capital is then regulated, including outlining key points of the Solvency II framework. Finally he outlines how insurance companies can prevent liquidity risk which could prevent it from paying out claims.
Ted Wainman • 06:08
The Need for Global Insurance Regulation
In the first video of this series, Sukhy emphasises the importance of regulating insurance companies with reference to the infamous collapse of AIG during the financial crisis. Sukhy discusses the international role of the Financial Stability Board (FSB) in insurance regulation post-financial crisis.
Sukhy Kaur • 09:19