A growing trend is emerging within the insurance sector, where insurers and other users of insurance products are looking to structured finance solutions both from an investment and risk management perspective.
What are the driving forces behind this development? Is regulation enhancing or impeding the trend? What role do insurers and other participants play in this new market?
On 10 November 2016, Hogan Lovells will host a seminar to discuss these issues. The session will feature a panel of experts drawn from across the industry, who will put forward their thoughts and share their own recent experiences.
Click here for further information on this seminar, with details on how to register.
Yesterday (18 October 2016), the UK Government announced it will not be taking forward its plans to create a secondary annuities market. The announcement was unexpected – having set the course for creating more choice for holders of annuities by enabling them to surrender an annuity back to the provider or sell it to a third party, the Government has concluded it is unable to deliver proper customer protection.
For the insurance industry, this will come as both a disappointment and a relief. A disappointment because the ability to buy back annuities would have provided insurers with a new method of reducing their liabilities and capital requirements. A relief because it would have required insurers to balance along a new tightrope of consumer protections and to develop new procedures, even if they were seeking to minimise their participation.
This development leaves the dichotomy between those who retired before pension freedoms were introduced in 2015, who were required to buy an annuity, and those who retired after that and who were not required to do so. It will be interesting to see if any alternative proposals will be offered to the former group, some of whom may feel unfairly treated.
A detailed note about the proposals was posted on our blog on 30 September 2016.
A number of factors are driving disruption in the insurance industry, posing a major challenge for the regulators – a challenge the UK regulators are rising to with gusto, says Helen Chapman, an insurance partner at law firm Hogan Lovells. Continue Reading
The Hogan Lovells’ Corporate Insurance Newsletter for September has been published. This provides a round-up of UK, EU and international regulatory developments relevant to UK based insurance market participants. In this issue, amongst other items, we cover:
- FCA/PRA developments
- Treasury Select Committee inquiry into EU insurance regulation
- PRIIPS developments
In the last years, it can be perceived in Spain an important increase of the corporate crimes, such as fraud, improper management, misappropriation, etc., which are attributed to the directors and officers of listed companies or financial entities with a huge media impact. These criminal offences result in the civil direct liability of the D&O insurers within the criminal proceedings, so some scholars even talk about the “criminalization” of the D&O insurance. But one of the most important consequences of this situation is that an accessory cover of this kind of policies, which is the bail cover, is right now the most problematic one and the cover that gives rise to more queries in the insurers operating in the Spanish D&O market, especially after two recent judgments.
Click here to continue reading the article.
The General Insurance Association of Singapore (GIA) has introduced new rules on the payment of premiums in a bid to reduce claim disputes between customers and insurers. The rules require premiums to be paid to insurers or intermediaries on or before the inception date or renewal of the policy. If full payment is not made by this date, there will be no cover.
These changes to the Premium Payment Framework (PPF) – which was first introduced in May 2005 – are designed to improve efficiency in the collection of premiums. Both general insurers and the public purchasing personalised insurance products will need to take note of these changes. Continue Reading
In August 2016, the FCA released a statement providing an updated on Consultation Paper 12/20 (“Consultation 12/20”)
The purpose of Consultation 12/20, held in August 2012, was to review the rules on holding client money applicable to general insurance intermediaries. The FCA discovered various issues of concern during its review of CASS 5, including ineffective risk transfer documentation, infrequent client money calculations and inappropriate controls regarding the use of non-statutory trusts. Continue Reading
Since greater pensions freedoms were introduced in April 2015, individuals retiring in the UK have had significantly wider choice where it comes to accessing their pension savings.
The choices now include:
- taking all the pension savings as a lump sum, subject to income tax on 75% of it;
- taking up to 25% of the pension savings tax free, and using the remainder to purchase an annuity;
- using the whole of the pension savings to purchase an annuity;
- taking up to 25% of the pension savings tax free and then drawing down income as and when required (known as “income drawdown“).
In March 2015, the UK Government consulted on plans to provide even greater flexibility by allowing people who have purchased an annuity to surrender the annuity back to the annuity provider (referred to as “surrender” or, from the perspective of the annuity provider, “buy-back“) or to sell it to a third party (referred to as “assignment“), in each case in return for payment of a lump sum or certain other forms of payment. The results of the consultation were published in December 2015 and further consultations have subsequently been published on the associated tax treatment, secondary legislation, and regulatory framework.
Since the proposals were announced, there has been significant discussion in the market about the viability of these proposals, and in particular on the willingness of insurers, potential investors and intermediaries to take the time – and make the investment – necessary to create a functioning market for the surrender or assignment of annuities. Such a market is generally referred to as a “secondary annuity market“.
The UK Government acknowledges that, for most retirees, retaining an annuity will still be the best option. However, the Government is also committed to ensuring the widest possible consumer choice. It is also apparent that insurers and other market participants may find opportunities in this new market. Annuity income streams could, for example, provide a partial hedge against longevity risks for institutional investors, or provide a trading product for onward sale, possibly packaged with other annuities into an investment fund or securitisation structure.
Against this backdrop, we have prepared a note summarising the conclusions reached by the UK Government to date and some of the key legal implications of the proposed reforms both for annuity providers and reinsurers offering protection to them. Please click here to download our note.
It is 90 days since the UK’s electorate voted to leave the EU.
With so many unknowns, how can you look beyond the uncertainty and decide what to do right now?
The Brexit toolkit is a seven step practical guide to help you assess real impacts and implement a practical response. It also contains critical analysis of the Brexit process and possible outcomes, the impact of Brexit on EU and UK law and the way to deal with contract “Brexit clauses”.
Click here for the full report.
The Hogan Lovells’ Corporate Insurance Newsletter for August has been published. This provides a round-up of UK, EU and international regulatory developments relevant to UK based insurance market participants. In this issue, amongst other items, we cover:
- FCA/PRA developments
- HM Treasury consultation on the Mutuals’ Deferred Shares Regulations
- IAIS paper on cyber risks