UK: Corporate Insurance Regulatory Update – May 2011

FSA Policy Documents

CP11/7: Quarterly consultation paper No.28

6 April 2011

In this consultation paper the FSA invites comments on various changes to the Handbook including those highlighted below, for which comments should be provided by 6 June 2011. In Chapter 2 the FSA explains its proposed amendments to the Handbook of the Glossary definition of 'Holloway sickness policy'. It intends to replace the reference to the 'Holloway system' with a list of the four characteristics that will need to be met for a policy to be classified as a Holloway sickness policy.

In Chapter 8 the FSA explains the changes it and the Financial Ombudsman Service intend to make to the Dispute Resolution: Complaints (DISP) sourcebook regarding the FSA's new statutory power to make consumer redress schemes. The proposed changes concern:

  • firms' complaint handling requirements- the FSA would expect that if a consumer redress scheme is established, the existing complaints handling rules contained in DISP 1 would not apply and that specific rules created to apply to consumer redress schemes would instead kick in;
  • complaints to the Financial Ombudsman Service;
  • time limits and case fees;
  • Ombudsman awards, directions and dealing with information;
  • compensation;
  • disciplinary measures;
  • the circumstances in which the FSA will impose a public censure or financial penalty for breaching a scheme's rules;
  • how penalty levels will be set following on from PS 10/4 Enforcement Financial Penalties; and
  • the FSA's view that the Regulatory Decisions Committee should be the decision maker.

A copy of the Feedback Statement can be found at: http://www.fsa.gov.uk/pubs/cp/cp11_07.pdf

Handbook Release 112

14 April 2011

The Release contains updates as to changes to the FSA Handbook which came into force between 7 March 2011 and 6 April 2011.

The updated sections are as follows:

  • Conduct of Business
  • Credit Unions
  • Dispute Resolution Complaints
  • General Provisions
  • Glossary of definitions
  • FEES manual
  • Mortgages and Home Finance: Conduct of Business sourcebook
  • Prudential sourcebook for Banks, Building Societies and Investment Firms
  • Prudential sourcebook for Mortgage and Home Finance Firms, and Insurance Intermediaries
  • Recognised Investment Exchanges and Recognised Clearing Houses
  • Supervision
  • Senior Management Arrangements, Systems and Controls
  • Training and Competence

A copy of Handbook Notice 108 can be obtained at: http://www.fsa.gov.uk/pages/Library/Policy/Handbook/Releases/2011/112.shtml

Finalised Guidance FG 11/07 Reverse stress-testing surgeries – Frequently Asked Questions (FAQS)

April 2011

The FSA has published Frequently Asked Questions that were raised during their reverse stress-testing surgeries held in 2010 together with responses to the same. The questions cover scope, process, scenarios, time horizon, governance and outputs of reverse stresstesting as well as questions raised by particular types of firms.

A full copy of the FAQS can be found at: http://www.fsa.gov.uk/pubs/guidance/fg11_07.pdf

FSA Communication Documents

Speech by Hector Sants at the FSA Solvency II Conference – Solvency II in context

18 April 2011

Hector Sants, Chief Executive of the FSA, gave a keynote speech on Solvency II concerning the following areas:

  • What we learnt about insurance from the crisis – Sants stated that the crisis showed how insurance business models can be improved and that the predictive ability of internal models is limited. He also highlighted ways of improving the management of insurers.
  • Why the UK is implementing Solvency II – Despite the fact that the UK is obliged to implement Solvency II and has limited discretion in how it does this, Sants noted that the FSA will propose practical policies within the European process where possible.
  • What the UK will gain from Solvency II – Sants said the costs of implementation may outweigh the benefits of Solvency II for smaller insurance firms initially. However, in the long term all firms should gain from a better prudential regime for insurers with greater policyholder protection, a harmonised regime in Europe and higher standards in non-EU countries.
  • How the FSA will implement Solvency II – The FSA's approach to implementation will seek to strike a balance between the cost of the implementation, the quality of its results, the need to ensure that implementation can be achieved on time and the need to integrate long term aspects into the future supervisory structure.
  • Europe – Hector Sants spoke of the new European Supervisory Authority, EIOPA, and the fact that the FSA is represented on its inaugural Management Board as well as the Board of Supervisors. He also highlighted the need for ongoing UK input to European initiatives.

