same way, savings contracts that are long - lived and provided by life insurers, and are often an individual ’ s primary pension provision, are critical financial services that are difficult to replace without unacceptable cost. there is therefore a common feature of banking and insurance in terms of continuity of access to critical financial services. the pra has the general objective of ensuring the safety and soundness of the firms under its regulation. safety and soundness is defined in terms of the resilience of the financial system, which in itself is closely linked to the access of users to critical financial services on a continuous basis. but for insurance we have a second objective, namely the protection of policyholders. why do we have a second objective for insurance? for me, the reason is that continuity of insurance protection – of risk transfer and long - term savings products – requires a greater assurance that the policyholder has access to their contract – in other words, it is quite contract specific, and in some cases those contracts are long - term in nature. for banks, depositors want continuity of access to funds, but they have less need of access to the exact contract – deposits can be moved. put another way, most of the underlying risks to banks arise from their assets, whereas for insurers they arise from liabilities and assets. so, we need somewhat different objectives for prudential supervision. the traditional model of supervision has been quite industry specific. the fsa regime introduced in 1997 created a single authority, but within the fsa the framework of rules bis central bankers ’ speeches applied to insurance supervision was unique to the industry. it is true that in the run - up to the start of the crisis, and for some time thereafter, the fsa mingled insurance and bank supervision in terms of its operating units, but i think that did not work effectively, and the fsa and now the pra moved to a clear distinction, with insurance supervision headed by julian adams. insurance supervision is a skill of its own, and while our supervisors do move roles between insurance and banking in both directions, we want to ensure that we have groups of truly expert insurance and banking supervisors. recently, we have taken a further step on insurance supervision by formalising two directorates, for general and life insurance, reporting to julian, and headed by chris moulder and andrew bulley respectively. chris and andrew bring a wealth of experience of insurance supervision and for chris auditing. alongside julian, chris and andrew is a

small, take responsibility for understanding and mitigating the risks in their business and be able to demonstrate to us that they are doing this. i realise that the parliamentary commission chaired by andrew tyrie was about banks and their record. but it raised an important theme that has to be considered more widely, namely that our approach to supervision of firms ensures that senior individuals are properly accountable and thus incentivised. the record of the banking crisis indicates that this senior accountability was not effective in banks that failed. often, the simplest points are the most powerful, and complexity is a poor guide. andrew tyrie and his colleagues have done a great service by making a simple but powerful bis central bankers ’ speeches point – as supervisors we must incentivise and hold to account those at the top, and not seek to do the job of management by influencing excessively further down. i could not end without talking about europe and solvency ii and wider global developments in insurance regulation. a month or two ago i ruffled a few feathers by criticising the cost and time taken preparing for a european directive that isn ’ t finalised. i have no regrets, because as public officials we have to speak honestly and transparently. i was making a point on behalf of firms because i feel strongly that you have been put to too much expense and time spent by management and boards. but, in saying this, i should be clear that the pra has not withdrawn from involvement in solvency ii, far from it. as tidjane said this morning, the insurance industry and its regulators cannot operate in a vacuum. this is why we continue to invest a large amount of our time engaging with our counterparts in europe as well as with the european supervisory authorities, the esas. we liaise closely with eiopa, the european insurance and occupational pensions authority. julian adams sits on the eiopa board of supervisors and management board and this gives us an opportunity to participate at a european level. a few weeks ago, eiopa reported on the critical issue of the long - term guarantees assessment and closed its consultation on proposals for preparatory guidelines. we now have acceptance that the classic matching adjustment is a prudent measure, which is hugely important for the uk life insurance industry. we know that many of you still have concerns around the restrictions built into the classic matching adjustment, particularly around the assets that can be used and the effect of possible downgrades in portfolios which are held for the long