European Commission
Failure of insurance undertakings - EIOPA publishes second report - 8 October 2021
The European Insurance and Occupational Pensions Authority (EIOPA) has published a report on insurers’ failures and ‘near misses’. It is the second in a series which aims at providing a better understanding of responses to those failures and enhancing supervisory knowledge on the prevention and management of such events.
The report examines the most common recovery and resolution actions taken by insurers and national competent authorities (NCAs). The most common recovery actions include the presentation of a recovery plan, cash injections from shareholders or parent companies, reinforcement of internal governance and risk management, commitments from shareholders to support the company and building a higher level of technical provisions. The most common resolution actions were run-off, liquidation, and the sale of all or part of an insurer’s business to a private purchaser. According to the report, losses to policyholders occur less often in the context of domestic, rather than cross-border, failings.
The EIOPA failures and near misses in insurance report
Press release
Financial Conduct Authority
Lloyd's and London market insurers - FCA publishes renewed portfolio letter - 12 October 2021
The FCA has published a renewed portfolio letter (dated 28 September 2021) sent to Lloyd's and London market insurers (LLM), re-insurers, protection and indemnity (P&I) clubs and run-off firms on its supervision strategy. The letter follows a November 2020 communication in which the FCA set out its views of the key risks of harm posed by LLM insurers to consumers. The letter sets out the following expectations:
- firms should consider the value products deliver for consumers during their product development and review process, taking action when products that do not provide fair value are identified;
- they are expected to treat claimants in a “fair and timely” manner and communicate clearly at the claims stage;
- firms should proactively manage increased operational resilience and cyber risks and take appropriate steps, including the necessary investment, to implement the requirements set out in the FCA's March 2021 Policy Statement on operational resilience (PS6/21); and
- firms are expected to continue addressing the issue of contract clarity and product simplification.
The FCA also notes that it will be assessing how effective a firm's purpose is at reducing harm from their business model. Firms will also need to demonstrate how they are working towards having a diverse workforce at all levels and an inclusive culture.
The FCA intends to write to firms again in 2023 to provide an updated view of the key risks firms in this portfolio pose, the extent to which these risks are being mitigated, and any updated supervisory plans.
FCA portfolio letter
Pensions market - FCA publishes speech - 14 October 2021
The FCA has published a speech by Executive Director, Sarah Pritchard, entitled ‘Partnerships, priorities and predictions for the future in the pensions market’. In her speech, Ms Pritchard sets out the FCA’s three priorities in relation to pensions:
- ensuring customers have the right level of advice and guidance to make informed decisions;
- ensuring pension products are well designed, comparable, and offer value for money, noting that the Pensions Regulator and the FCA have published, in September 2021, a Joint Discussion Paper on value for money in relation to defined contribution pension schemes (DP21/3); and
- taking action to reduce the number of scams reaching customers and teach customers how to protect themselves from scams.
Ms Pritchard highlights some of the previous work undertaken by the FCA to reach these objectives, and discusses how the regulator will become more “innovative, assertive and adaptive” in the pensions market. This includes the introduction of rules that will require pension providers to submit data to the Pensions Dashboard Programme operated by Money Advice and Pensions Service. The speech concludes with the point that the pensions industry will need to adapt to the increasing significance of consumer investment choice as the number of policyholders relying on defined contribution, rather than defined benefit, schemes also increases.
Speech by Sarah Pritchard: Partnership, priorities and predictions for the future in the pensions market
Joint Discussion Paper: Driving value for money in defined contribution pensions (DP21/3)
