An opinion published by EIOPA on 21 December 2017 raises concerns for UK insurers who have policyholders in EEA states other than the UK. This will include, for example, every life company with annuitants living in an EEA state*, perhaps because they moved from the UK on retirement.
Insurers have been aware of issues raised by Brexit for legacy contracts written (or performed) cross-border since the UK referendum on EU membership (see, for example, our client briefing issued in July 2016). However, it has been widely hoped, to now at least, that a sensible compromise would be reached by the UK government and EU authorities to ensure that firms do not need to embark on expensive and time-consuming processes to avoid detriment to policyholders once the UK finally leaves the EU. Such a compromise currently appears less likely. Continue reading
Delay to IDD start date
The EU Commission published draft legislation today (in the form of a proposed Directive and a proposed Delegated Regulation) to delay the IDD start date to 1 October 2018. It has agreed to requests for a delay made by the European Parliament and a number of Member States despite expressing the view that industry has already been given considerable time to adapt to the new rules. Individual states are still required to transpose the IDD into domestic regimes by 23 February 2018. The European Parliament and the Council will need to agree the new date in an accelerated legislative procedure.
Brexit – UK approach to incoming financial services firms
The Treasury, PRA and FCA have today set out proposals for dealing with EEA-headquartered financial services firms wishing to conduct regulated activities in the UK post-Brexit. The concern, of course, is how those firms, including (re)insurers and (re)insurance intermediaries, can operate in the UK once they have lost passporting rights (assuming that they do so).
In a decision that will be of interest to professional indemnity insurers as well as financial institutions and valuers, the Supreme Court has overturned a decision of the Court of Appeal and found in favour of the Defendant valuer in a professional negligence claim.
The Supreme Court, in Tiuta International Ltd (in liquidation) v De Villiers Surveyors Ltd  UKSC 77, held that where a lender advanced money on the basis of an initial valuation, then refinanced the facility (effectively repaying and replacing the original loan) on the basis of a second negligent valuation, the liability of the negligent valuer was limited to the ‘top up’ element of any additional lending. The valuer was not liable for the whole loss attributable to the entire amount of the second loan. Continue reading
Cyber incidents have the capacity to cause many different types of loss. Insurance coverage exists for at least some aspects of cyber risks in the UK market. However, given the range and diversity of risks that may arise, there are some key issues for businesses to consider when it comes to insurance against cyber risks in commercial contracts. Click here to read an article on these issues by Sarah McNally and Andrew Moir that was first published in the December 2017 issue of PLC magazine.
In Crowden and Crowden v QBE Insurance (Europe) Ltd  EWHC 2597 (Comm) the Commercial Court found in favour of the Defendant insurer on the disputed construction of an “insolvency” exclusion in a professional indemnity insurance policy. The case is a useful reminder of the approach which the English Courts take to the construction of exclusions in insurance contracts. Continue reading
This article was first published on Thomson Reuters Regulatory Intelligence.
The PRA has published the first of three consultation papers (CP21/17) on reforming the Solvency II regime.
The consultation reflects PRA experience of working with Solvency II since its introduction in January 2016, while covering some of the improvements proposed by the ABI and discussed earlier this year with the House of Commons Treasury Committee.
This first consultation paper contains some new guidance from the PRA on firms’ use of the matching adjustment. It also consolidates earlier guidance, allowing firms to comment on the PRA’s approach for the first time. The PRA’s aim is not to change its existing guidance but to improve a firm’s chance of making a successful MA application. Continue reading
The UK Senior Managers and Certification Regime (SMCR) is being extended to all financial services firms during 2018. PRA and FCA proposals applying to insurers build on the Senior Insurance Managers Regime (SIMR) although the transition to the SMCR is complicated by overlapping Solvency II requirements.
We have prepared a guide for insurers to the proposals set out in PRA CP14/7 and FCA CP17/26 (please click here for a copy).
Our experience of working with clients on the SMCR and the SIMR suggests that implementation projects should begin now rather than waiting for the outcome of the consultations.
On 14 September 2017, the UK Parliament published a letter from Nicky Morgan, Chair of the Treasury Committee, to Philip Hammond, Chancellor of the Exchequer, on insurers’ ability, post-Brexit, to service insurance contracts sold under passporting arrangements with a duration that extends beyond 29 March 2019.
The European Union (Withdrawal) Bill was published by the Government in July 2017 and is the key piece of UK domestic legislation that will implement Brexit.
Repeal of the European Communities Act:
The principal purpose of the Bill is to repeal the European Communities Act 1972, which gives effect and priority to EU law in the UK, thereby formally reasserting the sovereignty and independence of domestic law. The Government had published a White Paper in March 2017, Legislating for the United Kingdom’s withdrawal from the European Union (the “White Paper“) proposing a “Great Repeal Bill”. The now less dramatically titled European Union (Withdrawal) Bill (the “Withdrawal Bill“) is the vehicle for that legislation. The Government has also published detailed draft explanatory notes for the Bill (“Explanatory Notes“).
The FCA has published proposals to extend the Senior Managers and Certification Regime (SMCR), which already applies to banks, to other financial services firms. The new rules, which are designed to make individuals more accountable for their actions, will affect insurance intermediaries and their employees.
We have prepared:
- a two page “at a glance” guide (click here) to the FCA’s proposals; and
- a more detailed briefing (click here) which considers the implications for insurance intermediaries and their employees of the FCA’s proposals.