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:

Brexit day: next phase for cross-border financial firms begins

Financial firms may notice little everyday impact during the Brexit implementation period, but the industry still has no certainty about the impact of the UK's departure from the EU in the medium to longer term. Three and a half years after the referendum, the UK ceases to be a member of the EU at 11pm tonight. The UK will enter into an implementation period until 31 December 2020, unless extended by common agreement of the UK and EU member states to a later date. During the implementation period, EU derived laws and regulations will still apply and financial service firms can continue with existing cross border arrangements in a way that would not have been possible under a no-deal Brexit. Andrew Bailey of the UK's Financial Conduct Authority (FCA) has said: "The work the FCA has undertaken, along with government and the Bank of England, ensured the financial services sector was one of the best prepared industries for any of the possible Brexit outcomes. The implementation period gives firms a period of certainty while negotiations are continuing on our future relationship with the EU."  While this is helpful in dealing with short term concerns, the financial services industry still has no certainty of the impact of Brexit after the implementation period and is still potentially facing a cliff edge at the end of 2020, said Tobin Ashby of Pinsent Masons.  Read more here...

Flexible regulation urged to support innovation

UK regulators should consider "more flexible forms of regulation" to ensure innovative businesses are able to enter and disrupt existing markets, the Competition and Markets Authority (CMA) has said. In a new report, the regulator said there is evidence that regulation which creates barriers to entry and which is too rigid and focused on incumbents has "potentially large impacts on innovation". It said it is "critical" that regulators "understand and take into account how regulatory measures affect new entrants and innovation".  The CMA said a move away from "a reliance on detailed, prescriptive rules" to a system of principles-based regulation would provide businesses with "flexibility" over how they achieve compliance. It also backed the use of industry codes of conduct to regulate the behaviour of businesses, and further endorsed the use of "participative regulation".  Alan Davis of Pinsent Masons, the law firm behind Out-Law, said: "A more restrained and nuanced approach to regulatory intervention that could impact competition is to be welcomed. The CMA's recommendations should encourage UK government agencies to more thoroughly assess the potential competitive impact of any contemplated regulation." Read more here...

UK financial advice review: firms urged to participate

UK financial advisers have been urged to help shape future regulation as part of a review by the FCA. The FCA is due to publish a report on the impact of two recent regulatory initiatives, the Retail Distribution Review and Financial Advice Market Review (FAMR), this autumn. In a recent update, the regulator said that it was particularly interested in the impact technology has had on the market and the potential for it to help meet current and future consumer needs. Around 400 firms were recently surveyed by the FCA on their advice services, including businesses models and strategies; target customers; charging structures; future plans; and use of technology and recent innovations. The FCA is now conducting research on how consumers interact with the market, but is also keen to hear from firms about their future plans around technology and any "challenges and barriers" they are currently experiencing in doing so. Insurance and wealth management expert Tobin Ashby of Pinsent Masons, the law firm behind Out-Law, said: "It is a few years since FAMR first started, but the questions over barriers to providing advice and guidance to mass-market customers and whether customers will use the services provided remain". Read more here...

Cloud use charted in UK financial services survey

A Bank of England survey shows banks are using cloud-based services more widely than insurers, but a fintech expert believes forthcoming guidance could spur growth in the uptake of cloud services by UK insurers.  According to the Bank of England, the UK's 30 largest banks have adopted nearly 2,000 cloud-based applications between them. In contrast, the UK's 27 largest insurers have adopted fewer than 100 cloud-based applications in total. The BoE said that while the survey shows that "the maturity of transitioning to the cloud is higher for banks than insurers", the disparity might be exaggerated by banks' greater familiarity with reporting on the topic. Luke Scanlon of Pinsent Masons, the law firm behind Out-Law, said: "The figures highlight the significant growth of the use of cloud both at the infrastructure and application level by financial institutions. The regulatory landscape continues to shift with banks coming to terms with the European Banking Authority's requirements now also needing to consider further EBA ICT risk requirements and the PRA's future outsourcing expectations. Insurers on the other hand also will need to look closely at the PRA's views and cloud guidelines to be provided by EIOPA. As the figures demonstrate such a large increase in use by banks, there appears to be a great opportunity for insurers to embrace the cloud as more clarifications through guidance are provided by regulators in the coming months," he said. Read more here...

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.