By Huw Jones
LONDON (Reuters) - Britain will vet top insurance officials and actuaries, bringing the sector in line with banks to make misconduct by individuals easier to punish, Bank of England Governor Mark Carney said on Thursday.
Insurance officials and actuaries who come under the BoE's net will have to prove their suitability to regulators before they can start the job.
"The onus will be on them to ensure risks are understood, measured and properly considered," Carney told an actuaries conference in Wales.
"Those individuals that run financial institutions should act with integrity, honesty and skill regardless of whether they work for global investment banks, regional building societies or in the general insurance sector," Carney said.
In some parts of the financial sector, the link between seniority and accountability had become blurred or even severed, Carney said.
The new regime, however, won't "indiscriminately" copy rules planned for top bankers that followed lawmaker complaints that few bankers were brought to book after taxpayers had to rescue lenders in the 2007-09 financial crisis.
"For one thing, unlike in banking, there will be no statutory provision for applying a 'reverse burden of proof' in the insurance sector," Carney said.
Reverse burden of proof refers to top bankers having to prove they were unaware of wrongdoing that took place on their watch or that they had tried to stop misconduct at the time.
The Association of British Insurers, the UK sector's trade body, had no immediate comment.
The new regime for the insurance sector will also include actuaries, marking a stepping up of direct supervision.
"Later this year we will consult on a regime that includes the most senior actuaries – alongside CEOs, Chairmen and Chief Financial and Risk Officers – in our senior managers regime, making them directly accountable for how a firm is run, for their decisions, and for their actions," Carney said.
"It's your role in backing entrepreneurship with science; in ensuring premiums, reserves and capital are prudent; and in scanning the horizon for new risks and opportunities, that means we are minded to include both life and general insurance actuaries within the scope of our updated fit and proper regime for individuals in insurance," Carney added.
Once an insurance manager or actuary comes under the new regime, it would be easier for Britain's Financial Conduct Authority to pursue an individual rather than just the company, for wrongdoing.
The BoE's Prudential Regulation Authority (PRA) is responsible for making sure that insurers hold enough capital to protect policy holders.
Carney said the PRA would crack down on insurers that try to downplay risks on their books in order to hold less capital. Under new EU rules known as Solvency II, insurers will have to calculate how much capital to hold by using models approved by the PRA.
"The dangers of using poorly designed models were made all too clear in the banking sector. So the Bank won't hesitate to withhold approval of inadequate or opaque models. Models must be based on appropriate data and account for all quantifiable risks," Carney said.
(Editing By Ruth Pitchford and Hugh Lawson)