Welcome to this edition of our Insurance Regulatory eBulletin, which aims to keep you updated with significant regulatory developments and their implications across the insurance sector.
I hope that you have all had a break over Easter. April has been another busy month for those enforcing the changes to the sanction regime in response to the invasion of Ukraine and no doubt will have been the immediate focus of compliance officers. However, during April, both the PRA and FCA have issued their business plans for 2022/23 and there have also been some interesting speeches setting out the current view of the regulatory future for the UK.
This bulletin contains as much up to date regulatory news as we can gather. Inevitably, this may change as the current situation develops and we will aim to keep you informed in the future.
Please do not hesitate to contact myself or your normal BDO contact if you have any concerns over any matter highlighted in this update. For more information about our audit, tax and advisory services to the insurance sector, visit our insurance services page.
Stay safe and stay well and I hope you enjoy reading this latest update.
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We have had another quiet month in terms of regulatory announcements. The most important news related to actions for firms to take regarding the Ukraine conflict in relation to sanctions and potential cyber-attacks. The regulatory requirements for Operational Resilience have been a major focus of compliance officers and the FCA have published examples of good practice and identified areas where firms may need to improve.
In the UK, we had a very quiet month in terms of regulatory announcements. The most important news came from John Glen, the Economic Secretary to the Treasury, when speaking at the Association of British Insurers Annual Dinner. During his speech he set out in much more detail where exactly the Government’s is focusing on in delivering its promised post-Brexit reform of Solvency II.
The FCA have been reminding firms of some of the aspects of the Senior Managers and Certification Regime: regulatory references and assessing the fitness and propriety of the compliance officer and the MLRO. They have also reminded firms about the requirements of the Temporary Permissions Regime and set out their expectations of insurers and intermediaries on the insurance of multi-occupancy buildings. The PRA have set out the 2022 supervision priorities for insurers and requested technical input for the 2022 Insurance Stress test.
The PRA have confirmed their Phase 1 reforms to Solvency II on reporting which should reduce some of the reporting burdens for many of you. The FCA are consulting for the second time on their proposals for a new Consumer Duty and, in conjunction with the government, are also proposing changes to the Approved Persons regime. They have also opened a discussion on the future of the Financial Services Compensation scheme.
The issue of the latest edition of the Regulatory initiatives Grid sets out the regulatory agenda going forward. There are a number of initiatives driven by: the delays to initiatives caused by the pandemic; the response to Government strategic reviews and the emerging wider issues such as climate and diversity & inclusion); and the plans for legislative changes to deliver the Future Regulatory Framework (FRF) post Brexit. Proposals on the FRF have been set out in HM Treasury’s second consultation issued this month.
Reflecting the current COP26 agenda, both the PRA and FCA have been issuing reports on their approaches to climate change going forward and the challenges for firms in meeting regulatory expectations. The FCA has also set out the risks and the related expectations of firms operating in the Lloyd’s and London market.
Looking forward the latest edition of the Regulatory initiatives Grid sets out the regulatory agenda going forward. There is an increase in the number of initiatives driven by: the response to Government strategic reviews and to emerging themes and issues in financial services (such as climate and diversity & inclusion); plans for legislative changes to deliver the vision for the future of the UK financial services sector; and initiatives postponed by the response to COVID-19. Next month’s bulletin will consider the initiatives relevant to general insurance in more detail.
A relatively quiet month to report. Both the PRA and FCA have been making speeches on the regulatory challenges and priorities over the short to medium term. The FCA has also outlined its approach to firms’ unused permissions and noted there are delays to the determining of Approved Person applications.
A quiet month to report. The PRA have issued letters on the Insurance Stress Test for 2022 and on its ongoing Solvency II review. The FCA have issued two letters setting out their supervisory approach for Personal & Commercial Lines insurers and Life insurers. They have also been reminding insurers of their requirements on product governance which arose out of their General insurance pricing practices review.
A busy month to report on the regulatory front. The PRA has been issuing papers on the future regulatory environment following Brexit as the review of Solvency II gathers pace. The FCA have issued their Business Plan setting out their key priorities for the coming year, and reminded insurance intermediaries of the importance of the client money rules and the common failings they observe in this area. The Government has started reviews of the money laundering regulations in the light of Brexit.
