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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Many of the trends underpinning high levels of merger and acquisition (M&A) activity in the insurance sector over the past few years, such as persistently low interest rates, tightening regulation, and overcapacity in certain markets, continue to exist today. So what can we expect from M&A in the insurance industry in 2019? Will businesses pause in the pursuit of their M&A plans as a consequence of factors like Brexit, Trump’s trade agenda, and stock market volatility, or will M&A activity continue?
Please join us at our forthcoming webinar as we consider recent developments affecting M&A in the insurance sector from both a legal and financial perspective. We will consider developments specific to the insurance sector, including the potential impact of some of the recent High Court decisions on insurance business transfers in the United Kingdom. We will also consider some of the key legal developments that affect M&A generally, including the recent fines levied by the Information Commissioner’s Office for breach of the General Data Protection Regulation and how these are likely to impact M&A more generally. We will also consider some of the recent and ongoing financial developments, such as International Financial Reporting Standard 17 and supervisory statements on equity release, and consider the future shape of M&A in the life insurance sector.
The webinar will be hosted by members of our global Insurance sector team from London and they will be joined by Charles Dixon, a partner in KPMG’s Financial Services Deal Advisory team in London. The session will last around 50 minutes.
Wednesday, 18 September 2019
To register, please click here.
Our Asia insurance regulatory tracker for the first and second quarter of 2019 is attached.
The tracker covers a range of developments including the Hong Kong Insurance Authority’s newly issued Guideline on Qualifying Deferred Annuity Policy, the Monetary Authority of Singapore’s Guidance to Capital Markets Intermediaries on Enhancing AML/CFT Frameworks and Controls, and China’s recently adopted Foreign Investment Law.
If you would like to read our previous tracker, for the period July – December 2018, please click here.
We mentioned in our blog on 12 April 2019 that the European Insurance and Occupational Pension Authority (EIOPA) intended to publish guidance on cloud outsourcing in the (re)insurance sector.
Following the lead of the European Banking Authority (EBA), whose Recommendations on outsourcing to cloud service providers for the banking industry have been in force since 1 July 2018, EIOPA launched a consultation on 1 July 2019 on its own set of draft Guidelines on outsourcing to cloud service providers (Guidelines). The Guidelines are based on, and very closely follow, the EBA’s guidance on cloud (both the Recommendations and the EBA’s new Guidelines on outsourcing arrangements, which incorporate and will repeal the Recommendations from 30 September 2019). Continue Reading
The FCA has published a consultation on proposed non-Handbook guidance for firms on the fair treatment of vulnerable customers. The FCA reiterates that vulnerability is one of its key priorities and makes it clear that the draft guidance sets out its view of what its Principles for Businesses require of financial services firms to ensure the fair treatment of vulnerable consumers. Firms with existing policies and processes for fair treatment of vulnerable consumers should be looking to review them to make sure they meet their obligations under the Principles and plug any gaps.
Click here to read more.
The FCA is not alone in focusing on vulnerable customers. The Competition and Markets Authority and the Treasury Select Committee have both considered this issue. For more information see our article (at page 22) in our Insurance Horizons 2019 publication.
1. IVASS monitoring KIDs of insurance-based investment products (IBIPs)
On 10 July, IVASS launched a preliminary public consultation which could possibly be followed by a tendering procedure for the selection of a service provider which will be charged with the task of setting up and managing an online portal for the collection, updating and monitoring of Key Information Documents (KIDs) of IBIPs. The service provider would be required to supply: (i) a KID database, to be periodically updated and maintained, related to the domestic market, including the main foreign companies operating in Italy; (ii) automated access and extraction of qualitative information and numerical data contained in the KIDs; and (iii) tools for statistical analysis and comparison of information and data contained in the KIDs.
The scope of the recent initiative is not fully clear yet given that CONSOB currently supervises KIDs of financial insurance products and also receives the relevant communications. The general aim of the new portal – as per the IVASS public consultation – would be to strengthen the supervision of IBIPs in light of the general powers of supervision and intervention attributed thereto by law in relation to structure profiles of the insurance products. Thus, IVASS intends to equip itself with tools for the collection and analysis of data contained in KIDs in order to provide an initial source of information on the structure and main features of IBIPs.
The impact on the regulatory framework and supervision should become clearer when the expected IVASS regulation on IBIPs is issued.
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