A roundup of developments affecting the insurance industry from the past month including the FCA publishing a PPI complaints deadline progress report, the Law Society releasing results of its professional indemnity insurance survey and the PRA publishing its 2018 approach to insurance supervision document.

General Update

Law Society release results of professional indemnity insurance survey

The Law Society has published the results of the professional indemnity insurance (PII) survey which uncovers concerning statistics such as only 47% of firms being aware of the closure of the Solicitors Indemnity Fund (SIF) in 2020. The president of the Law Society noted that only a third of small firms are aware they are approaching a 'cliff edge' in relation to long-term run-off cover, despite the fact this is the part of the sector that is most likely to suffer if no substitution is put in place.

The Law Society, 1 October 2018

Insurance Europe issues paper on preparing for cyber insurance

Insurance Europe, together with the Federation of European Risk Management Associations and the European Federation of Insurance Intermediaries, has issued a paper regarding the dialogue on cyber insurance between intermediaries and insurers. The report has been produced to provide guidance to organisations that are considering buying cyber insurance and assist all levels of businesses in selecting the insurance solutions that are most suited to their needs.

IE, 9 October 2018

FCA consults on SM&CR—proposed guidance on SoRs and responsibilities maps 

The Financial Conduct Authority (FCA) has published draft guidance on the Senior Managers and Certification Regime (SM&CR). The guidance aims to give FCA solo-regulated firms practical guidance on preparing a Statement of Responsibilities (SoRs) and Responsibilities Map required by the Senior Managers and Certification Regime. Any comments are requested by 10 December 2018.

FCA, 11 October 2018

FCA publishes PS 18/21 and CP 18/31 confirming extension of FOS access to SMEs and proposing rise in FOS award limit

The Financial Conduct Authority (FCA) has published policy statement 18/21 (PS 18/21) in which the regulator has confirmed plans to extend access for small and medium-sized enterprises (SMEs) to the Financial Ombudsman Service (FOS) so that these businesses can seek redress. This modification to the policy means that SMEs with an annual turnover below £6.5m and fewer than 50 employees, or an annual balance sheet below £5m will be able to refer complaints to the FOS. The FCA has also published consultation paper 18/31 (CP 18/31), which proposes raising the maximum award of compensation the FOS can require financial services firms to pay from £150,000 to £350,000.

FCA, 16 October 2018

FCA FS18/2 on digital regulatory reporting

The Financial Conduct Authority (FCA) has published feedback statement 18/2 (FS18/2) which summarises the feedback it received on its February 2018 Call for Input on how technology could achieve smarter regulatory reporting by making it easier for firms to meet their regulatory reporting requirements and improve the quality of the data that they provide. In March 2018, the Chancellor stated that the FCA and BoE would run a pilot aiming to explore whether digital regulatory reporting is possible.

FCA, 17 October 2018

Global insurance associations call for a two-year delay in the implementation of IFRS 17

A global collection of nine insurance associations have written a letter to the chairman of the International Accounting Standards Board, Hans Hoogervorst, outlining the industry’s concerns relating to the implementation of the International Financial Reporting Standard (IFRS) 17 for insurance contracts. The letter states that many vital issues and operational constraints still need to be resolved before IFRS 17 is implemented and therefore proposes a two year delay of implementation to address these challenges.

IE, 17 October 2018

EIOPA has published its risk dashboard for Q2 2018

The European Insurance and Occupational Pensions Authority (EIOPA) has published its risk dashboard for Q2 2018, which shows a broadly stable risk exposure across the EU insurance sector. EIOPA states that although macro risks are at a medium level during the current economic recovery there is potential for deterioration due to political and international trade tensions.

EIOPA, 22 October 2018

FCA publishes PPI complaints deadline progress report

The Financial Conduct Authority (FCA) has published a progress report regarding its payment protection insurance (PPI) consumer communications campaign and supporting supervisory work, which has helped to improve consumer understanding of PPI and raise aware of the 29 August 2019 deadline for PPI complaints.