Another relatively quiet month to report on the regulatory front. Both the PRA and FCA have been speaking about the future of UK regulation. The PRA have also been discussing the ongoing Solvency II review. The FCA have released their final Policy Statement on pricing practices in the retail insurance market. They have also started a Consultation on climate change reporting.
Another relatively quiet month to report on the regulatory front. All the UK regulatory bodies have been looking to the future though the publication of the updated Regulatory Initiatives Grid. The PRA have confined themselves to publishing their Business Plan for 2021/22. The FCA have started a Consultation on their proposed new Consumer Duty to apply to retail financial services firms.
Another quiet month to report on the regulatory front. The FCA senior management have made a number of speeches on conduct, future regulation and diversity and inclusion. They have also delayed publishing their Annual Business Plan until July. The PRA has been more concerned with the banking sector this month with little to report affecting insurers. Both regulators have set out their fee proposals for the current year.
A relatively quiet month to report on the regulatory front. The PRA is continuing to look at the future of insurance prudential regulation without promising major reforms to the Solvency II regime and jointly with the FCA have finalised their proposals on strengthening operational resilience in the financial services industry. The FCA have emphasised the importance of both diversity and inclusion initiatives and the whistleblowing procedures for the industry. They have also set out their proposals for regulating funeral plan providers and issued further guidance for business interruption insurance claims settlement. The Government has issued its white paper on the future of audit and corporate governance including proposals relating to the accountability of directors at public interest entities (including insurers).
A relatively quiet month on the regulatory front. The PRA is looking at the future of insurance prudential regulation and have published the themes arising from meetings with independent Non-Executive Directors. The FCA have continued to explore the themes of operational resilience, vulnerable customers and impacts from COVID-19 such as refunds for cancellations. They have also been looking at their future regulation of ‘in-bound’ international firms.
A relatively quiet month on the regulatory front as the Brexit driven flurry prior to the UK’s EU withdrawal on 31 December ceased. There have been some announcements regarding Memorandums of Understanding for sharing of information between the various EEA regulators. However, the most important issue for the industry was probably the Supreme Court’s judgement on business interruption insurance and what that means for policyholders and others.
We continue to monitor EIOPA’s activity and draw your attention to it where we believe it to be necessary or helpful. This will, we hope, assist those firms continuing to operate in the EU under the new arrangements.
An extraordinarily busy month on the regulatory front as the UK’s EU withdrawal was implemented on 31 December. Whilst the there was a deal, it was almost silent light on the implications for the UK financial services sector. Thus, the UK regulators were busy bringing to life the Temporary Permissions Regime and updating their responses to the effect of COVID-19.
EIOPA was also busy and Brexit means that we will no longer need to set out in detail the changes to the EU regulatory regime in this bulletin. However, we will continue to monitor EIOPA’s activity and draw your attention to it where we believe it to be necessary or helpful. This will, we hope, assist those firms continuing to operate in the EU under the new arrangements.
A relatively busy month on the regulatory front as the regulators monitor and update their response to the effect of COVID-19 on the markets. The FCA have issued two ‘Dear CEO Letters’ setting out their supervisory strategy and priorities for Lloyd’s and London Market intermediaries and Managing General Agents and secondly, for Lloyd’s and London Market insurers. Both letters identify the key drivers of potential harm for these firms. The PRA issued a ‘Dear CRO Letter’ to general insurers on the effect of COVID-19 for reserving and exposure management. Other issues covered include the continuing regulatory focus on culture and the FCA’s prohibitions of three people for non-financial misconduct.
The regulators attention is increasingly turning to the end of the EU withdrawal transition period on 31 December. EIPOA and the PRA and FCA have all issued reminders on preparing for the finalisation of Brexit, possibly without an agreement. The Treasury has also issued a second Consultation Paper on its Future Regulatory Framework review which starts to address the future of ‘onshored’ EU Legislation such as the Solvency II Directive. The FCA continues also to address the potential harm to consumers arising from the impact of COVID-19 and has confirmed the delay in implementation of elements of the Certification Regime and the related Conduct Rules from 9 December 2020 to 31 March 2021.
