Insurance regulatory news, 28 May 2021

FIG Bulletin

Reports on recent regulatory developments of interest to insurers and their intermediaries. See also our Financial institutions general regulatory news in the Related Materials links.


Civil Liability Act 2018 (Financial Conduct Authority) (Whiplash) Regulations 2021

The Civil Liability Act 2018 (Financial Conduct Authority) (Whiplash) Regulations 2021 (SI 2021/594) have been published, together with an explanatory memorandum. The Regulations give powers to the UK Financial Conduct Authority (FCA) to enforce the ban on the making and requesting of offers to settle road traffic accident whiplash-related injury claims without a medical report, as set out in sections 6 and 8 of the Civil Liability Act 2018.

The Regulations apply in England and Wales and come into force on 31 May 2021.

In its latest edition of Regulation Round-up, the FCA notes that the whiplash reforms programme takes effect from 31 May 2021 and includes key changes to the claims process for low value road traffic accident claims. An information and FAQ document is available. The FCA states that firms considering representing claimants at the new Official Injury Claims Service portal should ensure they are not carrying out a regulated activity without the required permissions. They also need to carefully check the legislation and the FCA Handbook. The FCA encourages firms unsure of their position to seek independent legal advice.

Insolvency arrangements for insurers: HM Treasury consults on amendments

HM Treasury is consulting on proposed amendments to the insolvency arrangements for insurers that apply under the Financial Services and Markets Act 2000 (FSMA). It states that the government, working with the Bank of England, the Prudential Regulation Authority (PRA) and the FCA, has identified areas in which reform can make the UK's insolvency arrangements for insurers more robust, in order to better protect policyholders and reduce costs to industry and the wider financial sector. Therefore, the government is proposing a series of targeted amendments to the current insurer insolvency arrangements to enable the UK authorities to better manage insurer distress in an orderly manner.

The proposals include:

  • enhancements to the court's existing power under section 377 of FSMA to order a reduction ("write-down") of the value of an insurer's contracts;
  • the creation of a new court-appointed "write-down manager" to oversee and implement a court-ordered write-down under amended section 377;
  • the introduction of a moratorium on the termination or suspension of financial contracts and service contracts on the application to the court for (and, as applicable, during) an administration, write-down under section 377 or winding up;
  • for life insurance policies only, a stay on policyholder surrender rights on the application to the court for (and, as applicable, during) an administration, write-down under section 377 or winding up; and
  • a change to the operation of the Financial Services Compensation Scheme (FSCS) in the event of a write-down under section 377 to ensure protected policyholders are not financially worse.

The deadline for responses to the paper is 13 August 2021.

Responsible openness in the insurance sector: PRA speech

The PRA has published a speech by Anna Sweeney, PRA Executive Director, Insurance, on responsible openness in the insurance sector. In her speech, Ms Sweeney talks about how the PRA will regulate insurance services following the UK's departure from the EU, facilitating competition, and the UK's role in setting international standards on issues such as climate change.

BI insurance policyholder claims communications: FCA update

In its latest edition of Regulation Round-up, the FCA includes an update for insurers and intermediaries on policyholder claims communications relating the business interruption (BI) insurance test case.

The FCA notes that, in accordance with its Business Interruption Insurance Test Case: Finalised Guidance for Firms, insurers should have updated all policyholders with potentially affected claims or complaints after the conclusion of the test case. The FCA states that insurance intermediaries acting for policyholders should seek to support them, as appropriate, to progress their claims quickly with their insurer.  They should also consider whether it is fair, and in the policyholders’ best interests, to notify the policyholder if the intermediary reasonably considers that they may have a claim under their policy. This is irrespective of any separate commercial relationship between the intermediary and the insurer. 

Supervision of climate-related risks in insurance sector: IAIS application paper

The International Association of Insurance Supervisors (IAIS) has published an application paper on the supervision of climate-related risks in the insurance sector. The paper aims to support regulators in their work to integrate climate risk considerations into the supervision of the insurance sector. It sets out recommendations and examples of good practice, which are consistent with the IAIS Insurance Core Principles.

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Authored by Yvonne Clapham


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