FR1201 / 5 April 2023

International Association of Insurance Supervisors 

Holistic Framework - IAIS publishes report on Targeted Jurisdictional Assessment - 4 April 2023

The International Association of Insurance Supervisors (IAIS) has published a report on the Targeted Jurisdictional Assessment of the implementation of the standards that form part of the IAIS Holistic Framework for the assessment and mitigation of systemic risk in the insurance sector (TJA). The Framework was adopted by IAIS in November 2019 and endorsed in December 2022 by the Financial Stability Board (FSB). The TJA was undertaken in 2021 and 2022.

The report summarises the outcomes of the TJA across ten major insurance markets, namely Canada, China, Hong Kong, France, Germany, Japan, the Netherlands, Switzerland, the UK and the US. Overall, the TJA results demonstrate strong implementation of the Framework’s standards, with good levels of observance across many of the standards.

Other conclusions reached by the TJA include:

  • the objective of financial stability within the supervision of insurers is well embedded in the regulatory frameworks of participating jurisdictions;
  • the identification of internationally active insurance groups (IAIGs) is generally well conducted, based on a robust process in line with the IAIS criteria;
  • macro-prudential supervision of the insurance sector is also generally well established, although the assessment of the systemic importance of individual insurers could benefit from more robust processes in some cases;
  • data collection and analysis by supervisors to support macroprudential supervision is widely in place, although there are differences in scope and frequency.

Some gaps in implementation were identified for short and medium-term follow-up, including in the area of recovery and resolution. The report also contains examples relating to the implementation of the Framework standards, as observed during the assessment. The IAIS states that these examples are included to provide further detail on the implementation of the standards in practice but should not be treated as formal implementation guidance.

IAIS Report on the target jurisdictional assessment of the implementation of the holistic framework supervisory material

Press release

Financial Conduct Authority 

Calculating redress for non-compliant pension transfer advice - FCA updates webpage - 29 March 2023

The FCA has updated its webpage on calculating redress for non-complaint pension transfer advice in relation to defined-benefit pension transfer redress calculations.

The update clarifies the rules and guidance in the DISP Appendix 4 part of the FCA Handbook that firms must use from 1 April 2023 when calculating redress for non-compliant pension transfer advice. In particular, the webpage sets out:

  • Consequential losses: when firms have calculated the difference between the value of the defined benefit and defined contribution pensions (the primary compensation sum), they need to determine any consequential losses (the secondary compensation sum). The secondary compensation sum should be offset against any gains the consumer has made following the calculation of the primary compensation sum. This avoids consumers being given more redress than they need to put them back in the position they would have been in had they not transferred out;
  • Valuation date: the valuation date for valuing pension benefits is the first day of the quarter, not the first working, or business, day;
  • Consumer price index (CPI): the FCA notes that in its Policy Statement on calculating redress for non-compliant pension transfer advice (PS22/13), there was an error in the legal instrument for calculating post-retirement CPI. DISP has been updated with the correct formula; and
  • Consumer communications: to comply with obligations under DISP, firms must provide explanations of redress offers.

Updated webpage

Business interruption insurance test case - FCA publishes webpage on insurer claims data - 31 March 2023 

The FCA has published a new webpage on insurer claims data in relation to the business interruption (BI) insurance test case, FCA v Arch Insurance (UK) Ltd and others [2021] UKSC 1, as previously reported in this Bulletin.

The data has been received from all affected insurers and is up to date as of 6 March 2023 on the progress of their non-damage BI insurance claims. The FCA expects this to be the final iteration of data on the progress of these claims that will be collected and published. It acknowledges that insurers have received an unprecedented volume of BI claims and recognises the work undertaken by all parties to progress these claims to full and final settlement. Insurers are expected to continue to handle claims promptly and fairly, treat customers fairly and act in their best interests in accordance with ICOBS 8.1.1R and PRIN 2.1.1R, both in relation to remaining BI claims and, more generally, in relation to their claims-handling processes across all product lines.

The latest claims data shows that, at the date of the data, 37,978 BI policyholders out of the 43,027 who have had claims accepted have received at least an interim payment, and the aggregate value of the payments made for the 36,904 claims where final settlements have been agreed and paid is £1,406,662,310. The number of BI claims where the insurer's decision as to whether there is a valid claim is pending is 341.

The FCA reminds insurers to provide reasonable guidance to help policyholders make a claim.

FCA webpage: Business interruption insurance test case - Insurer claims data