COMPLIANCE NEWSLETTER - DECEMBER 2016

FCA critical of intermediaries’ PII cover

The FCA’s recent Thematic Review TR16/9 of general insurance intermediaries’ professional indemnity insurance (PII) arrangements has uncovered a number of issues which gives the regulator cause for concern. These include indemnity limits which are below the minimum requirements, higher than permitted excesses and inappropriate exclusions (particularly with regard to insurer insolvency, use of unrated and non-admitted insurers and suitability of insurer).

The FCA has called upon all firms to review their PII cover, to ensure it is fully aligned to regulatory requirements.

For more information, click here.

FSCS funding to be reviewed

The FCA has issued Consultation Paper CP16/42 as a first step to reforming the way the Financial Services Compensation Scheme (FSCS) is funded. Included within the consultation is a suggestion that the burden of funding be shifted to higher risk segments of the financial services sector. Depending on the outcome, intermediaries could face either a significant increase or moderate decrease in the amount of their annual FSCS levy, which has often represented a significant proportion of firms’ overall regulatory fees.

For more information, click here.

Tougher and more costly CASS audits ahead

It is widely expected that the cost of client money audits will increase in 2017, due to a revised standard for auditors developed by the Financial Reporting Council in conjunction with the FCA. This will take effect for year-ends falling on or after 31 December 2016. The aim of the new standard, which is more rigorous and controls-focused than the previous standard, is to improve the quality of CASS audits and to guard against systematic failure of the client assets regime.

For more details, click here.

FCA explains what it does with RMAR (GABRIEL) data

The FCA has produced a paper in which it explains its rationale for collecting RMAR data, referencing the regulator’s strategic objectives and wider approach to supervision. It also highlights some common reporting errors, to help firms avoid problems.

For more information, click here.

GDPR update

The UK government has formally confirmed that the General Data Protection Regulation (GDPR) will be adopted by the UK, as the implementation date (May 2018) will occur prior to the UK’s earliest likely departure date from the EU. The Information Commissioner’s Office (ICO) has issued its own response, welcoming the government’s announcement.

To read the ICO response, here.

Meanwhile, the Lloyd’s Market Association (LMA) has set up a London Market Working Group, assisted by three law firms, to produce guidance for the insurance industry on how to comply with the new GDPR requirements in an efficient and effective manner.

For more information on this initiative, click here.

LMA Round-up

The LMA has issued a bulletin about the possible legal effect of some standard clauses being presented to underwriters around the duty of fair presentation.

To see the LMA bulletin, click here.

The Association has also reissued its Consumer Wordings Guidance to reflect legislative changes made in the UK and Europe since the last Guidance was published in July 2015.

To download the latest LMA Guidance, click here.

FCA unveils successful ‘sandbox’ firms

The ‘regulatory sandbox’ was set up as part of the FCA’s Project Innovate, launched in 2014. Of the 69 applicants, 24 were accepted into the first cohort. The FCA has provided the names of all the firms in the cohort, partly to illustrate the diverse range of sectors, geographies and sizes of the firms involved.

The FCA will be receiving the next wave of applications until 19 January 2017. Firms applying should allow approximately 10 weeks for the design of their tests and be ready to begin testing by May 2017.

For more information, click here.

CII Policy Briefing – ‘Navigating Brexit’

The Chartered Insurance Institute (CII) has issued a Policy Briefing to its members in which it considers Brexit issues, such as the wider economic implications of the UK’s withdrawal from the EU as well as insurance industry-specific issues, including the regulatory environment and passporting.

For more information, click here.

Enhancing compliance - ‘Occasional Papers’ from the FCA

The FCA has issued two compliance-related Occasional Papers.

The first paper, ‘Behaviour and compliance in organisations’, discusses the factors that influence effective compliance and provides suggestions for how regulators and firms can improve levels of compliance.

To read more, click here.

The second paper, ‘Incentivising compliance with financial regulation’, looks into the basic economic theory of incentives and how they can be used to enhance compliance in financial regulation.

For further reading, click here.

New CPD online content available

The CII has recently added to its library of narrated CPD presentations, covering topical regulatory, technical general business and soft skills subjects.

To view the latest bank of presentations, click here.

FCA CEO’s speeches on ‘Big Data’

Andrew Bailey, the CEO of the FCA, delivered a noteworthy speech at the ABI Conference on 22 November 2016 on ‘The challenges for insurance and regulators in a Big Data world’. He explained how Big Data could allow insurers to assess risk on a more individual than pooled basis, as well as highlighting the benefits and unintended consequences this may bring.

To read the text of the ABI Conference speech, click here.

This followed an earlier speech given by Andrew Bailey at the FCA's Financial Crime Conference, in which he commented on the availability of technology as a double-edged sword: enabling more sophisticated financial crime on the one hand whilst allowing more sophisticated detection approaches on the other, for example by exploiting Big Data.

To read the text of the Financial Crime Conference speech, click here.

The information provided in this Newsletter is based on the Managing General Agents’ Association’s knowledge and understanding of regulatory issues at the date of publication. However, it is generic in content, and matters in UK regulation change regularly. Members should take their own professional advice in connection with any issues which could affect their business. The Managing General Agents’ Association accepts no responsibility or liability for any actions taken based on the information contained within this Newsletter.