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:

Natural for insurers to clarify cyber cover

It is a natural step in the evolution of the UK's cyber insurance market for insurers to clarify the scope of cyber-related cover in policies for more traditional insurance products, an expert in cyber risk has said. Ian Birdsey of Pinsent Masons, the law firm behind Out-Law, was commenting after the Financial Times reported that insurers have been amending the cover offered by property insurance products to exclude technology-related risk from those policies.  The move comes after the UK's Prudential Regulation Authority (PRA) called on insurers to "do more to ensure the prudent management of cyber risk exposures", with the regulator outlining a need for insurers to "take action to manage the unintended exposure to non-affirmative cyber risk".  Read more here...

FCA: insurers must 'proactively' tackle discrimination and harassment

Insurers must be "proactive" in tackling sexual harassment, discrimination, bullying and other cases of non-financial misconduct, the Financial Conduct Authority (FCA) has warned. Jonathan Davidson, the FCA's executive director of supervision, retail and authorisations, has written directly to the chief executives of wholesale general insurance firms in response to "recent, publicised incidents of non-financial misconduct". The letter emphasises the role that firm leadership should play in addressing misconduct, and warns that senior managers could fail the regulator's 'fit and proper' assessment if they fail to tackle known issues. Financial regulation expert Elizabeth Budd of Pinsent Masons, the law firm behind Out-Law, said that the letter "could not send a clearer message" that the FCA was committed to tackling sexual harassment and inappropriate behaviour.  Read more here...

'Step-change in culture' needed from personal and commercial insurers

The UK's personal and commercial insurers must deliver a "step-change in their culture" in order to protect consumers and avoid the risk of regulatory action, the FCA has warned.  The regulator has set out the areas on which it intends to focus over the next 12 months in a letter to the boards of these firms.  "Our view of the General Insurance (GI) sector overall is that there are significant risks of harm that both the market and individual firms need to address," the FCA said in its letter. Insurance law expert Tobin Ashby of Pinsent Masons, the law firm behind Out-Law, said: "Whilst the FCA's letter does not open up new ground - referring back to the work it has carried out in relation to distribution chains, pricing, governance and culture and operational resilience in particular – the tone of the letter should serve as a warning to all insurance firms within the GI sector of the seriousness with which the FCA intends to approach and monitor these issues". Iain Sawers of Pinsent Masons, explains that "The FCA makes it clear it will focus on firms' effective implementation of regulatory change on the basis this is fundamental to treating customers fairly and to those customers having products that suit their needs. Firms will need to ensure not only that regulatory changes have been properly implemented, but also that there is a clear audit trail to provide evidence of effective implementation to the regulator if necessary." Read more here...

Brexit: next steps for financial firms

The European Union (Withdrawal Agreement) Bill is currently progressing through the UK parliament ahead of an anticipated Brexit date of 31 January 2020 – but that does not mark the end of Brexit and there are still a number of unknowns.  We do not yet know what the UK financial services regulatory landscape will look like in January 2021 (at the end of any implementation or transition period). Although the UK and EU have taken steps to avoid market disruption in case of the 'cliff edge' scenario of a no-deal exit, the outstanding equivalence issues are major problems that ultimately depend on politics, says Alice Bell, a financial services and insurance law expert at Pinsent Masons. Read more here...

Travelex cyber ransomware case shows importance of service contracts

Businesses that rely on others for providing services to their customers should review their contracts with their service providers in light of the cyber attack on foreign exchange company Travelex, an expert in cyber risk has said.
Ian Birdsey of Pinsent Masons, the law firm behind Out-Law, said the terms of such contracts will dictate whether the businesses have any recourse against their service provider in circumstances where services are disrupted due to a cyber event. Several banks have reported that their foreign exchange services have been impacted by Travelex's decision to take its systems offline in a bid to contain a software virus.  "This case is the latest high-profile example of the ever-present threat of ransomware attacks," said Birdsey. "Such attacks carry risk for businesses in a range of areas, from legal and regulatory risk of non-compliance with requirements on data privacy, to the reputational damage that can arise from the impact on customers from disruption to services or from having an ineffective, unprepared or untested customer engagement and public relations strategy for cyber events." Read more here...

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