UK regulator warns insurers over corporate culture
PRA raises ‘deep concern’ over revelations on harassment and bullying
The Bank of England has fired a shot across the bows of insurers, warning chief executives across the sector to improve their culture in the wake of revelations about sexual harassment and bullying.
Dubbing instances of reported abuse of “deep concern”, the Boe’s Prudential Regulation Authority on Tuesday made some of its most hard-hitting public comments about the cultural shortcomings of some parts of the industry to date in a letter to all chief executives of general insurance companies.
It warned that under personal accountability rules, such episodes could trigger a fine and even a ban on senior managers if there were failings on their watch, including in instances of wider misconduct beyond the breaking of pure financial regulations.
The Boe’s warning is detailed within a wider catalogue of concern about risk-taking and inadequate provisioning by insurers that may be overly “optimistic”, and where “notable large losses have occurred” since last year.
The letter also put insurance chief executives on notice that their assumptions around how they build up their reserves will be put under greater scrutiny over the coming months.
The PRA, which oversees the largest lenders and insurers in the UK, is concerned that a workplace where harassment and bullying is rife may also be one where employees feel they cannot come forward with concerns about general risks at their companies. It did not identify any particular companies.
The move comes after revelations that 500 people at Lloyd’s of London reported that they have witnessed sexual harassment at the London market, with just 45 per cent of respondents saying they were comfortable raising wider concerns. Lloyd’s is not an insurance company itself, but a market where brokers and underwriters meet to arrange cover for everything from natural catastrophes to cyber attacks.
“These issues also raise broader questions about whether firms are promoting a culture where staff feel able to speak up about poor practices or unidentified risks within their organisations,” reads the letter, written by Gareth Truran, the PRA’S acting director of insurance supervision. “Senior management should be careful to ensure that commercial pressure to deliver results does not translate into inappropriate pressure on individuals within control functions to weaken assumptions.”
The PRA’S sister regulator, the Financial Conduct Authority, already has ongoing investigations into instances of alleged sexual misconduct at City companies, and the PRA said it would work with the FCA on such matters.
Lloyd’s, which has launched a remedial programme to try to overhaul its culture, did not immediately respond to requests seeking comment.
Mr Truran also warned insurers that he would take a much closer look at the quality of their underwriting and reserving decisions, and the way they are reacting to rising claims in some parts of the speciality insurance market.
In particular, he highlighted the US liability insurance market, where areas such as medical malpractice and professional insurance have seen rising claims in recent months because of growing payouts to claimants.