FCA, 24 October 2018

ABI and Department for Health and Social Care launch update on Code on use of genetic testing 

The Association of British Insurers (ABI) and Department for Health and Social Care have updated the Code on how insurers use genetic information in formulating their policies. The updated code is open ended whereas the previous code expired every three years unless extended, which provides reassurance to the public who are worried about their genetic information being unfavourable, that the insurance industry will manage any future change via the Code.

ABI, 23 October 2018

EIOPA webpage sets out work on long-term insurance business and illiquid liabilities

The European Insurance and Occupational Pensions Authority (EIOPA) has published a webpage on the treatment of long-term insurance business and illiquid liabilities. It sets out EIOPA’s work stream, including the review processes within EIOPA project groups, and the response to the European Commission’s April 2018 call for information on the liquidity of undertaking's insurance liabilities and information on the asset management of insurers. EIOPA must respond to the call for information by 16 December 2018.

EIOPA, 25 October 2018

FATF publishes risk-based ML/TF guidance for life insurance sector

The Financial Action Task Force (FATF) has published Guidance for a risk-based approach (RBA) for the life insurance sector, which aims to support the implementation of the RBA to combating money laundering (ML) and terrorist financing (TF) in the life insurance sector.

TATF, 26 October 2018

New EIOPA Q&As on regulation

The European Insurance and Occupational Pensions Authority (EIOPA) has issued news sets of Q&As on regulatory issues. The new Q&As cover the risk-weighting to be assigned to the International Development Association, templates for the submission of information to the supervisory authorities, and the calculation of the capital requirement for lapse risk.

EIOPA, 26 October 2018

EIOPA issues request for feedback on illiquid liabilities

The European Insurance and Occupational Pensions Authority (EIOPA) has issued a request for feedback on illiquid liabilities. EIOPA asks stakeholders for feedback on certain aspects including the illiquidity characteristics of insurance liabilities to establish illiquidity indicators and the risks of holding assets by insurers over a longer term to evaluate the management of different asset classes. The deadline for feedback is 7 December 2018.

EIOPA, 29 October 2018

IT failures causing disruption to retail banking services drive rise in complaints

The Financial Conduct Authority (FCA) has published the complaints figures for regulated firms for the first half of 2018. Excluding PPI which accounted for 42% of all complaints, complaints figures increased by 9% (193,360) from the previous six months. Several high-profile IT failures, which caused disruption to retail banks in the first half of the year have contributed to the increase in complaints. The FCA urges firms to look at the causes of the complaints to address the increase in figures and ensure good consumer outcomes are achieved.

FCA, 29 October 2018

PRA publishes its 2018 approach to insurance supervision document

The Prudential Regulation Authority (PRA) has published an updated approach to insurance supervision document for 2018. This describes how the PRA carries out its role practically in respect of insurers. The document has been produced to help enhance transparency between insurers and the PRA, and sets out what the PRA expects of insurers and what they can expect from the PRA in the course of supervision.

PRA, 31 October 2018

FCA publishes market study 18/1 (MS18/1), discussion paper 18/9 (DP18/9) and a CEO directed letter on fair pricing

The Financial Conduct Authority (FCA) has set out a summary of the points that will be covered as part of market study 18/1 (MS18/1) into how general insurance (GI) firms charge their customers for home and motor insurance. The FCA urges firms to ensure fair treatment of their customers, and has written to CEOs of firms about its expectations. It has also published a discussion paper (DP18/9) on fairness of pricing in financial services.

FCA, 31 October 2018

Brexit

HMT publishes explanatory memorandum to draft Solvency II and Insurance (Amendment etc) (EU Exit) Regulations 

HM Treasury (HMT) has published an explanatory memorandum to accompany draft statutory instrument (SI) Solvency II and Insurance (Amendments) (EU Exit) Regulations 2018. The memorandum explains amendments to retained EU law related to the prudential regulation that arise from the UK's withdrawal from the EU. The government expects to put the SI before Parliament under the European Union (Withdrawal) Act 2018 in autumn 2018.

HM Treasury, 10 October 2018

FCA publishes two consultations on proposals in the event the UK leaves the EU with no implementation period

The FCA has published both, CP18/28: Brexit: proposed changes to the Handbook and Binding Technical Standards consultation as well as CP18/29: Temporary permissions regime for inbound firms and funds. Both consultations discuss the FCA's plans for the scenario that the UK leaves the EU without an implementation period. The papers are open until 7 December 2018.

