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International Insurance and Reinsurance News, Trends, and Cases

Posted in Regulatory and legislative updates, UK

UK: Operational resilience: a PRA priority for insurance

The PRA published an update on its approach to insurance supervision on 31 October 2018. In the update, it introduced a new section on operational resilience.

This comes off the back of the discussion paper published jointly in July 2018 by the PRA, FCA and Bank of England, in which the regulators were very clear that the operational resilience of firms is a priority and “viewed as no less important than financial resilience”.

Sam Woods, Chief Executive of the PRA, has stressed that operational resilience matters more now due to:

  • more consumers accessing banks and insurers digitally and operational failures becoming visible quicker in the age of social media; and
  • the increase of cyber attacks.

This message has been consistent from the regulators. In October 2018, the FCA fined Tesco Bank £16.4m (which would have been £33.56m, but for early settlement and co-operation) following a cyber attack that exploited deficiencies in Tesco Bank’s financial crime controls and debit card payments systems. The fine was issued for failing to exercise due skill, care and diligence in protecting its personal current account holders against a cyber attack – essentially a failure to ensure cyber resilience. In the FCA’s press release, Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said that the fine showed the FCA “has no tolerance for banks that fail to protect customers from foreseeable risks.” It can be assumed that the same approach would be taken with insurers.

All firms – big or small – are expected to put plans in place to resume essential and systemically important functions in the event of major disruption. In particular, the regulators expect firms to develop “impact tolerances” and “acknowledge that disruptive events will happen”.

However, having documented plans and procedures in place is only one element of a resilience framework, and firms must ensure also that their personnel understand them and have been appropriately trained in how to implement them.

While the increased use of technology can lead to vulnerabilities if it is not properly implemented, maintained and managed, it is also the case that firms are looking to technology to provide solutions and facilitate resilience. For example, third party cloud solutions may provide a more modern, secure and resilient infrastructure than a firm’s own legacy IT systems, as long as any risks of outsourcing are understood and managed.

The insurance market has argued against proposals for substantially changing recovery and resolution rules for insurers. Insurance Europe, a trade body comprised of insurance associations, asserted current safeguards under Solvency II are sufficient and that overhauling the current rules is unnecessary. See here for full comment by Steven McEwan, partner at Hogan Lovells.

Notwithstanding this, it is clear from the PRA’s updated approach that it will be pushing forward with the development of its supervision of operational resilience for insurers into 2019.

If you would like to discuss this or any related issues, please contact Angela Greenough and Susan McKiernan.

Posted in European Union, Regulatory and legislative updates, UK

UK regulators prepare for ‘No Deal Brexit’ with a Temporary Permissions Regime

HM Treasury has proposed a Temporary Permissions Regime (“TPR“) as a temporary measure to replace the passporting regime in Schedule 3 and 4 of the Financial Services and Markets Act 2000 (“FSMA“) in the event of a no-deal Brexit. The legislative framework for the TPR is found in the EEA Passport Rights (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2018 (SI 2018/1149), enacted on 6 November 2018.

Under the TPR, EEA firms which currently operate in the UK under the FSMA passporting regime may, after exit day, be treated as if they had domestic authorisation under Part 4A of FSMA to carry on the same regulated activities they currently carry on. The TPR is an opt-in regime: firms must, between 7 January and 28 March 2019, either make an application for authorisation under Part 4A of FSMA or notify the relevant regulator.

Notably, the TPR is a one-way street: it will enable EEA firms to continue to operate in the UK, but it will not enable UK firms to continue to operate in the EEA. At the moment there is no indication that the EU or individual member states generally are considering implementing their own reciprocal regimes.

In August, the Financial Conduct Authority (“FCA“) and the Prudential Regulation Authority (“PRA“) published papers outlining their approach to implementing the TPR.  On 11 October 2018 the FCA published a consultation paper on the TPR for inbound firms and on 25 October 2018 the PRA published a similar consultation paper and an information webpage.  Details of the proposed changes are described below. The FCA’s proposed changes will be relevant to both insurers and insurance intermediaries (“firms“) unless specified otherwise, but the PRA’s proposed changes will only be relevant to insurers.

To continue reading, click here.

Posted in Regulatory and legislative updates, UK

UK: PPI Update – November 2018

FCA publishes final guidance on regular premium PPI complaints and new consultation on mailing rules

On 7 November 2018, the FCA released a consultation paper (CP18/33) publishing final guidance clarifying its expectations about the handling of mis-selling complaints relating to regular premium PPI, and proposing new mailing rules requiring firms to write to previously rejected complainants.