Whilst August proved to be very quiet month on the regulatory front, September has brought the regulators back to life reinvigorated by their break. COVID-19 issues continue to feed much of the regulatory announcements in Europe and of the PRA and FCA. We saw the outcome of the FCA test case on business interruption and as expected there are both negotiations with insurers and the possibility of further legal action. The regulatory output includes more preparations for Brexit and the FCA is consulting on potential new rules on the pricing of general insurance products.
August has been one of the quietest months on the regulatory front since we started publishing this newsletter. The PRA have issued nothing of interest for the insurance sector and EIOPA have also been very quiet. COVID-19 issues continue to feed much of the FCA’s actions and output. We now await the outcome of the FCA test case on business interruption.
July has been a surprisingly busy month on the regulatory front. COVID-19 issues continue to impact but the regulators are now also addressing the issues that had been put on hold. EIOPA has published a single Rulebook for Solvency II and the EC has reminded the insurance sector of the legal implications of Brexit and the effect on their activities at the end of the transition period on 31 December. No doubt Brexit will become a regular theme of this bulletin in the next few months. The FCA is pressing on with its test case on business interruption insurance but is also turning back to its themes of treating customers fairly by banning contingent commissions in motor finance and addressing vulnerable customer issues.
June has again been a busy month on the regulatory front as a result of the implications of COVID-19 for both prudential and conduct regulation. The regulators in Europe and the UK continue to defer making and proposing new policy but continue to emphasise their focus on ensuring the insurance sector is both financially resilient and treating its customers fairly. The PRA have provided feedback on its Insurance Stress Test 2019 and related COVID-19 stress testing and the Treasury has announced a review of Solvency II in preparation for a post-Brexit world. The FCA is pressing on with its test case on business interruption insurance and will have a new Chief Executive in the autumn. Jointly the PRA and FCA have released the Climate Financial Risk Forum’s initial guidance on climate change to assist firms in approaching and addressing climate-related financial risk management.
May has again been a busy month on the regulatory front as a result of the implications of the COVID-19 on both prudential and conduct regulation and for financial reporting in general. The regulators in Europe and the UK continue to defer making and proposing new policy but continue to emphasise their focus on ensuring the insurance sector is both financially resilient and treats its customers fairly. COVID-19 now looks certain to be a historic event for the insurance industry in terms of both the claims quantum and its reputation.
April has again been a busy month on the regulatory front as a result of the implications of the COVID-19 on both prudential and conduct regulation and for financial reporting in general. Whilst the regulators in Europe and the UK have relaxed making and proposing new policy they have continued to emphasise their focus on ensuring the insurance sector is financially resilient and treats its customers fairly. Both the PRA and FCA have issued their 2020/21 Business Plans which inevitably are affected by the current situation. Indeed, COVID-19 may well become a historic event for the insurance industry in terms of both the claims quantum and the industry’s reputation.
The Bank of England and the PRA continue to work closely with the FCA, HM Treasury and other central government bodies to support the measures to manage the impact of the Coronavirus outbreak. The FCA has stated it stands ready to take any steps necessary to ensure customers are protected and markets continue to function well.
We have gathered together in this update relevant information from EIOPA and the UK regulators and I hope this update is useful to you and your businesses at this time.
March has been busy on the regulatory front as a result of the implications of the COVID-19 situation for prudential and conduct regulation and for financial reporting in general. This bulletin contains as much up to date regulatory news as we can gather. Inevitably, this may change as the situation develops and we will aim to keep you informed in the future.
February has been a busier month than January on the regulatory front. Topically, the FRC has issued guidance to companies on reporting risks relating to coronavirus and climate change in their financial statements. EIOPA is consulting on elements of its Solvency II 2020 review and IBOR transition. It has also published its final guidelines on outsourcing. Data privacy has been highlighted during the month with the FCA admitting a breach and the FCA and ICO warning FCA firms on the issue of mis-use of personal data. The FCA has also issued its annual Sector Views which will inform its future supervisory priorities. For the insurance sector these highlight the continuing cultural misconduct risk in the sector.
