Professor Philip Lane:

There has clearly been much supervisory emphasis on ensuring those companies operate in a prudentially sound manner, including, as the Senator mentioned, taking a realistic view of the prices required to cover incoming claims. This will be an ongoing area of focus and insurance in a pan-European market. The prudential approach to insurance supervision will be important but it is only a minor part of the fundamental issues here with the high cost of insurance. Much of those relate to volume of claims, the legal system and all the work that the different parts of the system are doing. We are not the prudential supervisor of many firms that operate here. We supervise the brokers and conduct of business but not the prudential decisions. The risk of underpricing and price wars could be there in future because of pricing by foreign firms active here.