Insurance Regulatory eBulletin - Conduct regulation

Regulation round up
On 17 May, the FCA published its monthly Regulation round-up. The Hot Topics included EU withdrawal, the interim report on the mortgage market and the FCA’s move to Stratford *.

This edition includes the following articles that are relevant to insurers or insurance intermediaries:

  • FCA: Live and Local regional programme events in 2018
  • The Bank of England consultation on a new messaging standard
*covered below

FCA's move to Stratford
The FCA confirmed they are moving offices over the summer from Canary Wharf to Stratford and their registered address will change on 1 July 2018 to:

Financial Conduct Authority
12 Endeavour Square
London
E20 1JN

The FCA note that firms should ensure they include the correct address in any communications with customers, and take steps to replace any printed material that refers to the current address and include the new address as soon as reasonably practicable.

Recovering the costs of the Office for Professional Body Anti-Money Laundering Supervision – PS18/9
On 30 April, the FCA published a Policy Statement (PS18/9) setting out how it will recover the costs of running the Office for Professional Body Anti-Money Laundering Supervision (OPBAS) from the bodies it supervises.

OPBAS has been set up within the FCA to strengthen the UK’s anti-money laundering (AML) supervisory regime and ensure that professional body AML supervisors provide consistently high standards of supervision. In addition, the FCA has asked that professional body supervisors submit data to the FCA for fees purposes by 2 July 2018. The data will be used to calculate a fee rate for 2018/19.

Reviewing the funding of the Financial Services Compensation Scheme – CP18/11
On 1 May, the FCA published a Consultation Paper (CP18/11) on proposals to change how the Financial Services Compensation Scheme (FSCS) is funded and the coverage it provides to consumers. The CP includes a review of the feedback from consultation CP17/36. In response to the review the FCA presents new proposals and final rules for consultation. Following the feedback received the FCA has now made final rules (to take effect in April 2019), as follows:

  • merging the Life and Pensions and Investment Intermediation funding classes;
  • requiring product providers to contribute around 25% of the compensation costs which fall to the intermediation classes;
  • moving pure protection intermediation from the Life and Pensions funding class to the General Insurance Distribution class.

The FCA is also proposing rules:
  • to increase the FSCS compensation limit for investment provision, investment intermediation, home finance and debt management claims to £85,000, also from April 2019;
  • to ensure that Personal Investment Firms (PIFs) should have Professional Indemnity Insurance policies that do not limit claims, where the policyholder or a third party is insolvent, or where a person other than the PIF (e.g. the FSCS) is entitled to make a claim. The changes are intended to ensure that more consumer claims are paid by insurers which could help to reduce the cost of the FSCS to other firms.

All comments must be made on or before 1 August 2018.

Skilled persons reports commissioned in Q4 17/18
On 1 May, the FCA released a report detailing the number of skilled persons commissioned in Q4 2017/18. A total of five skilled people were commissioned during this period, all relating to Conduct of Business and Financial Crime issues.

Alpha Insurance A/S declared bankrupt
On 9 May, the FCA issued a statement announcing that Alpha Insurance A/S, a Danish FSA-authorised firm also authorised to operate in the UK, has been declared bankrupt. Existing Alpha insurance policyholders should immediately contact their insurance broker or firm who sold them their policy in the first instance in order to seek new insurance cover.

FCA and PRA jointly fine James Staley, CEO of Barclays
On 11 May, the FCA and the PRA announced they had fined Mr James Staley, Chief Executive of Barclays Group (Barclays), £642,430. Mr Staley attempted to identify the author of an anonymous letter received by Barclays in June 2016, containing various allegations, some of which concerned Mr Staley. The FCA and PRA determined that Mr Staley should have maintained an appropriate distance and should not have taken steps to identify the author. Mr Staley failed to consult with those with the expertise and responsibility for whistleblowing in Barclays and failed to seek express confirmation from them that what he wanted to do was permissible. Consequently, Mr Staley failed to act with due skill, care and diligence. In addition, Barclays must now report to the regulators annually on how it handles whistleblowing.

Our blog addresses the three key lessons from the first fine under the Senior Managers Regime.

Fairness of variation terms in financial services consumer contracts – GC18/2
On 17 May, the FCA issued a Guidance Consultation (GC18/2) on the fairness of variation terms in financial services consumer contracts under the Consumer Rights Act (CRA) of 2015. In 2015 and 2016, the FCA withdrew from its website some unfair contract terms material. The proposed guidance reflects the current legislation as well as case law.

The draft guidance outlines a number of non-exhaustive areas the FCA believes firms should have regard to when drafting and reviewing variation terms.  These include and are not limited to the following:
  • the validity of the reason(s) for varying a term;
  • the transparency of the variation term;
  • provision for notice in the variation term;
  • provision for freedom to exit the contract should a consumer not wish to accept the variation.

The draft guidance outlines factors for firms to consider when seeking to draft variation terms, and also considers a number of reasons that the FCA has observed firms commonly include, when drafting variation terms allowing them to alter their consumer contracts.

Comments should be submitted to the FCA by 7 September 2018.