The UK government has been told that the “inflexible culture” of British regulators has hindered efforts to develop markets for insurance-linked securities, captive insurance and other new forms of insurance business.

Artemis has outlined how the House of Lords Industry and Regulators Committee, a UK parliamentary group, included this in an initial report following an inquiry into regulation for commercial insurance and reinsurance.

The committee was assessing the effects of such regulation on the competitiveness of the London market, as they heard from trade organisations and other industry representatives.

Artemis said the head of the London Market Group pointed to ILS in particular, saying regulation did not support the market’s ambitions.

The committee heard agreement from the Prudential Regulation Authority with regard to the ILS industry, promising to streamline the insurance process.

Lord Hollick, chairman of the committee, expressed concern that the UK could lose out on new and fast growing areas of business because of an overly inflexible and bureaucratic regulatory framework.

He said regulators needed to consider if current rules could be applied more proportionately and are efficiently achieving their objectives.

Honing in on UK efforts to attract ILS business, the committee said they heard during their inquiry that, “an overly inflexible culture within the regulators may have inhibited the development of new forms of business within the UK commercial insurance and reinsurance industry, such as insurance-linked securities and captives.”

A letter to the Economic Secretary to the UK Treasury, John Glen MP from the PRA, contained the committee’s initial thoughts: “...other jurisdictions have found greater success with fast-track methods and a more welcoming regulatory environment”.

Artemis commented: “Tasking the regulators with having a secondary objective of increasing the competitiveness of the UK insurance and reinsurance market and driving growth should help, but whether it will be enough to get the regulators past their reticence to make ILS applications much simpler and swifter, or to allow approvals to be notifiable for more complex, repeatable ILS arrangements remains to be seen.

“But this is a sign that the concerns that the UK may have missed an opportunity when implementing new regulations, such as for ILS, run deep and there is broad agreement that things could have been done much better.”

The publication added: “That suggests a regulator that is wanting to do more and to prove itself to be more flexible, which bodes well for the ambitions of the UK and London insurance and reinsurance market to become better connected with ILS capital and opportunities.

“It is a little unfair to level the failure of the UK’s ILS offering to gain much traction in its first few years solely at the door of the regulator, though.

“Entrenched interests of parties involved in setting the direction also tend to hold back the development of any new framework, such as for ILS business.”