Welcome to Insurance Briefing - a fortnightly round-up of insurance legal and business developments published on Out-Law - with analysis and commentary from the insurance team at Pinsent Masons.
The SIX topics of focus this fortnight include:
Wholesale insurance brokers should expect 'serious scrutiny' from FCA, says expert
Large insurance brokers dealing in the wholesale market can expect to be "under serious scrutiny" from the regulator in the year ahead, an expert has said. Nick Bradley of Pinsent Masons was commenting as the Financial Conduct Authority (FCA) published the terms of reference for a full market study of the sector, as trailed in its business plan for the 2017/18 financial year. The market study will consider whether wholesale insurance broking is "working well, and fosters innovation and competition in the interests of its diverse range of clients", the FCA said. Read more...
EU chief Brexit negotiator Michel Barnier has said that the UK's decision on whether to adopt business regulation similar to the EU's is a fundamental societal choice. Insurance expert Tobin Ashby of Pinsent Masons, said: "The potential implications for insurers, and the wider financial services sector, of Barnier's question would be significant. Adopting the EU regulatory requirements, such as those of Solvency II, are a huge and costly exercise for insurance firms. Whilst the prospect of reducing the burden of regulation may seem attractive, there would be a cost for financial services firms both in terms of further regulatory change after a period of significant movement in regulation and in potentially closing off the EU market, assuming some sort of equivalence approach could be agreed." Read more...
FCA proposes customer 'duty of care' for financial firms
Financial firms could be made subject to a new duty of care, requiring them to exercise "reasonable skill and care" when providing services to consumers, the financial regulator has indicated. The FCA intends to explore the issue in a new discussion paper, which will be published as part of a broader review of its handbook for firms after the UK's departure from the European Union. The FCA handbook currently requires that firms treat their customers fairly, and act in the best interests of their clients. Insurance expert Iain Sawers of Pinsent Masons said that firms should closely monitor the FCA's developing approach. "Although the FCA plans to issue a more detailed discussion paper on this issue at a later date, it certainly reflects another raising of the bar for financial services firms in the obligations they have towards retail consumers," he said. "It is also a feature of the consultation that warrants close attention now and going forward." Read more...
PRA finalises how it will authorise and supervise insurance linked securities regime
The Prudential Regulation Authority (PRA) has published final rules setting out how it will authorise and supervise insurance special purpose vehicles (ISPVs), which will be used to issue insurance linked securities (ILS) in the UK. The new rules and supervisory statement will be formally adopted once the 2017 Risk Transfer Regulations, which were laid before parliament last month, come into force. The PRA's final approach mostly corresponds to the draft that it published in July. It also includes some additional guidance on the requirement that the ISPV be fully funded, the circumstances in which ISPVs may be authorised before receiving funding, and interaction with the Senior Insurance Managers Regime (SIMR), among other matters. Read more...
Expert warns against 'scaremongering' as regulator gives evidence on impact of Brexit
Industry estimates of 75,000 long term job losses in the City of London in the aftermath of the UK's departure from the EU are "plausible", the head of the Prudential Regulation Authority (PRA) has said. Sam Woods told a House of Lords committee that the PRA was anticipating up to 10,000 jobs to shift to the EU on 'day one' of Brexit, based on submissions provided to the regulator by the banks, insurers and financial firms that it regulates. However, he said that the actual number of jobs that would be lost was a "moving feast", which would depend on the nature of the UK's future trade arrangements with the EU. Read more...
New grant scheme will let insurers recover costs from issuing catastrophe bonds in Singapore
Insurers that issue 'catastrophe bonds' out of Singapore will have all their "upfront costs" in doing so reimbursed by the city state's central bank from next year, a government minister has said. Expert in the financial services regulation Alexis Roberts of Pinsent Masons said: "This is another interesting example of how forward looking the insurance market is in Singapore. ILS structures are very much a focus for development in insurance centres like London too, and this demonstrates the ambition for further development in the Singapore market." Read more...
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