CP18/33 follows the FCA’s July 2018 consultation paper (CP18/18) in which the FCA sought responses on whether firms should consider recurring non-disclosure of commissions or profit-share (“RND”) when assessing mis-selling complaints in relation to regular premium PPI policies.  For further information on CP18/18, see this blog post from Hogan Lovells.  See here for previous blog posts on PPI mis-selling and the impact of the Supreme Court decision in Plevin v Paragon Personal Finance Limited (“Plevin“) more generally. Continue Reading

Posted in Regulatory and legislative updates, UK

UK: Corporate Insurance Newsletter – October 2018

The Hogan Lovells’ Corporate Insurance Newsletter for October 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:

  • Latest Brexit related consultation papers and other material from the Bank of England, PRA and FCA
  • The FCA thematic review report on pricing practices
  • The PRA’s updated approach to the supervision of insurance document
Posted in Regulatory and legislative updates, UK

UK: FCA publishes PPI complaints deadline progress report

On 24 October 2018, the FCA published a report on the progress of its consumer communications campaign on PPI mis-selling (the “CCC”) and its supervision of the manner in which firms are handling PPI complaints.

The progress report is the latest of a series of publications from the FCA on PPI mis-selling following the Supreme Court decision in Plevin v Paragon Personal Finance Limited, in which the Court held that a lender’s failure to disclose the level of commission taken from a PPI sale gave rise to an unfair relationship between creditor and borrower under the Consumer Credit Act.  Previous blog posts from Hogan Lovells have considered these FCA publications and the associated regulatory changes in detail, most recently our blog post on the FCA’s July 2018 consultation paper. Continue Reading

Posted in European Union, Regulatory and legislative updates, UK

The time is now: EIOPA calls for action to ensure service continuity in cross-border insurance

Following its Opinion on 21 December 2017, the European Insurance and Occupational Pensions Authority (EIOPA), yesterday (5th November) issued a call to action to ensure service continuity in cross-border insurance.

In the December 2017 Opinion, EIOPA urged insurance undertakings and regulators to take the necessary steps in good time to ensure the continuity of cross-border insurance contracts between the UK and EEA following Brexit. Now, EIOPA calls for “immediate and reinforced action” by insurance undertakings and regulators in order to avoid disruptions to service continuity. Continue Reading

Posted in Market developments, Regulatory and legislative updates, UK

Webinar – Recent developments in Part VII transfers and schemes of arrangement for insurers

Part VII transfers continue to be an important tool for both M&A and group reorganisations in the insurance industry, not least because of Brexit. In addition, there is an increasing interest in the use of schemes of arrangement to restructure insurance businesses.

Click here to read more and to register for the Webinar.

Posted in European Union, Regulatory and legislative updates, UK

No deal Brexit – Government publishes advice on vehicle insurance

On 24 September 2018, the Government published a technical notice on vehicle insurance if there is no Brexit deal.

The current position

Motorists from non-EU countries driving in the EU must have a Green Card, an internationally recognised certificate issued by their motor insurer as proof that they have third party motor insurance cover for driving in the country of travel. Currently, EU based private and commercial motorists do not need a Green Card to drive in the EU and EEA countries and in Andorra, Serbia and Switzerland as these countries benefit from being in the EU’s ‘Green Card-free circulation area’.  Continue Reading

Posted in Market developments, Regulatory and legislative updates, USA

US: NAIC Developing Best Practices for Regulatory Review of Predictive Models and Analytics in Rate Filings

As computing power grows exponentially, it has opened the actuarial modeling world to new and sophisticated forms of data collection and analysis, resulting in insurance companies seeking increased “predictiveness” of potential losses by employing ever more complex modeling methods in establishing, and justifying, premium rates.

Predictive analytics, which involve a number of techniques, including data mining, statistical modeling and machine learning, in its forecasts, allows insurers to use “big data” to more precisely forecast future events.
Continue Reading

Posted in Case reports, UK

UK: Sanctions exclusion clauses: What can we learn from Mamancochet Mining Limited v Aegis Managing Agency Limited and Others [2018] EWHC 2643 (Comm)?

On 12 October 2018 the High Court handed down judgment in a case that concerned a claim brought against insurers for payment under a marine cargo policy relating to the theft of steel billets from an Iranian port in late 2012. The 11 defendant underwriters sought to rely on a London standard insurance market sanctions exclusion clause included within the policy in resisting payment of the claim:

No (re)insurer shall be deemed to provide cover and no (re)insurer shall be liable to pay any claim or provide any benefit hereunder to the extent that the provision of such cover, payment of such claim or provision of such benefit would expose that (re)insurer to any sanction, prohibition or restriction under United Nations resolutions or the trade or economic sanctions, law or regulations of the European Union, United Kingdom or United States of America“. Continue Reading