GPA: Influencing the regulatory landscape

1. GPA: Influencing the regulatory landscape Alastair Evans, Head, Government Policy and Affairs James Walmsley, Senior Manager, Government Policy and Affairs Compliance Officers’ Breakfast Briefing: 16 July 2009

2. Agenda • GPA: structure and functions • GPA: operations • Lloyd’s and the EU • Current initiatives • Conclusions

3. GPA: Structure and functions

4. GPA Team Alastair EvansHead James WalmsleySenior Manager Linda NoyesPA Lindsey DonnithorneExecutive Hannah GrantExecutive

5. UK Government FSA European Union Monitor G8/G20 Influence OECD Iais WTO Key GPA functions To monitor and influence international legal and regulatory developments which could affect Lloyd’s Government Policy & Affairs

6. GPA: Operations

7. The Lobbying Environment Global environment G 20 WTO EU IMF SANCO MARKT OECD EMPL TAXUD European Commission ENV COMP ECON EMPL Economic & Social Committee IMCO AGRI TRADE European Parliament TREN ENTR INTA WB ENVI JURI ITRE UNEP ARC Council/ EU Presidency European Central Bank ECJ IASB IAA/EAG IFRIC EFRAG EFC CESR EIOPC CEA NCOIL IAIS FSC Occupational pensions Insurance mediation Insurance groups CEIOPS Financial stability FCC Joint Forum NAIC Solvency II FSB IOPS = central bodies = representation of States

8. Some Guiding Principles • Support for regulatory systems that are: • Transparent • Non-discriminatory • Proportionate. • Regulatory change that takes account of Lloyd’s unique structure… • …and existing special arrangements defended. • Lloyd’s reputation protected. • Removal of barriers to trade - cross-border and establishment… • …Preferably supported by binding, legal commitments.

9. Eight rules of effective lobbying • Influence the agenda early. • Develop good arguments for positions taken. • Co-operate with others. • Establish and maintain good relations with key policy makers in London and internationally. • Provide succinct briefings at the right time. • Be European… • Stay vigilant. • Solutions, not problems.

10. GPA represents Lloyd’s with the following (amongst others): • World Trade Organisation. • OECD. • European Commission and Parliament. • House of Commons Select and other Committees. • Geneva Association. • International Association of Insurance Supervisors. • US National Association of Insurance Commissioners.

11. How does the Lloyd’s market benefit? Benefit EXAMPLES Lloyd’s unique structure is defended. Solvency II – LoCs. Improved market access & business opportunities. WTO, trade agreements. Anti-discrimination directives, Liability directives, Collective redress. Implications for Lloyd’s of changes are identified. Reduced business costs US collateral project. Lloyd’s reputation protected EU investigation into Lloyd’s Names issues. Subscription market defended EU competition enquiry.

12. Working with the market • GPA seeks to promote and protect Lloyd’s interests. • Lobbying positions are immensely enhanced if the centre and the market speak with a single voice… • …so GPA works with the LMA to develop common approaches to regulatory and legislative issues. • Sometimes Lloyd’s and the LMA agree to pursue separate (but coordinated) responses on UK issues. • GPA keeps the market informed of key international developments… • …and values market input… • …but is aware that many issues are long-term and market focus is often more immediate.

13. Market communications • GPA staff attend: • LMA Regulatory Committee; • Regular GCD Compliance Officers’ meetings; • Monthly round tables with LMA staff; • Meetings with LMA staff & members to discuss particular issues. • GPA produces: • Briefings via Lloyd’s Regulatory News Alerts. • EU insurance update on www.lloyds.com • Solvency II pages on www.lloyds.com

14. Working with other insurers • Messages are amplified when they delivered by more than one entity. • The CEA – Europe’s insurance federation • Lloyd’s is a member of the CEA • Alastair Evans chairs the CEA’s Single Market Ctte. • GPA seeks to influence development of CEA positions on key European initiatives – e.g. Solvency II. • The ABI • Lloyd’s is not an ABI member… • …but both are members of the British Insurers European Ctte… • …so lobbying positions and activities are coordinated.

15. Lloyd’s and the EU

16. Why the EU matters to Lloyd’s • A large insurance and reinsurance market. • 2008 non-life premiums: USD 630bn – 35% of global NL market*. • A single set of rules for insurers. • UK insurance laws are based on EU directives… • …so are the insurance laws of other member states… • …so Lloyd’s underwriters’ UK authorisation lets them trade in 30EEA member states. • The EU is an influential voice in international trade arenas. * Source: Sigma 3/2009

17. Lloyd’s and the EU Direct and coalition lobbying • Alone • UK Insurance industry • European insurance industry • Others in UK and European interest groups Our principal targets • HMG/ FSA • CEIOPS • Other Governments • European Commission & Parliament

18. Current initiatives

19. Current initiatives • Solvency II • Financial Crisis: legal and regulatory consequences. • FSA consultations • International trade agreements and dialogues • Other issues

20. Solvency II • GPA leads Lloyd’s Solvency II lobbying… • …working closely with Finance & Risk Management & the LMA. • Framework Directive -agreed April 2009. • GPA objectives: • Continuation of single Lloyd’s licence concept; • LoCs recognised as Tier 2 capital. • Implementing Measures – out for consultation • CEIOPS issued 12 papers in March and 25 in July – more to follow. • UK implementation – how FSA will regulate Lloyd’s • Lloyd’s competitive position – requires GPA to make the case for appropriate regulatory provisions.

21. Financial crisis: legal and regulatory consequences • Regulatory reaction at different levels: • Global - G20, G8, IMF, FSB. • EU – de Larosière Report, European Commission Communication. • UK – Turner Review, HMT White Paper. • Debates over the shape of financial supervisory architecture. • Important to recognise differences between banking & insurance. • Proper consultations not always conducted. • Unclear how proposals will apply to insurance. • Possible for existing arrangements to be revisited • E.g. EU home state financial regulation of branches.

22. FSA Consultations • GPA responsible for monitoring and responding Dec. 2008. • 21 consultation papers and 3 discussion papers so far in 2009. • Subjects covered include: • Remuneration. • FSA fees and levies. • Turner Review. • Short selling. • Solvency II. • GPA drafts responses after talking to LMA, ABI and other Corporation areas able to add technical input.

23. International trade agreements and dialogues • World Trade Organisation (WTO) • Multilateral negotiations – The Doha Development Round • Lloyd’s interest focused on services negotiations. • Bilateral negotiations – Free Trade Agreements (FTAs) • EU – Korea FTA • EU – India FTA • EU – ASEAN FTA • EU regulatory dialogues with major non-EU countries: • US • China

24. Other current issues • Ongoing EU initiatives: • Competition enquiry & co-insurance. • Insurance Guarantee Schemes. • Environmental provisions – e.g. review of Environmental Liability Directive; Carbon Capture and Storage. • Anti-discrimination Directive. • Access to justice – collective redress. • Other international initiatives: • US regulatory change. • IAIS proposals on groups and solvency regulation.

25. Conclusions • The international regulatory environment is a decisive factor in the Lloyd’s market’s competitive position. • A developing international regulatory environment presents new opportunities and challenges. • It is therefore essential that Lloyd’s views are heard by international policymakers. • GPA channels Lloyd’s views to appropriate entities… • …which has influenced outcomes in many areas.

26. Questions?