Regulator ups fees due to 'mismanaged' insurers

GFSC said it intends to increase fees by between 50% and 600% for retail insurance firms

Guernsey's financial regulator plans to increase fees above inflation for some insurance firms because of examples of "mismanaged" companies and the need for increased supervision, it said.

The Guernsey Financial Services Commission (GFSC) said it intended to increase fees by between about 50% and 600% for insurance companies with retail customers.

It comes in the wake of the failure of Guernsey-based insurer GBG in December, which happened because "many millions of pounds did not actually exist" in the company's audited accounts, according to the commission.

The commission said in a statement the changes "needed to be made to enable the industry in Guernsey to grow safely" and to "protect Guernsey’s reputation internationally".

The GFSC has proposed the fee rises in a consultation paper published last week, along with other fee increases.

If agreed, fees would rise to between £15,000 and £25,000 a year for all types of retail insurance firms, depending on their size, up from about £10,000 for insurers and about £3,500 for cell companies.

The fee rises would be phased over two years and represent a rise of up to 150% for insurers and up to 600% for cells, the commission said.

'Risk to the bailiwick'

The GFSC said the fee increases reflected the "additional supervisory effort required to mitigate the risks [retail insurers] pose to the bailiwick".

It said the retail insurance sector was a "small" sector for Guernsey, representing less than 10% of insurance companies on the island, with fewer than 30 such companies operating at the end of 2023.

GFSC said: "The commission’s experience with several retail general insurers drew [its] attention to areas where the rules needed to be expanded... to address the risks presented by retail insurance.

"These risks were reputational, reflecting that retail policyholders need more regulatory protection than wholesale policyholders, and because the commission had seen several Guernsey-based retail general insurers that had been mismanaged."

It said the proposal reflected the commission’s "user-pays" principle, that one financial sector should "not materially subsidise another".

Investing in technology

The commission said it was planning to raise other fees by 5.3%, in line with inflation.

Katherine Jane, GFSC's deputy director general, said the fee increases would help the GFSC "continue to retain and recruit staff in a competitive financial services market", as well as investing in IT.

She said the GFSC was replacing "parts of our legacy systems which are due to go out of support" and to introduce new technology that would "improve our ability to store, retrieve and analyse data more efficiently".

The commission said a consultation paper into the proposals had been published and comments on it were being accepted, with a deadline of 4 October for submissions.