Welcome to Insurance Briefing - a fortnightly round-up of insurance legal and business developments with analysis and commentary from the insurance team at Pinsent Masons.
The topics we're focusing on this week include:
The UK's Financial Conduct Authority (FCA) has published a package of new rules intended to make it easier for customers to transfer from one investment platform to another without having to liquidate their assets. The move follows a market study and consultation earlier this year. The new rules follow feedback received during the consultation process, which the regulator said supported the principle that customers should be able to make 'in-specie' transfers between platforms without liquidating their assets. Financial services expert Tobin Ashby of Pinsent Masons, the law firm behind Out-Law, said the policy statement and the rules meant previous discussions about a flexible fund pricing approach using fund cost rebates were over for the time being. Ashby said the FCA had noted that it did "not currently intend" to allow a move back to the rebate approach because of the fear of confusing customers. Read more here...
The FCA and Prudential Regulation Authority (PRA) have increased pressure on firms with a 16% increase in the number of independent reviews ordered last year. The number of 'skilled person' reviews launched by the regulators in the 2018/19 financial year hit 51, up from 44 in 2017/18, in the first rise in four years. Skilled person, or section 166 reviews, can be commissioned by the regulators if they are concerned about an area of a firm's business or its compliance with regulation. During a skilled person review an independent third party – usually a law firm, accountancy firm or other consultancy – visit a firm and carry out further analysis into its activities. Contentious regulatory expert Colin Read of Pinsent Masons, the law firm behind Out-Law, said: "The FCA and PRA continue to come under pressure from legislators about their role in effective regulation of financial services firms. In discharging their duties as regulators, these statistics suggest a preferred and well worn course in using Skilled Persons powers. The professional firms who provide these services have built up extensive expertise and the ability to respond quickly - which suits regulators with finite resources." Read more here...
Senior staff at financial services firms should check that their directors' and officers' (D&O) insurance covers their decisions on whether or not to service customers in the EU after Brexit, say D&O expert Chamika Hand and financial regulation expert Elizabeth Budd, both of Pinsent Masons, the law firm behind Out-law. D&O insurance does not cover fines or penalties but can cover the defence costs of cooperating or responding to an investigation. Firms face difficult decisions about whether to continue providing services to clients outside the UK if there is a no-deal Brexit or if the Brexit transition period ends on 31 December 2020 with no deal. Read more here...
The FCA has confirmed its first fines of claims management companies (CMCs) for poor practices since it became responsible for their regulation in April 2019. Professional Personal Claims Ltd (PPC) was fined £70,000 for misleading consumers in a case opened by the previous Claims Management Regulator (CMR), but closed by the FCA after PPC dropped an appeal. Separately, the first-tier tribunal upheld a £91,000 fine imposed on Hall and Hanley Ltd (H&H) by the CMR, in a case argued before the tribunal by the FCA. Regulatory enforcement expert David Hamilton of Pinsent Masons, the law firm behind Out-Law, said: "The FCA has shown itself more than willing to make early use of new regulatory powers. Firms would do well to take heed. "Although the FCA inherited these cases at quite a late stage from the Ministry of Justice, they nevertheless represent the first enforcement actions against CMCs since the FCA assumed responsibility for the industry in April 2019. They will not be the last. The FCA's assumption of responsibility marked a step change in regulation from the Ministry of Justice; the FCA operating a more stringent and consumer-focussed regime. Treating customers fairly, a requirement enshrined in Principle 6 of the FCA's Principles for Businesses, has always been an FCA priority and these cases are a timely warning for others involved in the claims management industry," he said. Read more here...
The Financial Reporting Council (FRC) is to focus on areas such
as the effect of Brexit on companies' disclosures, the impact
of recently introduced accounting standards, and climate change in
its 2020/21 corporate reporting and audit quality review
programme. The FRC said its corporate reporting review team
would carry out four thematic reviews, aimed at identifying scope
for improvement, as well as areas of better practices, in a number
of areas of stakeholder interest. The four areas include the
effects of the UK's decision to leave the EU on companies'
disclosures. The corporate reporting review team is also due to
contribute to a planned FRC-wide project focusing on climate
change, by reviewing the relevant disclosures given in
companies' annual reports.
Corporate governance expert Martin Webster of Pinsent Masons, the law firm behind Out-Law, said Brexit had been on the agenda for companies' annual reports since 2016, but the continued uncertainty over the terms of the UK's departure from the EU meant there was little new that could be said. "There is now some certainty that we are leaving, but still great uncertainty over the trade deal to be in place by the end of 2020, and that will be decisive for many companies. Directors still have little to base any planning on, save the worst case scenario, and so little to write about in their reports," Webster said. Read more here...
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