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Lightening the load


Nobody likes rules, or the people that enforce them. You only have to watch a soccer match to know what people really think of the referee.

And risk managers have the unenviable task of dealing with an unimaginable number of regulations and regulators. However, there are some promising signs of a change of heart at European and member state governmental level. While it is too early to tell, recent moves could herald a period in which governments across Europe shy away from new rules, and even look to do away with existing red tape.

Last week in the United Kingdom, Prime Minister Tony Blair unveiled a plan to cut the cost of regulation to business by more than £2 billion (€2.9 billion) by identifying 500 ways to reduce the administrative burden on business.

Several initiatives under the "Better Regulation" banner have already taken place in the United Kingdom. Last week the Prime Minister committed 19 government departments and agencies to reduce the cost of regulation by 2010. Already the health and safety regulators, the Health and Safety Executive and the Health and Safety Commission have published plans to simplify their rules (BIE October 9, 2006) while the Department of Trade and Industry announced plans to reduce the burden of its rules by some £700 million (€1.04 billion) by 2010.

For risk managers, such plans could mean complying with fewer rules and fewer regulators--for example, the HSE and HSC have already announced plans to join forces and become a single regulator. It will also mean that regulators will think twice before drafting additional rules. An example of this in the United Kingdom is the insurance regulator, the Financial Services Authority, which is keen to see industry issues--such as contract certainty and transparency of broker commissions--resolved by industry agreements, rather than new rules.

A separate initiative in the U.K. was the Davidson Review, the findings of which were published at the end of last month. The review, which was commissioned by the U.K. government, identified incidents of "gold-plating," where European legislation has been implemented into domestic law with additional rules. The review proposed repealing rules and dealing with overimplementation on a number of fronts, including insurance mediation.

The U.K. is by no means the leader in Europe when it comes to reducing the burden of regulation. The Dutch embarked on the same process back in the 1990s and set themselves a 25% target to reduce regulation over four years. Both Dutch and U.K. governments are pushing for simplification of rules emanating from the European Commission while France, Italy, Norway, Belgium, Poland and Hungary have started measuring the regulatory burden.

Nobody believes that all the unpopular regulations will be scrapped and there will be no new rules to comply with.

But risk managers and their representative trade associations have an opportunity to engage in this debate and further the current drive to reduce the regulatory burden.