UK: What the Insurance Distribution Directive means for firms (Pinsent Masons Insurance Briefing: 17 October 2018)

Last Updated: 18 October 2018
Article by Colin Read, Nicholas Bradley and Alexis Roberts

Latest fortnightly round-up of insurance, legal and business developments with analysis and commentary from the insurance team at Pinsent Masons.

The main topics we're focusing on this week are:

What the Insurance Distribution Directive means for firms 

ANALYSIS: New rules on insurance distribution have come into force that set new requirements about the way businesses in the insurance market engage with customers. Implementation of the EU's Insurance Distribution Directive (IDD) had been delayed, but the new rules began to apply on 1 October. Amongst other things, the rules on insurance distribution now apply to a broader range of firms than before, and they face new disclosure obligations, oversight and governance rules, and parameters around cross selling. It is vital that insurers and insurance intermediaries familiarise themselves with their new duties.

Bank of England sets out expectations for management of climate risk

The Bank of England's Prudential Regulation Authority (PRA) has published a consultation on its expectations for banks and insurance companies for the management of financial risks arising from climate change. The draft supervisory statement sets out how firms should apply effective governance, risk management, scenario analysis and disclosures to manage the financial risks connected to climate change. The PRA said there needs to be "clear board-level engagement and responsibility" for the issue, and firms need to identify those in senior management who are responsible for managing climate-related financial risks.

UK government reveals transition from EU to UK law for financial instruments

The UK's Financial Conduct Authority (FCA) will be given a set of temporary powers giving it flexibility over the operation of the transparency regime for the EU's second Markets in Financial Instruments Directive (MiFID II) after Brexit. HM Treasury has published the latest in a series of draft statutory instruments which will amend retained EU law to ensure that it operates in the UK after Brexit. The Markets in Financial Instrumen(Amendment) (EU Exit) Regulations 2018 addresses the changes needed to regulate the trading of financial instruments by banks, investment managers and other financial services institutions. It follows the implementation of MiFID II into EU law earlier this year. HM Treasury said the policy approach set out in the EU legislation would not change after the UK had left the EU and the statutory instrument "will support the fair, stable and transparent operation of UK financial markets after EU withdrawal, and provides for investors to have the same protections they currently enjoy".

FCA consults on 'no deal' Brexit plans for financial firms 

The Financial Conduct Authority (FCA) has published plans for incorporating European financial services rules into the UK framework in the event of a 'no deal' Brexit. The plans make technical changes but do not propose any immediate policy changes. The UK regulator has published two detailed consultation papers: one setting out proposed changes to the FCA Handbook and binding technical standards (BTS); and the other on the previously-announced temporary permissions regime for EEA firms and funds passporting into the UK. Both consultations are open until 7 December 2018.

Are you ready for the new carbon reporting framework?

ANALYSIS: The UK's new Streamlined Energy and Carbon Reporting framework (SECR) is being introduced from 1 April 2019.

The introduction of SECR dovetails with the end of the carbon reduction commitment (CRC) on the same date, although there are several differences between the application and coverage of SECR in comparison to the CRC. The new regime will apply, subject to exemptions and exclusions, to quoted and unquoted companies and limited liability partnerships (LLPs) ('relevant organisations') in the UK: whether public or private organisations; within financial years beginning on or after 1 April 2019; that consume more than 40,000 kilowatt hours (kWh) of energy in a financial reporting year.

European insurers publish cyber resources for businesses

New guidance to help businesses understand and discuss their cyber insurance needs with insurers and intermediaries has been published by a group of European industry bodies and insurers. The guide has been described as "the first of its kind" by the authors, which include Insurance Europe, the Federation of European Risk Management Associations (FERMA) and the European Federation of Insurance Intermediaries (BIPAR). It sets out how organisations should assess their cyber risk and potential vulnerabilities before contacting a potential insurer and where they might find this information, and provides information on the different types of cyber coverage that are generally available.


Insurance briefing is a round-up of legal and business developments published on  Out-Law.com.

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.

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