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HMRC internal manual

General Insurance Manual

The UK insurance market: regulation and supervision

The diversity of forms of insurer operating in the United Kingdom market reflects its historical development, the evolution of different forms of business organisation in the UK, and the development of the regulatory framework.

In the UK, insurers have in recent years been regulated and supervised by the DTI and HM Treasury, and now by the FSA.

The language of the regulatory framework has changed over the years. The Insurance Companies Act 1982 applied to authorised ‘insurance companies’. The statute which replaced it, the Financial Services and Markets Act 2000 (FSMA 2000), refers to ‘authorised persons’ who may carry on ‘regulated activities’, of which the effecting and carrying out of contracts of insurance is one.

Authorised persons are either those who have received permission under Part 4 FSMA 2000 from the FSA, or an EEA or Treaty firm which qualifies for permission under Schedules 3 or 4 to that Act. Schedule 3 sets out the ‘passport rights’, under which one EEA regulator can give authorisation covering firms operating throughout the EEA under Directive rules. Schedule 4 sets out ‘treaty rights’, which are similar to those under Schedule 3, but are granted on a case by case basis.

Authorised persons must also meet the FSA’s ‘threshold conditions’, one of which for insurers is the person must be a body corporate, a registered friendly society or a member of Lloyd’s.

More details on the regulatory framework are given in GIM3000+.