This week the FCA has published detailed finalised guidance setting out their expectations of insurance product manufacturers and distributors in relation to product value and distribution arrangements in general insurance.
The fair treatment of vulnerable customers is a key priority for the FCA. It is an important topic not least because the FCA considers that half of UK adults (25.6 million people) display one or more characteristics of potential vulnerability.
The FCA’s definition of a vulnerable customer is intentionally broad and captures anyone who “due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care“.
Vulnerability for these purposes can be both ‘actual’ and ‘potential’ and is dependent, to some degree at least, on the nature of a customer’s treatment by firms and the level of complexity of the products or services that a customer is engaging with as well as the customer’s personal circumstances.
It is clear that “vulnerability” is not a static state of affairs; instead, customers may move in and out of “vulnerability” as circumstances dictate. Vulnerable (or potentially vulnerable) customers are therefore likely to comprise a significant proportion of a firm’s customer base at any given time.
A number of current FCA initiatives are designed – in varying degrees – to address the issue of fair treatment of vulnerable customers in the financial services sector.
With this in mind, what (additional) protections for vulnerable customers is the FCA contemplating and what can financial services firms expect in this area?
Pool Reinsurance Company Limited has launched Pool Re Solutions, a new in-house centre of excellence for understanding, modelling and managing the threat of terrorism. The new unit is aimed at helping the reinsurer support its members in a bid to address market failures that exist in capacity, demand and information gaps. It is hoped that Solutions will represent a “turning point” in the insurance industry’s relationship with terrorism risk, lead to more policies being purchased, and strengthen the resilience of the economy to acts of terrorism.
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 papers and other material from the HM Treasury, PRA, FCA and EIOPA
- FCA’s papers on climate change and green finance and general insurance pricing practices
- The future of financial services regulation in the UK
- The Solvency II 2020 review.
Hogan Lovells is proud to host our Blockchain Summit on “The Impact of Digital Assets on Financial Institutions” at our offices in London. Join us for a series of in-depth panels and presentations on regulatory and compliance issues from industry leaders and legal compliance specialists.
- Lawrence Wintermeyer, Co-Chair, Global Digital Finance
Blockchain regulation around the world
This panel will feature a range of regulators from across Europe who will discuss their views on blockchain and how they have addressed it in their jurisdiction. We will look to discuss how the regulators have arrived at this position and the challenges that they see going forward.
Blockchain policy around the world
This is a forward-looking panel where we ask policy makers from across Europe to discuss how they think how blockchain policy will develop over the next few years. A number of jurisdictions are moving out of the wait and see phase and into implementing policy recommendations phase and we will gain an insight into what this is.
Blockchain and capital markets
This session on the blockchain and capital market panel will focus on the benefits and impact it will have on the value chain. We want to also look at some of the hurdles that need to be overcome from a technological, regulatory and industry perspective.
Blockchain and payments and Libra
This session will look at how blockchain has been used in the payments sector. We will look at where blockchain has been utilised to good effect and what have been the drivers behind this. We will also discuss the growing prominence of stablecoins and some of the concerns that stablecoins such as Libra will have to address.
Blockchain and sustainable development
This session will see how blockchain has been used to improve the efficiency of the UN SDG implementation and the delivery of humanitarian aid. This panel will not only look at examples of use cases but also look at why blockchain has been used and what needs to be done to further this agenda.
Blockchain and insurance
This session will look to see how blockchain is being used in the insurance sector. The panel will look at how blockchain has been used to a positive effect in the industry and how the distributed ledger has helped eliminate common causes of fraud as well as simplifying the flow of information. Continue Reading
On 4 October 2019, the FCA published its much anticipated Interim Report on its Market Study into general insurance pricing practices (the “Interim Report“).
The Market Study stems from the work of the FCA in its Thematic Review into pricing practices in the retail insurance sector which concluded that further action was necessary due to concerns that general insurance pricing practices have the potential to cause harm to consumers, particularly those that are vulnerable. The FCA has also taken account of the CMA’s response to the super-compliant made by the Citizens Advice Bureau concerning loyalty pricing practices.
The focus of the Market Study is pricing practices in home and motor insurance, looking specifically at three key areas:
- the harm from pricing practices and what drives this;
- the fairness of pricing practices; and
- the impact of pricing practices on competition.
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:
- Latest Brexit related papers and other material from the HM Treasury, PRA and FCA
- PRA’s latest consultations on the prudent person principle and on income producing real estate (IPRE) loans and internal credit assessments for illiquid, unrated assets
- EIOPA’s Opinion on sustainability in Solvency II
- EIOPA’s report on the challenges and opportunities for insurers in relation to cyber risk.
On 18 September 2019, the Prudential Regulation Authority (the “PRA”) published Consultation Paper (“CP”) 22/19, which details its proposed expectations of firms investing in accordance with the Prudent Person Principle (“PPP”).
The PPP can be found in Chapters 2 to 5 of the Investments Part of the PRA Rulebook, which transposes Article 132 of the Solvency II Directive (2009/138/EC). The PPP sets objective standards for prudent investment which, when applied to a particular firm’s circumstances, are likely to allow for a range of reasonable investment strategies.
In addition, the PPP embeds investment activity within the wider qualitative risk management requirements placed on firms under Solvency II. The PPP requires firms to have adequate governance and risk management in place and requires investment decisions to be made in the context of a firm’s broader framework for enterprise risk management.
CP 22/19 draws on the PRA’s recent discussions with industry, in the light of which the PRA has identified certain inconsistencies in the way the PPP is applied by firms. CP 22/19 sets out the PRA’s proposed expectations for the management of investment risk in accordance with the PPP in a draft Supervisory Statement (“SS”). The PRA has noted that it will exercise independent judgement regarding whether a firm is meeting the requisite PPP standards.
Click here for more details of the proposals.
The Hogan Lovells’ Corporate Insurance Newsletter for July and 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:
- Latest Brexit related papers and other material from the HM Treasury, PRA and FCA
- FCA’s latest consultations on guidance on the fair treatment of customers and on proposals to help customers with pre-existing medical conditions access travel insurance
- EIOPA’s draft Opinion on remuneration principles for the insurance sector
- EIOPA’s consultation on outsourcing to cloud service providers
First published in the International Bar Association’s August newsletter
In recent years the Spanish Mergers and Acquisitions (M&A) market has seen in an increase in warranty and indemnity (W&I) insurance as a means to cover certain transactions risks, namely those losses or liabilities arising from a breach of warranty or a representation.
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