UK: In-sight - Corporate Insurance Newsletter - March 2014



Despite it having appeared that the new draft IMD 2 Directive ("IMD 2") had been kicked into the long grass, there have been some recent developments.

On 22 January, the Economic and Monetary Affairs Committee ("ECON") of the European Parliament adopted its draft report on IMD 2 which also contained a draft Parliament legislative resolution on IMD 2. This report was then considered at the Parliament's plenary session on Wednesday 26 February.

By way of brief background, IMD 2 is intended to deal with deficiencies in the Insurance Mediation Directive ("IMD") (which came into force on 15 January 2005). There is broad agreement that IMD is not working well, and has resulted in a patchwork of national regulations, inconsistencies in selling practices, and information provided to consumers which is dense and legalistic.

The objectives of IMD 2 are to ensure a more level playing field, strengthen policyholder protection and align with other regulatory reforms. The recent ECON report noted the following:

  • IMD 2 should not apply to the professional management of claims nor to loss adjusting nor expert appraisal of claims
  • All steps should be taken to identify conflicts of interest, and in order to mitigate this, it would be necessary to ensure sufficient disclosure of remuneration and there should be an obligation to inform the customer on request about the nature and source of its remuneration
  • IMD 2 should not be too burdensome for small and medium-sized insurance undertakings and there should be a proper application of the proportionality principle
  • When insurance is offered together with another service or ancillary product as part of a package, the customer should be informed and offered the possibility of buying the different components either jointly or separately, and should receive premium, pricing and risk information for each of the components
  • Member States may introduce or retain additional disclosure requirements concerning the amount of remuneration, fees, commissions or non-monetary benefits in relation to the provision of intermediation provided that, amongst other matters, the resulting administrative burdens remain proportional to the intended level of consumer protection

Fortunately, the ECON report has not called for full compulsory disclosure of fees, commissions and other non-monetary benefits which will be welcomed in the UK.

At its plenary session, the Parliament voted on certain amendments but not the underlying legislation as a whole. We will need to digest whether any significant changes have been proposed by the Parliament, but it would appear not. As the final text of IMD 2 is yet to be agreed by the European Commission, Council and Parliament, the new IMD 2 regime is not expected to come into force until sometime in 2016 at the earliest.

The UK will be hoping that as it introduced a "gold-plated" insurance mediation regime, it is likely that many of the provisions of the final text of IMD 2 will be of limited impact in the UK.


JLT Specialty Limited: The FCA's cautionary tale

In December 2013, the UK Financial Conduct Authority (FCA) imposed a GBP 1.9 million fine on JLT Specialty Limited (JLTSL) after concluding that it did not have appropriate systems and controls in place to counter the risk of bribery and corruption.

The FCA found that, between 2009 and 2012, JLTSL failed to have in place appropriate checks and controls to guard against the risk of corruption associated with making payments to third parties who helped win and retain business from overseas clients, particularly in high risk jurisdictions. This is familiar ground for the regulator whose predecessor imposed substantial fines on two major insurance brokers for similar breaches.

Overarching messages

Taken together, these are the overarching messages that regulated firms should take away from the three insurance broker enforcement actions:

  • Adequate due diligence should be conducted before entering into a relationship with, or making a payment to, a third party. In particular, it is important to take adequate steps to establish whether a third party is connected with the clients it introduces and/or any public officials
  • Relationships with third parties should be subject to ongoing reviews. Firms should move towards a practice of carrying out a risk assessment each time a third party introduces a new business as opposed to only carrying out a risk assessment at the start of a new relationship
  • There should be a concerted effort to improve gaps in senior management oversight and provide additional guidance and employee training in this area. In addition, checks should be carried out to ensure that any improvements are being implemented correctly

What does this mean going forward?

The indications are that corporate governance will be high on the FCA's agenda for 2014, with particular emphasis on ensuring firms have appropriate systems and controls which are regularly monitored. Firms should consider:

  • The nature of their relationships with third parties and if their current policies and procedures adequately capture how relationships should be managed
  • Issuing documented guidance which sets out the practical steps that employees must take in order to fulfil the requirements of the firm's anti-bribery and corruption (ABC) policy
  • The need for specific employee training including the rationale behind the need to obtain information on third parties appropriately to help move away from a "box ticking exercise"
  • The appropriateness and frequency of risk assessment in relation to their bribery and corruption risk exposure and if resource allocation is aligned to the output from the risk assessment
  • The level of senior management oversight of ABC
  • The collation of sufficient, meaningful MI and record retention
  • The quality of their assurance processes and whether it would have helped identify the issues in these enforcement actions

With the FCA adopting such a proactive stance, firms would be well-advised to take stock of these recurring themes if they wish to avoid joining the list of cautionary tales.

A full copy of this article, which was produced with KPMG, will be available on our website.

Corporate governance

Corporate hospitality

The RBS 6 nations rugby tournament is in full-swing now and is shaping up to be a very close-fought tournament, with it being very difficult at this stage to call who might end up winning.

A number of people in the insurance market will no doubt have attended a match, or will be doing so. Where this is part of corporate hospitality, this does raise the issue of whether in any circumstances this could fall foul of the Bribery Act 2010 (the "Act").

Many firms now have policies in place requiring that prior approval is obtained before a ticket can be offered or accepted to, for instance, a sports event such as a rugby match, particularly if the invite includes a lavish lunch or other hospitality. The issue becomes a much more live one if the invite is to one of the away internationals, such as in Paris or Rome, which may include travel and accommodation being paid for.

So what is the position? Well, unhelpfully, not as clear as it could be. The Ministry of Justice has published Guidance which is welcome but, as might be expected, is quite general. The Guidance states, for example, that the "Government does not intend for the Act to prohibit reasonable and proportionate hospitality". In addition, the director of the Serious Fraud Office has commented that "most routine and inexpensive hospitality would be unlikely to lead to a reasonable expectation of improper conduct".

Assessing whether a particular invite is proper or not will require a consideration of all of the relevant circumstances. Much will turn on the seniority of the individual invited and what kind of entertainment he or she is used to enjoying. Also, the context could be relevant – for example, is the host going to be shortly pitching for some business from the invitee? If so, that could suggest an intention to try to influence or secure a business advantage. Finally, there is no substitute for common sense – if a particular invite seems almost too good to be true, then it may not be regarded as reasonable and proportionate, and, as a result, caution should be exercised in offering it or accepting it.

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

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

In association with
Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (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

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’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.


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.


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 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.


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.


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.


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.


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

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

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

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