Insurance

Issue 1223 / 21 September 2023

European Insurance and Occupational Pensions Authority

Cyber insurance and SMEs - EIOPA publishes survey - 20 September 2023

EIOPA has launched a survey on the access small and medium-sized businesses (SMEs) have to cyber insurance. The survey is intended to provide deeper insights into the challenges SMEs are facing in relation to cyber threats and the insurance available to them, particularly in the context of such businesses becoming more digitised and cyber risks becoming more evident.

The survey will cover a number of areas, including SMEs’ awareness of cyber threats to their business; whether cyber insurance is available to SMEs; the factors that may have influenced SMEs’ decision to purchase or not purchase cyber insurance; and any barriers to purchasing cyber insurance or lack of cyber insurance coverage for SMEs.

The survey is open until 20 March 2024.

EIOPA Survey

Press Release

Prudential Regulation Authority

Solvency II regime - PRA publishes speech - 20 September 2023

The PRA has published a speech given by Gareth Truran, PRA Director, Cross-Cutting and Insurance Policy, providing an update on the UK Solvency II regime.

Mr Truran explains that the PRA has made significant progress this year in progressing with the reforms of the UK Solvency II regime and is maintaining momentum to implement the reforms in 2024. Key points of interest include:

  • the PRA’s proposed reforms of the matching adjustment (MA) should be published at the end of September 2023 for consultation. The proposals themselves aim to improve investment flexibility within the MA for life insurers, improve operation of the MA and enhance firms’ responsibility for risk management;

  • the PRA is close to having published all substantive reforms to implement the results of the Solvency II Review, with its final policy scheduled to be published in the first half of 2024. The implementation of most changes is scheduled for the second half of 2024, although the PRA is working with HM Treasury to bring its MA changes forward to June 2024;

  • the PRA will consult on transferring the rest of Solvency II largely unchanged into the PRA Rulebook in 2024, creating a single solvency regime for insurers in the UK;

  • HM Treasury intends to legislate by the end of 2023 to cut risk margin for long-term life insurance by around 65% and for non-life insurance by around 30%. The PRA indicates that this will release a significant amount of financial resources which insurers may deploy toward more productive investment opportunities before the remaining reforms become effective; and

  • the PRA continues to engage with stakeholders regarding its plans for enhanced stress testing. More details about the PRA’s approach to its next exercise for life insurers will be published in the first half of 2024, ahead of the first of the new stress tests expected in Q1 2025 and on which results are scheduled to be published in Q4 2025.

Speech by Gareth Truran: Solvency UK: Maintaining the momentum

Financial Conduct Authority

Fair value for general insurance - FCA publishes value measures data and Dear CEO letters - 20 September 2023

The FCA has published its first full year of value measures data across a range of general insurance (GI) products, covering the period January to December 2021. This follows the publication of the FCA’s first set of value measures data in November 2022.

The FCA explains that the data suggests that some GI firms may be failing to comply with its rules on offering fair value products as required by PROD4 of the Product Intervention and Product Governance Sourcebook, as well as delivering positive outcomes under the Consumer Duty. The FCA highlights the following three areas of concern as applicable to all insurance firms across all products:

  • the extent and quality to which insurance firms have implemented and embedded the FCA’s rules overall;

  • certain firms and specific products where intelligence shows that customers may not be receiving fair value, and whether firms are able to show that their value assessment of those products is in line with FCA rules; and

  • potential deficiencies in product governance and a lack of adequate management information.

Of particular concern is firms’ provision of guaranteed asset protection (GAP) products. The FCA has published Dear CEO letters to firms providing retail, wholesale and life insurance setting out its 2023-25 supervisory priorities for the insurance market. In these letters, the FCA reminds firms of their need to ensure that they are providing fair value to their consumers in relation to GAP products. It warns firms manufacturing GAP insurance products that they must take immediate action to ensure customers are receiving a fair deal, or it will intervene with a three-month ultimatum. The firms addressed have one month from 20 September 2023 to demonstrate this.

FCA Publication: General insurance value measures data 2022

FCA Dear CEO Letter to wholesale insurance firms

FCA Dear CEO Letter to life insurance firms

FCA Dear CEO Letter to retail insurance firms

Press release

Recent Cases

R (Assurant General Insurance Ltd) v Financial Ombudsman Service Ltd and others, [2023] EWCA Civ 1049, 18 September 2023

Judicial Review - Financial Ombudsman service - payment protection insurance

The Court of Appeal (the Court) has dismissed an appeal of a decision by the Administrative Court to dismiss a request for judicial review in November 2022. The respondent, the Financial Ombudsman Service (the FOS), had decided that it had jurisdiction under section 226 of the Financial Services and Markets Act 2000 to accept a number of complaints against an insurance company, Assurant General Insurance Ltd (Assurant, the appellant).

Assurant provided an underwritten payment protection insurance (PPI) product in relation to credit facilities sold by home-shopping catalogue retailers to consumers, which several customers complained had been mis-sold to them. The FOS assumed jurisdiction to consider those complaints against Assurant on the basis that the retailers, acting as the insurer’s agents, had carried out the acts complained about. The FOS found that the agreements between Assurant and the retailers amounted to an implied agency arrangement which extended to the retailers’ marketing and selling of the insurance cover to consumers.

The Administrative Court had dismissed Assurant’s claim for judicial review of the FOS’s decisions, considering only the judicial review grounds of error of law and irrationality. The Court of Appeal held that this was the wrong approach. The question of whether there had been a relationship of agency relied on the construction of the agreements in place, thereby making it an issue of law. The Administrative Court should, therefore, have considered the correct construction of those agreements to determine whether such a relationship existed between Assurant and the retailers.

Furthermore, in doing so, the Court of Appeal held that a relationship of agency did exist between the insurer and the retailers for a number of reasons. These included that Assurant was shown to have exerted a large degree of control over the retailers; the retailers owed fiduciary duties to the insurer when they received premiums from the consumers; and the agreements in place contained an exclusivity clause, restricting the retailers to only marketing Assurant’s PPI policies. As such, the FOS was right to assume jurisdiction over the complaints and the Court dismissed the appeal.

R (Assurant General Insurance Ltd) v Financial Ombudsman Service Ltd and others, [2023] EWCA Civ 1049