2020 has started relatively quietly from a regulatory point of view. The theme of the month appears to be data and its use, with the PRA setting out its proposals for quarterly reporting of insurance data, the FCA revising its Data strategy and the Bank of England issuing a discussion paper on improving the timeliness and effectiveness of data collection from firms across the financial system. The FCA also issued an impact assessment on the extension of the SM&CR to the 47,000 solo-regulated firms which includes estimates for the one-off and ongoing compliance costs for individual firms and the sector as a whole.
2019 has seen some significant regulatory developments including the extension of the Senior Managers and Certification Regime (SM&CR) to all financial services firms. Brexit continues to cause some regulatory uncertainty (despite the election result) and may mean that there is more change to come. December saw a focus on operational resilience and the potential effects of climate change by the regulators. Both of these topics will continue to be a focus as we move into 2020.
A relatively quiet month from a regulatory perspective as ‘election purdah’ struck in the UK. There were some substantial enforcement proceedings announced by both the PRA and FCA.
A bumper month – particularly if you enjoy regulatory reading. EIOPA has issued an 878 page tome on its proposals for modifying the current Solvency II Directive and related regulations in 2020. The proposals include changes to the long-term guarantee measures, new regulatory tools for macro-prudential issues, recovery and resolution, and insurance guarantee schemes. There also proposed revisions to elements of freedom of services provisions, reporting and disclosure, and the solvency capital requirement. The PRA was busy updating various supervisory Statements relating to Solvency II whilst the FCA has been considering the effects of climate change, the changing nature of regulation and what machine learning might mean for consumers. The FCA also issued an interim report on general insurance pricing practices and its next steps in this area.
Another very quiet month on the regulatory front probably reflecting both the time of the year and the continuing uncertainty over Brexit. The FCA have been busy reminding firms of the need for appropriate Brexit planning and updating their SM&CR guidance. EIOPA has been considering cyber risk from both underwriting and operational risk perspectives and the PRA have issued a consultation on the Prudent Person Principle and finalised policy on liquidity risk management for insurers.
A very quiet month on the regulatory front probably reflecting the time of the year! I hope that you and our regulators have been enjoying your summer break. EIOPA has published a consultation on its Solvency II remuneration principles and issued its latest Risk Dashboard. The PRA have released the results of their work on proxy modelling and the FCA have issued a reminder to insurers of the end of the transition period for the Senior Managers & Certification Regime together with some lessons for implementation arising out of its review of the regime in the banking sector.
A busy month on the regulatory front from both the European and UK regulatory perspective. EIOPA has issued a series of consultations related to the 2020 Solvency II review and in particular on Solvency II reporting and disclosure and IDD implementation and on cloud outsourcing. The PRA has been looking at Solvency II remuneration policy and has published its findings. The FCA has been following its TCF agenda in particular considering Intergenerational Differences, vulnerable customers and travel insurance customers with pre-existing medical conditions accessing suitable travel insurance. The use of AI and related digital ethics has been considered by EIOPA and the FCA. The UK has a new Prime Minister and the Bank of England and the PRA / FCA have been tidying up the Brexit planning. Time for a rest – so if you are going away enjoy your holidays.
A relatively quiet month on the regulatory front from both the European and prudential regulatory perspective however, the PRA has issued its Annual Report, the FCA has been a little more active and has published some large enforcement fines relating to Bank of Scotland and Raphaels Bank. It has also issued its first Annual Perimeter Report.
To cope with the Brexit uncertainty, the FCA has confirmed the extension of the Temporary Permissions Regime and, both the PRA and the FCA, have made speeches indicating their hopes for the future of regulation post Brexit in the past month.
The PRA became the first regulator in the world to highlight its concerns for climate change on the economy and financial sector through its publication of a Policy Statement setting out its regulatory expectations on this topic.
Brexit continues to make the political headlines and the uncertainty of the outcome is reflected in the regulators’ preparations for a no-deal Brexit which have resulted in more guidance and statements during the past month.
There has been a flurry of activity from both EIOPA and the FCA around the continuing uncertainty of a possible no-deal Brexit.