The head of Britain’s powerful financial watchdog said yesterday that over-regulation across the world’s financial markets is stifling growth and creativity.

“We probably already have too much regulation. What we need to head towards is better regulation”, Financial Services Authority Chief Executive John Tiner said at a meeting of reinsurers.

“The current stock of rules and regulations that exist around the world and across societies detract from the positive effect of markets.”

He said regulators needed to streamline their rulebooks to promote competition.

He singled out the European Commission’s Insurance Mediation Directive, which imposes strict rules on agents who sell insurance products, for criticism.

But regulators and policymakers have a unique opportunity to get the regulatory environment right in financial services over the next few years, Tiner said.

Solvency II, which is due to come into effect in the European Union by the end of this decade, should “drag the insurance industry into the 21st century”, he said.

The new rules will make it simpler for customers, regulators and analysts to understand companies’ balance sheets, while allowing company managers to properly understand and define the amount of capital required in their businesses.

Tiner said insurers in the London market had responded well to his challenge to agree the terms of every contract before cover begins, known as “contract certainty”, before the end of this year.

Contract certainty should reduce the cost of doing business and improve the quality of service to the customer, which should boost the competitive position of the London market, Tiner said.

But he said it seemed the market had made less progress in agreeing on clear commissions for insurance brokers.

He said the FSA would decide later this year whether to intervene. But the regulatory option is, he added, “one that I thought should never be necessary”.