Policymakers should focus on making existing regulatory powers work before jumping to extend their remit, or risk damaging UK competitiveness, says the Association of British Insurers (ABI).
Speaking at a reception at the seat of the devolved Scottish Parliament in Holyrood last night, ABI chairman Archie Kane warned there is a danger the regulatory response to the financial crisis could squeeze the life out of the UK insurance industry.
Instead, state regulators should look to better use the powers they currently have, he said.
"I would urge those in the Parliament and Government to focus on what specifically can be done within existing powers to ensure Scotland remains an attractive destination for financial services and business more widely."
He said the ABI must embrace change, and accepts scrutiny will increase and regulation intensify.
"But any new regulation should not be broad brush and needs to be targeted at risk in the financial system," he said.
"Also we must remain in step with other countries. If we don't, we risk undermining the competitiveness of the insurance sector here in the UK."
He said the ABI will seek to work closely with Government to secure a "strong and competitive environment" for the insurance industry.
Ahead of Wednesday's Budget, Kane fired a warning shot at the Chancellor not to stifle the UK economy with tax hikes and more regulation.
"Changes to the regulatory and fiscal environment can and will deter investors from the UK, he said.
"What we need is stability and a long term plan to ensure that we remain competitive."