A copy of the full speech can be found at: http://www.fsa.gov.uk/pages/Library/Communication/Speeches/2011/0320_hs.shtml

Speech by Julian Adams at the FSA Solvency II Conference – The FSA's approach to the implementation of Solvency II

18 April 2011

Julian Adams, Director of Insurance at the FSA, addressed the FSA's Solvency II Conference on how the FSA plans to implement Solvency II in view of the anticipated start date of 1 January 2013.

The focus of Adams' speech was the internal model approval process (IMAP). He indicated that although firms in the UK have shown considerable interest in the using full internal models, use of the standard formula process could also of course produce acceptable results.

Adams explained that the FSA has decided to focus its resources available for firms going through the IMAP pre-application process on certain firms: major UK life and non-life firms, firms operating in the Lloyd's market and subsidiaries of major European groups where the FSA take part in a college of supervisors. Adams advised that pre-application had closed and that supervisors would be in contact with individual firms to indicate how much interaction they would have with the FSA. Firms not included in the focus sectors referred to above could expect less interaction with the regulator.

Adams said that irrespective of whether or not a firm has applied for pre-approval, the FSA plans to be able to receive full IMAP applications from 20 March 2012 for a period of two months. He also reminded the conference that two of the three possible outcomes of the IMAP (specifically, partial approval or rejection) do require contingency planning by firms. Adams referred to the role of the standard formula in such contingency planning, with particular reference to, firstly, the need for firms to consider the formula's suitability and whether it properly reflects risks relevant to their business and, secondly, if the standard formula would result in a significantly higher capital requirement than their own formula, how firms would approach meeting such a requirement.

In addition, Adams touched on other aspects of Solvency II such as the significant changes to the reporting regime for all firms and the requirement to have in place an Own Risk and Solvency Assessment process.

A copy of the full speech can be found at: http://www.fsa.gov.uk/pages/Library/Communication/Speeches/2011/0319_ja.shtml

Dear CEO Letter- Update on Transition to New Regulatory Structure

4 April 2011

The FSA has published a letter to CEOs which reviews the FSA's progress towards the new regulatory structure.

The letter confirms that on 4 April 2011 the FSA created two new internal units: the Prudential Business Unit (PBU) headed by Hector Sants with assistance from Andrew Bailey, who has been seconded from the Bank of England, and the Conduct Business Unit, which will be lead by Margaret Cole until 1 September 2011 when Martin Wheatley will replace her. These units take the place of the Supervision and Risk business units. An organisation plan reflecting this change is attached to the letter.

The letter states that integrated supervision will continue until the FSA has designed and piloted new regulatory processes and trained staff. It also indicates that legislation to enable the transfer of power from the FSA to its successors, the Prudential Regulation Authority and the Financial Conduct Authority, is expected to come into force in 2012.

A full copy of the letter can be found at: http://www.fsa.gov.uk/pubs/ceo/reg_reform.pdf

Europe

EIOPA Draft Report on Variable Annuities

5 April 2011

In 2010, EIOPA set up a Task Force in order to establish common European regulatory guidelines for insurers selling variable annuities. By nature, variable annuity products each have their own unique features but do involve some element of investment guarantee. In the European market, variable annuities are often sold cross-border by large insurers on the basis of either freedom of establishment or freedom of services. In light of this, EIOPA's predecessor CEIOPS considered that standard EU guidelines for national supervisors would benefit the various local regulators who supervise insurers selling variable annuities. The intention is that the EIOPA guidelines will be adapted by the various local regulators in accordance with the features of the variable annuity product in question.

The draft report sets out the Task Force's recommendations to date and covers matters including technical and actuarial issues, governance matters cross-border aspects, systemic risk and key points, differentiating between the Solvency I and Solvency II frameworks where relevant.

A full copy of the draft report can be found at: https://eiopa.europa.eu/fileadmin/tx_dam/files/publications/reports/Report-on-Variable-Annuities.pdf

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.