Following a short break, the next update will be published on 9 November 2020.
Brexit: PRA and FCA Dear CEO letter on final preparations for end of transition period
The UK Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) have published a joint Dear CEO letter that they have sent to insurance firms regarding final preparations for the end of the Brexit transition period.
In the letter, the regulators state it is imperative that firms continue to build on their preparatory work to ensure that they, and, to the extent possible, their clients, are ready for a range of scenarios at the end of the transition period. Final steps by individual firms are required to ensure their preparedness. Actions will vary between firms and may differ between UK firms and EEA firms operating in the UK.
The Dear CEO letter sets out key areas requiring final preparations, including:
- contingency planning and continuity of cross-border business in respect of EU liabilities;
- the conditional Part VII "saving provision", which provides up to two years from the end of the transition period for parties to obtain a UK court order under the Financial Services and Markets Act (FSMA) sanctioning the transfer of insurance business;
- data, particularly in the absence of a data adequacy decision;
- EEA bank account closures;
- EEA passporting firms; and
- temporary permissions regime (TPR) firms' Part 4A application for authorisation submission timeline.
This is not an exhaustive list of all the issues that may arise. The PRA and FCA acknowledge that they are aware insurance firms are also working on other matters linked to the end of the transition period. Their expectation is that firms will continue these efforts to address firm-specific risks and that they will keep FCA and PRA supervisors informed.
In a related statement, the FCA suggests that other firms may find it useful to consider this Dear CEO letter to insurers, the Dear CEO letter sent to banks, and statements issued by the Financial Policy Committee (FPC) and the European Supervisory Authorities (ESAs) (linked in the statement), to help them prepare for the end of the transition period.
COVID-19: FCA update on BI insurance test case
The FCA has updated its webpage on the business interruption (BI) insurance test case to publish, among other things, the High Court declarations made in the test case, and the applications by the FCA and others for permission to appeal to the Supreme Court.
UK Solvency II review: HM Treasury call for evidence
HM Treasury has published a call for evidence relating to its review of the Solvency II regime for insurance firms. The aim of the review is to ensure that the UK's prudential regulatory regime for the insurance sector is better tailored to support the unique features of the sector and the UK regulatory approach. While the government and the PRA continue to support the fundamental principles and framework underlying the EU Solvency II regime, they consider that there are certain areas of the regime that could better reflect the particular structures, products and business models of the UK insurance sector.
The review will consider how the current prudential regulatory framework can be improved to ensure that it provides for an appropriate amount of capital for the whole insurance sector, a high degree of policyholder protection and suitable standards of governance, risk management and transparency. The call for evidence is the first stage of the review.
The deadline for responses to the call for evidence is 19 January 2021.
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Authored by Yvonne Clapham