FCA, 10 October 2018

Lloyd's discuss Brexit and EEA risks after 1 January 2019 and Solvency II equivalence strategy

Lloyd's of London has announced it will write facultative reinsurance and non-proportional excess of loss treaty reinsurance across all markets in the EEA. Furthermore, the Chief Commercial Officer of Lloyds noted that although the UK will nevertheless apply to receive Solvency II reinsurance equivalence, Lloyds will ensure that their reinsurance customers have continued access to market specialist policies if the UK leaves the EU without an implementation agreement.

Lloyds, 30 October 2018

Insurance Distribution Directive

SRA publishes rules for European Insurance Distribution Directive

The Solicitors Regulation Authority (SRA) has published rules and guidance for the Insurance Distribution Directive, which replaces the Insurance Mediation Directive. The rules brought in as a result of the Directive cover issues such as conduct of business requirements and information requirements and have been approved by both the FCA and Legal Services Board.

SRA, 1 October 2018

EIOPA highlights the need for NCA co-operation in the supervision of cross-border insurance distribution

The European Insurance and Occupational Pensions Authority (EIOPA) has published a decision of the board of supervisors on the co-operation of national competent authorities (NCAs) with regard to the supervision of cross-border insurance distribution activities in order to achieve increased market integration.

EIOPA, 10 October 2018

Solvency II

PRA publish policy statements concerning Solvency II requirements on internal modelling and public disclosure

The Prudential Regulation Authority (PRA) has published a number of policy statements (PS22/18, PS23/18, PS24/18 and PS25/18) which are for the attention of Solvency II insurers. The final associated supervisory statements are appended to the policy statements.

PRA, 17 October 2018

PRA policy statement 26/18: Strengthening accountability: Implementing the extension of the SM&CR to insurers

The Prudential Regulation Authority (PRA) has published PS26/18 'Strengthening accountability: Implementing the extension of the SM&CR to insurers'. The statement provides feedback to responses to PRA CP18/18 'Strengthening accountability: Implementing the extension of the SM&CR to insurers'; which contains amendments to the final rules for the implementation of the extension of the Senior Managers and Certification Regime (SM&CR) to insurers. These final rules will apply from 10 December 2018.

PRA, 18 October 2018

EIOPA chair discusses Solvency II review, proportionality and supervisory convergence

The European Insurance and Occupational Pensions Authority (EIOPA) has published a speech delivered by its chairman, Gabriel Bernardino on the 2020 Solvency II review, proportionality and supervisory convergence. Mr Bernardino states that supervisory convergence will ensure that the European insurance sector is properly prepared for the challenges of economic uncertainty, digitalisation and climate change.

EIOPA, 25 October 2018

PRA has announced that the equity release mortgage changes to SS3/17 are postponed

The Prudential Regulation Authority (PRA) announced that it is postponing the date of implementation of the changes to SS3/17 Solvency II: matching adjustment—illiquid unrated assets and equity release mortgages, proposed in CP13/18 Solvency II equity release mortgages. The implementation date will now not be before 31 December 2019.

PRA, 26 October 2018

IE responds to the EIOPA discussion paper on insurance guarantee schemes

Insurance Europe (IE) has responded to the European Insurance and Occupational Pensions Authority's (EIOPA) discussion paper on national insurance guarantee schemes (IGS) at EU level. IE said that Solvency II has not been applied consistently at National Competent Authority (NCA) level and that these powers should be properly enforced before looking to instigate new EU-level rules for IGS.

IE, 29 October 2018

PRA publishes CP27/18 on Solvency II: Adjusting for the reduction of loss absorbency where own fund instruments are taxed on write down

The Prudential Regulation Authority (PRA) has published consultation paper 27/18 (CP27/18) on 'Solvency II: Adjusting for the reduction of loss absorbency where own fund instruments are taxed on write down'. The paper outlines a proposed amendment supervisory statement (SS) 3/15 Solvency II: the quality of capital instruments.

PRA, 31 October 2018