One of the toughest regulators in the City quit his job at the Financial Conduct Authority this month to avoid distracting the organisation from its work after criticism of his handling of changes to the insurance industry.
Clive Adamson, the FCA’s director of supervision, told an all-party group of MPs he had previously considered leaving the watchdog before the end of his term in 2016, but the furore around his handling of an insurance review had also been a factor. “I didn’t want to become part of the story,” he said.
Adamson quit days before the regulator published a report into events in March that led to £6bn being wiped off the stock market value of insurance companies. The dramatic plunge in the shares of leading insurance companies followed a report in the Telegraph, which quoted Adamson and said the FCA was planning to review 30m policies going back decades and was considering scrapping policy exit fees.
The FCA press office waited six hours before issuing a statement denying the wide-ranging and historical nature of the review.
Soon after the incident, the chair of parliament’s Treasury select committee, Andrew Tyrie, said it looked as if the FCA had been guilty of an “extraordinary blunder” and had created a “disorderly market” through its actions.
The events infuriated George Osborne, who wrote to the FCA’s chairman, John Griffith-Jones, to tell him the regulator should consider disciplinary action against its staff.
City lawyer Simon Davis conducted a £3m investigation into the incident. In the report he argued that it would have been obvious even to an outsider that the insurance review posed a risk to the value of major firms.
The Clifford Chance solicitor said in his report that a business plan authorised by Adamson failed to acknowledge the potential impact on the insurance industry.
“Given the sensitivities for the life industry that were anticipated by the supervision division, there was at least a risk that the contents of the business plan, concerning the life insurance review, were price-sensitive. This possibility was not addressed, nor was it addressed in relation to the other contents of the business plan,” he said.
“Furthermore, the issue of price-sensitive information was not addressed when any advance briefings (or ‘pre-briefings’) of the business plan were considered, including in relation to the life insurance review. There was therefore no appreciation within the FCA that the business plan could contain price-sensitive information.”
Adamson, appearing before the same committee after his resignation, said it was a mistake for the FCA to ignore the price sensitivity of a historical review, but denied it regularly failed to take into account the effect of its actions on the value of City firms.
He said the organisation had toughened its stance towards the industry after the arrival of Martin Wheatley and communications chief Zitah McMillan, who wanted to integrate how changes were developed and communicated to the banking and insurance industries.
He recognised this was an understandable objective after the creation of the regulator in the aftermath of the financial crisis. The formal committee decision making processes at the FCA were ill-suited for acting in a crisis, he said, and this was a lesson that should be learned from the incident.
