John Nelson says process has been “unnecessarily costly and time consuming”

Lloyd’s new chairman John Nelson has added his voice to concerns raised over Solvency II and its impact on the competitiveness of the London market.

While he is not an opponent of the new regulatory framework, Nelson is concerned about how it is being implemented.

Speaking at the Insurance Institute of London president’s annual lunch, he said: “The principles that it articulates are good ones and, in large part, reflect the prudential regulatory oversight approach that Lloyd’s itself provides.”

“However the implementation of this process has been unnecessarily and counterproductively, costly and time consuming. This together with the extremely detailed ‘in the weeds’ approach of the regulators is in danger of diluting the advantages which London brings.”

“We don’t want light touch regulation, what we want is firm, tough regulation – and this is best brought about by a prudential, proportionate culture – operating top down, with the exercise of good judgement,” he continued. “I would urge the government and regulators to move towards this kind of approach.”

“I know from recent discussions with the leadership of the Bank of England and the FSA that they are seized of these issues – and we look forward to their support. They have a good opportunity to adjust the culture with the creation of the PRA under the Bank of England, who will become our new regulator.”

His concerns echo comments made by Prime Minister David Cameron on 7 March. He described Solvency II as “ill thought-out” after hearing that Prudential was considering moving its headquarters from London to Hong Kong as a result of uncertainty surrounding third-country equivalency.

Cameron blamed Solvency II for “endangering a great British business that should have its headquarters in the UK”.

The European Commission has been quick to come out and defend the regulation. “There are a few issues which indeed remain to be solved,” it conceded in a statement. “But they should not be exaggerated.”