International Association of Insurance Supervisors
Supervisory colleges - IAIS publishes application paper - 11 November 2021
The International Association of Insurance Supervisors (IAIS) has published an application paper on the processes and practices relating to the establishment and functioning of supervisory colleges for insurance groups. Supervisory colleges are established in order to facilitate effective and efficient supervision of cross-border insurance groups. The paper aims to explain the role insurers may have in supervisory colleges and to increase understanding of their work. The IAIS emphasises that the colleges support the development of a common understanding of risks within insurance groups and for a shared agenda to be promoted in order to address these risks.
Application Paper on Supervisory Colleges
Insurer culture - IAIS publishes issues paper - 11 November 2021
The IAIS has published an ‘issues paper’ on insurer culture, with a particular focus on culture as a “point of intersection for prudential and conduct risks”. IAIS ‘issues papers’ provide background on particular topics, describe current practices and identify relevant supervisory issues and challenges. They are not, however, intended to be guidance on supervisory expectations.
The paper is part of the IAIS’s broader shift in recognising culture as a key trend in insurance markets and supervision, and explores the concept of culture in more detail and provides illustrative examples. Key points made by the paper include:
- that there is no one ‘right’ or ‘good’ culture for insurers: the key question for supervisors is instead whether a particular insurer’s culture effectively promotes safety and soundness, the interests of stakeholders (including policyholders) and the fair treatment of customers; and
- insurers must not approach the management of culture as a one-off, whereby shortcomings can be identified and rectified in one go. Instead, culture management must be seen as an ongoing process requiring long-term commitment.
Issues Paper on Insurer Culture
Financial Conduct Authority
Pre-paid funeral plans - FCA publishes Policy Statement - 5 November 2021
The FCA has published a Policy Statement (PS21/15) on its forthcoming regulation of pre-paid funeral plans. In July 2021, the FCA published Policy Statement PS21/8 setting out its final rules, guidance and standards for when the pre-paid funeral plans sector comes within FCA regulation on 29 July 2022. At the same time, the FCA published a Consultation Paper (CP21/20) setting out its intended approach for consumers in the event of firm failure.
This new Policy Statement takes into account the feedback received in relation to CP21/20 and outlines further rules in a number of areas, including: the resolution of firms; the rights of the Financial Services Compensation Scheme (FSCS) in the event of firm default; the structure of the underlying trust and insurance arrangements firms are required to enter into; and the obligation of firms to notify customers in the event of a transfer of a funeral plan contract.
These rules will come into force on 29 July 2022, subject, in the case of those concerning the FSCS, to the government’s proposed funeral plans being introduced. The FCA will conduct a review of the regime in 2026 in order to give the industry time to adapt.
Policy statement: Regulation of funeral plans: Feedback to CP21/20 and final rules
Handbook instrument: Funeral Plans (No. 2) Instrument 2021 (FCA 2021/42)
General insurance pricing practices - FCA updates webpage on final rules - 10 November 2021
The FCA has updated its webpage on its final rules in relation to general insurance pricing practices. The update concerns the rules on attesting compliance published in Policy Statement PS21/5. The FCA states it will send a survey to all general insurers and premium finance providers in January 2022 through which firms can provide their response in relation to the first annual attestation. Firms subject to the rules must provide the first attestation by 31 March 2022. Firms not subject to the rules (because they undertake no pricing activities in relation to in-scope products), are requested to submit a nil response in accordance with instructions to be provided in the survey.
Policy Statement: General insurance pricing practices market study (PS21/5)
Department for Work and Pensions
The Occupational and Personal Pension Schemes (Conditions for Transfers) Regulations 2021 - DWP publishes response - 8 November 2021
The Department for Work and Pensions (DWP) has published the government’s response to its consultation on the Occupational and Personal Pension Schemes (Conditions for Transfers) Regulations 2021 (the Regulations), which closed on 10 June 2021.
The Regulations seek to tackle the threat of pension scams by limiting the statutory right to transfer to some occupational pension schemes. This follows a request from the pensions industry for powers to be able to act when they have concerns about a transfer, as individuals have a statutory right to transfer and can insist on a transfer proceeding even if concerns are raised.
To this end, the Regulations build on due diligence into pension scams that the pensions industry is already undertaking, and gives them powers to act when they have concerns. In particular, the Regulations enable trustees and scheme managers to prevent or pause a transfer request if they see evidence of ‘red flags’ or ‘amber flags’. The consultation response outlines modifications to the Regulations, which include changes such as an express requirement for requested information to be provided by a member directly to the scheme rather than a third-party on their behalf (minimising the risk of interference by a scammer).
The Regulations will come into force on 30 November 2021, and the government has committed to a review of the regulations within 18 months of them coming into force.
The Occupational and Personal Pension Schemes (Conditions for Transfers) Regulations 2021: Consultation Response
See the Banking and Finance section for an item on the Council of the EU’s Economic and Financial Affairs Council meeting on 9 November 2021.
See the Financial Crime section for an item on the IAIS’s application paper on combating money laundering and terrorist financing.